You might have heard that many successful people have brokerage accounts. Some of them are even discussing their investment within that accounts.
Before you start investing you need to at least know the definition of the brokerage account.
Definition of brokerage accounts
A brokerage account is a type of taxable investment account. You can open a brokerage account with a stock brokerage firm.
After you have the account, you need to deposit some cash by writing a check, wiring money or linking it to a checking or savings account at your bank.
Once you have made the deposit, you can buy various types of investments securities.
However, you don’t do that purchases by yourself, your brokerage will do that for you, instead. After every transaction, then, you need to pay the brokerage commission.
Types of investment held by a brokerage account
There are many types of investment you can buy in a brokerage account. Here are a few popular accounts according to The Balance.
It represents ownership stakes in businesses.
It gives you a higher claim to dividends or asset distribution than the common stockholder.
It represents a loan made by an investor to a borrower (typically corporate or governmental).
Real Estate Investment Trusts (REITS)
It represents pools of real estate related assets including some specialty types.
Money Markets and Certificates of Deposits
It represents either ownership in pools of highly liquid mutual funds that hold cash and fixed income investments or loans you make to a bank in exchange for a fixed rate of interest.
Also read: How Do Stocks and Stock Market Work?
It is a pooled investment portfolio owned by many smaller investors who buy shares in the portfolio or trust that owns the portfolio.
Instead of trading throughout the day the way other assets do, buy and sell orders are put in at the end of the day all at once.
Exchange-Traded Funds (ETFs)
It is a mutual fund, including index funds, that trade like stocks.
Writer: Lisa Ramadhani