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What kind of account should I open at a Brokerage Firm?

Home » Investing » Selecting a Brokerage Firm » What kind of account should I open at a Brokerage Firm?

To open an account with a Brokerage Firm, you will need to choose the type of investment account you want. The basic choices are: Cash, Margin, Option, or IRA

• Cash account. You deposit cash and then use that cash to buy stocks, bonds, mutual funds, etc.

• Margin account. The cash and securities in your account act as collateral for a line of credit you use in order to buy more stock. The interest rate makes the return needed much higher than if you're investing with your own cash.

• Option account. This type allows you to trade options, which is much riskier than stocks. Not usually recommended.

• Retirement account. There are a variety of types.

Your decision will depend on whether your new account will be taxable or tax-deferred, just for you, or for you and another person. Your basic account type will be either Standard or Retirement.

• Standard, or Personal Account, includes Individual, Joint, Community Property, or Guardianship/ Custodial (minor)

• Retirement Accounts such as IRAs

The choices of IRA Accounts include Traditional, Roth, Rollover, SEP (Simplified Employee Pension) or Savings Incentive Match Plan for Employees (SIMPLE) IRA.

Discretionary accounts give a broker or financial adviser the right to buy and sell stock without notifying you. Never give away this type of control over you finances.

Additionally you can open Specialty Accounts, such as Trusts, Partnerships, Limited Partnerships, Investment Clubs, Limited Liability Companies (LLC), Sole Proprietorships, Corporates (Profit or Nonprofit), Non-Incorporated Organizations, and Pension or Profit Plans for Small Business.

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