What is a brokerage account & how does it work?

An investor deposits funds into their brokerage account and the brokerage firm transacts orders for investments such as stocks, bonds, mutual funds, and exchange-traded-funds (ETFs) on their behalf. The assets in investment accounts belong to the investors, who normally must report as taxable the income derived from the account.

What are the different types of brokerage accounts?

Brokerage accounts may differ in terms of order execution speed, analytical tools, the scope of tradable assets, and the extent to which investors can trade on margin. In any type of brokerage, the most basic account is a cash account. This allows clients to buy investments using the money deposited in the account.

What can I invest in a brokerage account?

Securities: Depending on the brokerage account, you may be able to invest in a range of securities, including stocks, bonds, mutual funds and ETFs. Some offer other investing choices, such as options, futures trading or cryptocurrency.

How much does it cost to open a discount brokerage account?

For example, an investor who decides on a typical discount broker can expect to open a regular taxable brokerage account (or retirement account) with a $500 minimum required amount. There is little or no commission charged to buy or sell most stocks, options, or ETFs.