| Opening an Online Brokerage Account |
The Easiest Five Minutes You Will Ever Spend All too often, people fail to open a stock brokerage account because they think it is going to be hard, or that it is going to take a long time. They couldn't be more wrong.  Opening an online trading account is one of the easiest things you will do in your investment career. In most cases, an online application only take five minutes. Before stock brokerages will let you open an account with them, they want to know a little bit about you first. Here are the basic categories of information a stock brokerage will ask for when you apply to open an account: - All about you - Account type - Employer - Investment I.Q. - Account funding All About You Stock brokerages want to know all about you. They want to know your name, your address, your social security number, your phone number, your email address and so on. They want to know all of these things to make sure you are a real person and not some fictional person used to launder money. They also want to know how to contact you in the future. Account Type When you open a brokerage account, you need to select what type of an account you want to open. The following are a few of the choices you have when opening a brokerage account: - Individual account - Joint account - Individual retirement account (IRA) - Rollover IRA - Roth IRA The choice you make here will affect not only how the investments within your account will be taxed but also who has access to your account. Brokerages also want to know if you would like a cash account or a margin account. Having a cash account means that you will simply pay for any stock, mutual fund or ETF you buy using cash from your account. Having a margin account means that you can borrow money from your broker to buy stocks. It also means you can trade options, which you cannot do in a cash account. Employer Brokerages want to know who your employer is for the following two principle reasons: - To know if you have a controlling interest in or are a director of any publicly traded company - To know if you are employed by another broker or a company that is regulated by the Securities and Exchange Commission (SEC) If you have a controlling interest in or are a director of a publicly traded company, you could use your influence to affect the performance of the company and its stock. Individuals with controlling interests or undue influence are subject to special investing rules and regulations, which the brokerage must adhere to. If you are employed by another brokerage or a company that is regulated by the SEC, you also have special investing rules and regulations that you must follow. Investment I.Q. Stock brokerages want to know your investment I.Q. so they can know what investments you should and should not be allowed to participate int. In this regard, brokerages are a lot like bar tenders. Just as a bar tender can't serve someone a drink if that person is too drunk, a brokerage can't allow a novice to lose his shirt if he is investing with money he doesn't really have. If you have investment experience, are using your account for speculation and have assets to cover your losses, a brokerage will allow you to trade stocks, options and pretty much anything else that the brokerage offers. On the other hand, if you are a novice investor, are using your account for capital preservation and don't have assets to cover your losses, a brokerage is not going to allow you to make extremely risky investments. Account Funding Lastly, a brokerage wants to know how you are going to fund your account. After all, you can't trade unless you have money in your account. Typically, investors fund their accounts in one of the following four ways: - Wire transfer - Mail a check - Electronic check - Transfer an account NEXT: Check out How to Move Your Brokerage Account. |
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