Do You Have To Be Rich To Open A Brokerage Account? %page

Do You Have To Be Rich To Open A Brokerage Account?

Posted by Sophie Egge on July 4, 2011 Leave a comment (0) Go to comments

I meet an old friend and get the answer to this question About 4 years ago I visited an old friend and found him in his study frantically working the keyboard in front of a 3 or 4 computer screens. “What’s going on?” I asked. “I’m playing the stock exchange; be with you as soon as I complete this trade,” he said. That’s the day I found out one can do it from the privacy and comfort of one’s own study and that you don’t have to be rich to do it. Agreed, I was backward in stock exchange matters in those days. I wonder if he did become rich after all.

My broker Today the term, “my broker” means something entirely different than it did 20 years ago. A few decades ago, having a broker usually meant having a relationship with a human who would help you manage your portfolio and select stocks. These human, “full service” brokers still exist and serve many people. But things have changed.

Brokerage firms The giant brokerage firms like TD Ameritrade, Charles Schwab, Fidelity and E-Trade allow just about anyone to create a brokerage account. Once you set up a brokerage account, usually just a matter of filling out some information about yourself online and then funding your account. You can fund, or put money into your brokerage account, by transferring cash from your checking or savings accounts, either by writing a check or doing it electronically.

Now you have a broker Once you do that, you can say you have a broker. And luckily, thanks to cost-savings powered by technology and competition, having a broker is more accessible than ever. Most of the major and even the smaller brokerage firms have all but done away with minimum deposits. That means if you only have a few hundred dollars you can save your money in your brokerage account and start buying stocks and investing.

U.S. brokerage firms Here is a list of some noteworthy U.S. brokerage firms and the minimum balances they require to open an account: • Charles Schwab, $1,000 (for most account types) • E-Trade, $500 • Fidelity, $2,500 • FirsTrade, None • FolioFN, None • ING Direct Sharebuilder, None • Scottrade, $500 • TD Ameritrade, None • TradeKing, None • Vanguard, $3,000 • Zecco, None

Commissions Keep in mind that while many large brokers may not have a minimum deposit, they do charge commissions for many transactions. Even a seemingly small $7 a trade commission can be pretty costly with a small account. A $7 commission is 7% of a $100 account.

No initial deposit If you are starting small, you’ll want to consider brokerages that not only have no minimum initial deposit, but also offer commission-free mutual funds and exchange-traded funds. Fidelity, Schwab, Scotttrade, TD Ameritrade and Vanguard all offer a broad family of ETFs that you can buy without paying any commission.

Electronic brokers I use a company called Interactive Brokers. There was no initial fee and they charge $1 per trade, which means I am trading for virtually nothing.