How to Open a Brokerage Account #business #school #rankings
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How to Open a Brokerage Account
NEW YORK (TheStreet ) — There are lots of brokerage firms out there. Each one will likely tell you that it can offer more for your investing dollar than its competitors can. It’s up to you to know what you should look for in a broker and what you need to do to open an account with one.
One of the first questions you’ll want to ask yourself when you start your search for a broker is: “Which brokers will let me open an account?” Some brokers have restrictions that limit who will be able to open an account with them. These restrictions usually boil down to age and money.
If you’re young and interested in investing, keep in mind that in order to open your own brokerage account, you’ll need to be a legal adult (usually 18 years old). If you’re not considered a legal adult yet, you can still invest, but your parents will need to set up a custodial account with your broker.
A custodial account is essentially an account set up for a minor for which the parents bear the legal responsibilities on the minor’s behalf. With a custodial account, you’ll still be able to trade stocks just as you would with your own account, but your parents’ names will be on the account as well.
Another thing you’ll have to think about is the minimum account balance required by your broker. Most brokers require a minimum account balance for the same reason that banks do: They make money by lending your cash out to other customers in exchange for interest. Because it’s expensive for a broker to maintain your account, they have to be sure that you’re bringing in enough incremental revenue to cover the expenses of having you as a customer. As points of reference, minimum balances for online discount brokers are usually between $500 and $1,000.