There are lots of ways to begin investing. But one of the most popular is investing in publicly traded stocks via a brokerage account.
This special account type is based upon investing in accounts without immediate withdrawal options.
You can invest in stocks, bonds, and many other markets. You can even use a brokerage count like a second retirement account, i.e. set and forget.
But you don’t have to use it this way. It’s a great way to start your journey into investing!
Before investing, know your own financial profile.
Most brokers, even those in your local neighborhood, can help you open up a basic brokerage account.
Finding someone to help you with this isn’t the challenging part. The hard part is the self-knowledge that you will need to make the process as smooth as possible.
According to the SEC, you should know your annual income and net worth (among other financial details) before opening up a brokerage account.
You should have a social security number and an address before applying.
You should also do some soul searching about how much risk you want to pursue with this account.
Do you want a brokerage account just so you can start investing in general? Or are you looking to make a killing on a lot of highly dynamic stocks?
Look for a broker that suits your needs.
Once you know exactly what you’re looking for from your account, start researching brokers in your area and online.
Most brokers have restrictions on who they work with and may not choose to work with you for these reasons.
Don’t take it personally if you’re rejected—just research a different broker and look for someone else to work with.
Online brokers can offer more freedom on behalf of the investor.
You’ll be able to have your own dashboard and see more of the nitty-gritty in terms of sales.
These can teach you a lot!
But you may be overwhelmed by the number of choices offered.
You may also need to be constantly active on the platform, at the risk of incurring inactivity fees. Not fun!
Your broker may offer you the option of a margin account, wherein you can borrow from the firm itself to grow your investment.
This can be a very risky choice. If you’re not willing to take on the possibility of more debt, skip this option.
But this also has the ability to introduce leverage to your stock investing. I recently made a trade on margin – using 50% my cash and 50% margin – and increased my gain by 50%!
How much money should you start a brokerage account with?
Check with your broker to see if they have minimums or restrictions for their clients. They may even have special recommendations for a good investment trajectory for you.
Be prepared to have a starting deposit upon opening an account.
As always, consult with your financial advisor before investing.
The top rule of investing: Be ready!
As you would with any other investment venture, educate yourself and make sure you’re not depending on just your investments to do well.
The whole point of having a diverse portfolio is making sure you have enough different income sources to support yourself now and in the future.
One final word about brokerage account investments…
When coordinating your brokerage account, make sure you’re able to trade in every type of market that you’re looking to invest in the future.
With some evolving markets, such as cannabis, you may have to go outside of the traditional exchanges such as NASDAQ or the NYSE to participate.
This doesn’t mean you should do anything illegal!
We’re referring to over the counter (or OTC) stocks versus the mainstream stock exchanges.
These accounts are often traded through dealer networks or on specialized OTC networks.
OTC stocks are perfectly legal and I trade them all the time in both my Fidelity and Schwab brokerage accounts.
The stocks that trade on the OTC are “penny stocks” that might not fit the exact qualifications or legal requirements necessary to be listed on NASDAQ or the NYSE.
Their annual profits may not be high enough, or the company running the index may not want dissimilar industries together.
Do your homework on where your most desirable stocks are listed—if you want to invest with us in CannaVestor Lab, you’ll have to be able to trade OTC!
Overall, brokerage accounts are a fantastic way to start investing and building up a portfolio of your own. If you’re interested in starting out as a stock investor, this is a perfect way to start.