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[O278]Open A Brokerage Account

by Matthew Merriman, Mat

1. Inactivity fees

Brokers charge inactivity fees. These are applied if you don't make a certain number of trades in a month (often around 10). The brokers that charge these normally have very low trading fees.

These fees can be around $20 a month and if you just want to put $2,000 into one stock for the long term (1yr+), then you will be charged $240 during the year, which means you will have to make a 24% profit on the stock just to break even!!

2. Interest rates paid to your account

It is vital that you pick a brokerage account that offers competitive interest rates on your money!! Think of the amount of time that you are not using 100% of your account, you could be earning interest on this money! Lets put that in an example;

-- Interest rate is 5%
-- You have capital of $60,000, $40,000 is in stock, this means $20,000 left over in your account.
-- Over the year you could be earning an extra $1,000 in interest!
-- And the best thing is that interest goes down as capital gains and you don't have to declare it as part of your income.

3. Market data fees

If you want to trade stocks in several different countries then you need to look at the data fees each broker charges for different countries. Brokers will allow you free data feeds for the country you choose to trade in but may charge you for data from abroad. The fees really do vary and if you choose to trade in 3 countries then you could easily be paying over $40 a month or more to do this.

4. Withdrawal fees

Brokers charge you to take out your money if you withdraw more than once a month. This could potentially be a problem if you have a small to medium starting capital and are looking for a regular income stream , which means you will often need to take out cash more than once a month. This will consequently cut into your profits.

5. What platform the brokers use

It is important to view the trading platform brokers use, some allow you to trade from their website and some offer Java based trading platforms or something alike. This is especially important if you are not computer literate as you may find some java based platforms hard to use and could end up executing wrong or inaccurate trades! It is best to view a demo of the brokers trading platform before signing up for an account (there will be a link to a demo on most brokers' websites).

So to summarise, it is not just the trading fees you should look out for when choosing a broker as there are several other fees that dig into your profits.

Final tip - have a strategy and know how much you are going to trade in a year and then choose a brokerage account that suits your strategy.

1.The foremost reason may be the prevailing market conditions. The bullish trend of the market may be followed by overspeculation and investment, leading to a recession in the market. This is a condition in which several companies may go bankrupt and cause individuals to lose millions. The Securities and Exchange Commission (SEC) mandates that brokerage accounts must be kept separate from the brokerage firm's corporate finances; this gives them the security in the event of bankruptcy.

2.The next is the question of security. There are many circumstances that can expose online traders to the risk of ?fraud? in online transactions through brokerage accounts. Here, the investors must take some precautions to safeguard themselves from such situations.

a.It is always advisable to use own PCs and laptops while accessing an online brokerage account. This saves the risk of personal data being stolen through any device connected in any public computer. The PCs should be kept up-to-date with the latest software updates, anti-virus, etc.

b.Even if using a public computer when need arises, one should check if the computer has any external device connected to it. The account should always be logged out of and the cache cleared of temporary files to prevent the next user from getting access to some confidential information.

c.Website security is another major concern. The websites starting with ?https://? are more secure than those with ?http://.? Moreover, the security certificate of any website can also be checked to ensure that it is secure.

d.These days, Microsoft and others provide a feature that volunteers to remember the password. It should always be checked for ?no? even if using a personal computer to prevent any transfer of confidential information to anyone. The passwords chosen for online transaction should also be a combination of letters, digits, numbers, etc., so that it cannot be guessed quite easily.

e.Hospitals, airports, and other places have Wi-Fi connectivity that allows one to remain online. But these connections are not always secure. It is advisable not to transact online through this connectivity. It is better to switch off the wireless connectivity and sharing of information or printers over this network to prevent the possibility of data theft.

f.Another menace can be what is called the ?phising? e-mail that asks one for personal information like password or PIN. These are information that a brokerage firm never asks for over e-mails. So one should never respond to such e-mails with the valuable information.

g.The monthly brokerage account statements should be scrutinized thoroughly to detect any discrepancy. Also, social security number should not be used as PIN or password. The credit report should also be reviewed to detect any possible breach of account security.

In spite of these precautions, if some emergency situation arises, the brokerage firm and credit institutions must be contacted and briefed about the situation immediately to investigate the theft.

Article Source : Pg. 239

About Author

Both Matthew Merriman & Vijay are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Matthew Merriman has sinced written about articles on various topics from Finances. Matthew Merriman, has experienced winning and losing in the stock market and now works from home and makes a decent living out of it. His website