Purchasing stocks, bonds, mutual funds, and other investment assets remains a fairly easy process. For those hoping to increase their net worth, the process might be very worthwhile. Buying these assets directly, however, is not always possible. Setting up a brokerage account may be necessary in order to make investments or trades.
Someone who might not be familiar with brokerage accounts might think specialized knowledge is needed. It really is not. The financial world would move at a crawl if unnecessary or cumbersome steps stood between the investor and any desired assets. Neither the investor nor the broker would make any money if this were the case.
Brokerage accounts are designed to move money without any hassles.
What is a Brokerage Account?
A brokerage account is an account handled by an investment firm. An investor opens an account with the firm and deposits money. He/she may also provide the investment firm with a bank account or routing number to quickly facilitate moving money into the account. Deposits can be made via mailing a check as well.
The purpose of putting money in the brokerage account is to buy investment assets. The investment firm executes the orders at the client’s request. Buying a stock, mutual funds or an IRA could be easily done in the manner. Those who wish to put funds into money markets or certificates of deposit may do so.
Buying, Selling, Exchanging, and Trading Investments
A lot can be done with a brokerage account. To buy an investment goes hand-in-hand with the ability to sell one. No one said assets positively must be sold. A person buying a stock or other investment item through a brokerage account could hold onto the asset for the long term.
Trading is also possible if the investment firm facilitates these types of transactions. Day trading is enormously risky. Venturing into trading must be done wisely. A good brokerage account could allow for swiftly making trades without much trouble.
Exchanging assets is another possibility. An exchange simply refers to transferring funds from one asset to another. An investor who is not thrilled with the performance of a particular mutual fund could exchange the money in the funds — all or in part — for another fund. In essence, a new fund is procured with an old one.
Again, this is not the same as buying and selling — a process that could potentially open tax doors. Rather the money is moved around as opposed to being bought and sold.
Access to Variety
An investment firm that maintains a brokerage account commonly has access to a great many different investment vehicles. Access to well-known stocks and mutual funds is a given with any licensed brokerage account. Buying treasury bonds should be too difficult through a reputation brokerage firm. A truly exceptional brokerage firm could make it possible to buy high-interest certificates of deposits from smaller banks and credit unions or local municipal bonds in counties through all 50 states.
Of course, opening more than one brokerage account with more than one investment firm is possible. This would expand access to a wide array of investment options for sure.