Why wouldn't you pay yourself too?As you go through all your monthly expenses and pay all your bills, make sure you have enough money to put away for your future goals. Letting your savings work for you by using an online brokerage account is a solid choice as this service offers you the transparency you want to have in order to be in charge of your own investment portfolio.
How to open a Brokerage Account:Why do Brokerage Firms ask so many personal questions on their applications? Because they have to. FINRA (Financial INdustry Regulatory Authority) requires a broker to get to know their clients. Therefore you’ll need to be ready to provide your broker with some personal information before you open a Brokerage Account. There are three key questions the broker needs answers to in order for them to operate as your broker:
- Who you are:
- Name and address
- Whether you are over 18 (you’ll need to provide a legal form of identification).
- Don't worry, if you're not 18, you can still invest but your parents will need to setup a custodial account where they agree to bear legal responsibility for your actions. You'll still be able to control this account, but it will have your Mom and Dad's names on it as well.
- Country of citizenship
- How to report your tax on your huge investment gains you'll see.
- Social Security number or Taxpayer ID
- Marital Status
- If your finances allows you to invest or on the other side, an accredited investor
- Employment Status
- Investment knowledge and experience
- What's your net-worth
- Whether you are associated with a different FINRA member.
- This is to prevent illegal activities such as insider trading.
Account TypeAdditionally, you'll need to decide what type of account you need. Generally, this can be determined by deciding how much money you are planning on depositing in your new account. For example, if it’s less than $2,000 you’ll need to go with a simple Cash Account as that is the initial deposit to establish a Margin Account. Your broker will want to determine the nature of the account. The most common ones are Individual accounts, but there are a multitude of other accounts you can choose between. E.g. a joint account which allows you to share the profits and losses with your wife or someone else. You can even open an IRA account to start investing for your future pension.
Investment ObjectivesIn order to discuss investment strategies with you, your broker is required to find out your investment objectives and risk tolerance. The questions you may want to ask yourself before opening your account are:
- Is my primary goal to generate income or to appreciate my capital at a high rate?
- Am I very risk-averse and want to use my investment portfolio as a hedge against inflation, or am I risk -loving and want to see huge returns?
- What’s my time horizon? Do I need the funds to be liquid short-term or long-term?
- What’s my tax situation? Can/should I use my investments as a tax relief? ( Think IRA vs. Roth IRA)
Next Step: Fund Your AccountOnce it's setup, Now you need to fund your account. Pick the most convenient way of funding your account. Indisputably, using an ACH (Automated Clearing House) is the best and most convenient way of funding your account. The first step of using an ACH is to sync your bank account with your new brokerage account. For this you need your bank name and bank account information. Once your account is synced, you can use an ACH to transfer money between your brokerage account and bank account. You can also use other ways to fund your brokerage account, like a wire-transfer or by sending in a check. Once all is set and money is in your account, you’re ready to trade! So plunge in to your SprinkleBit community to find Better Investment Thoughts to capitalize on and see that portfolio grow.
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