What to consider when Opening a Brokerage Accounts

There are many well advertised stock brokerage firms, each of whom charge their, so called, smallest commission fees to either purchase and/or sell shares of ownership of financial market listed businesses on behalf of other corporations and/or individual investors. Keep in mind that each of those brokerage firms are in such a business to earn a profit. If not, each of them will soon be out of business.

Additionally, each firm requires the investor to open and maintain an account from which the cost, including the transfer fees, will be deducted from the cash balance within that account. In other words, they will not purchase such stock or other financial instruments for a client who does not first pay in advance for such investments. Also, such cash accounts usually are not insured by the Federal Government of the United States of America against loss.

Therefore, to deposit money into that, so called, brokerage account puts at risk that cash that is not currently invested in such stocks or other income producing financial instruments. That particular brokerage account can be a managed account. The difference between the two is the fact that managed accounts allow the brokerage firm to select and purchase and/or sell, using your money, those investments that are believed to be the most profitable for their clients. Needless to say that the money placed in either type of account should be money that the investor can easily afford to lose.

The risk of loss of the money within such an account is far greater that cash within an account that is somehow insured against losses that can or would be sustained without your direct control. Do you trust yourself? Do you trust the broker who buys in your behalf, or do you trust a bank and/or other financial institution to safeguard your money? Only you can answer those above questions and act accordingly. The cash amounts within any of those types of accounts could easily vanish before you are aware of such a loss.

As a result, it is wise to only deal with a trusted broker, a bank and/or other financial institution that is not on the verge of bankruptcy and has been in business for many years, if not decades.

Some say that the investment in ownership interests of businesses is not much different than gambling. Ask yourself: How much am I willing to lose for the opportunity to become filthy rich or be, at least, well off?