What is a Brokerage Account (2024)

A brokerage account is an investment account that allows you to buy and sell a variety of investments, such as stocks, bonds, mutual funds, and ETFs. Whether you're setting aside money for the future or saving up for a big purchase, you can use your funds whenever and however you want.

Ready to work toward your financial goals? Learn more about the benefits of a brokerage account and how it compares to other types of investment accounts.

What can you do with a brokerage account?

You can use your brokerage account to gain access to stocks and other types of investments. Opening a brokerage account is one of the first steps to building your personal investment portfolio.

  • Buy and sell stocks, mutual funds, ETFs, and other securities.
  • Take advantage of potential long-term growth.
  • Set aside money for your retirement, or other goals like college tuition or a down payment.
  • Gain access to investment research, tools, and strategies.

What is a Brokerage Account (1)

Ready to get started?

Open a brokerage account

How is a brokerage account different from other accounts?

Brokerage account is a broad term that covers a few types of accounts. For example, a standard brokerage account offers maximum flexibility and access to a variety of investments. Learn more about how a standard brokerage account compares to other account types with our account comparison table below.

Types of Accounts

What is a Brokerage Account (2024)

FAQs

What is a brokerage account in simple terms? ›

A brokerage account is an investment account that allows you to buy and sell a variety of investments, such as stocks, bonds, mutual funds, and ETFs. Whether you're setting aside money for the future or saving up for a big purchase, you can use your funds whenever and however you want.

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What is a brokerage account quizlet? ›

Brokerage Account. A brokerage account is an account you open with a stockbroker in order to trade stock on a stock exchange. The broker uses the money in the account to buy and sell stock on your behalf when you decide you would like to make a trade.

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What should be in a brokerage account? ›

Brokerage accounts hold securities such as stocks, bonds, and mutual funds and some cash. A bank account only holds cash deposits. A bank account lets you write checks and use a debit card.

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How do you describe brokerage? ›

What is a Brokerage? A brokerage provides intermediary services in various areas, e.g., investing, obtaining a loan, or purchasing real estate. A broker is an intermediary who connects a seller and a buyer to facilitate a transaction. Individuals or legal entities can act as brokers.

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What is brokerage and examples? ›

A brokerage firm or brokerage company is a middleman who connects buyers and sellers to complete a transaction for stock shares, bonds, options, and other financial instruments. Brokers are compensated in commissions or fees that are charged once the transaction has been completed.

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What is a brokerage account for kids? ›

A custodial account is a type of investment account that's managed by a parent or guardian who opens it for a minor before the age of 18 (or 21, depending on the state.) Once the child turns the age of majority, the parent or guardian loses the ability to manage the account.

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What is a brokerage account called? ›

A brokerage account is a tool you can use to invest in the stock market. They are also called taxable investment accounts to differentiate them from tax-advantaged retirement accounts like 401(k)s. You can open a brokerage account with online brokers or robo-advisors.

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What is a brokerage account also known as? ›

Key Takeaways. A brokerage account is an investor's financial account with a licensed brokerage to buy and sell securities. Different firms are geared toward various investors based on experience, the desire for support, and asset levels.

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What is a brokerage account used for quizizz? ›

What is a brokerage account used for? It's an online portal that allows you to set up appointments with a fund manager. It's the account you use to pay any taxes you owe on money you earned in your investments. It's a type of account used to buy and sell stocks, bonds, and mutual funds.

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Are brokerage accounts safe? ›

Accounts Are Typically Insured

Brokerage firms that are members of the Securities Investor Protection Corporation (SIPC), which includes most brokerages registered with the Securities and Exchange Commission (SEC) insure your account for up to $500,000 should your brokerage go out of business.

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What is the most common type of brokerage account? ›

The most common type of brokerage account is the standard cash account (aka a brokerage account funded by your own funds). Standard cash accounts are taxable accounts that give investors access to a multitude of investable securities.

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What is better than a brokerage account? ›

Brokerage vs.

A self-directed IRA or SDIRA offers the added advantage and flexibility of allowing you to invest in real estate (as investment property only). With IRAs, you'll generally have a minimum deposit requirement of $1,000 whereas many brokerage accounts have no minimums to get started.

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Why is a brokerage important? ›

The vital role of a brokerage company is to act as an intermediary, connecting buyers and sellers to allow for a transaction. Brokerage firms can receive payment through a commission (either a flat fee or a percentage of the transaction amount) once the transaction is completed successfully.

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How do you open a brokerage account? ›

Key steps include:
  1. Choosing the type of brokerage account (individual or joint)
  2. Providing your personal, employment, and financial information.
  3. Selecting specific account features.
  4. Creating login credentials and providing contact information for your account.
  5. Verifying your identity.
  6. Indicating how you'll fund the account.

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How do you use brokerage in a sentence? ›

I have a great stock brokerage company going. When they failed to put up the money, the brokerage houses sold some of their stocks to raise cash. There is also a margin on the amount you pay for buying and selling, as well as brokerage fees.

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What is a brokerage account and how do you use it? ›

A brokerage account is like a basket that holds your investments. Once you put money into your account, you may want to allocate your assets to specific investments. You can place trades in your account to buy those investments, including mutual funds, ETFs, stocks, bonds, and more.

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What is the downside to a brokerage account? ›

Downsides of a standard brokerage account

Since it's a taxable account, you'll have to pay taxes on earnings in your account, including capital gains and dividends.

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Why no one should use brokerage accounts? ›

If the value of your investments drops too far, you might struggle to repay the money you owe the brokerage. Should your account be sent to collections, it could damage your credit score. You can avoid this risk by opening a cash account, which doesn't involve borrowing money.

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Is it a good idea to have a brokerage account? ›

For example, if you want to buy a house with cash or save up a very large down payment, a brokerage account might be a good option if you plan to save for about five years. But for savings goals that will take less than five years, you might want to use a regular savings account or a money market account.

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