What Is a Stock Account?

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The average investor uses a stock account to buy and sell securities. Stock accounts (also called cash or brokerage accounts) differ from trading accounts. Trading accounts manage various investment instruments including stocks, currencies and more.

Definition

  • Investors with stock accounts place cash in the account in order to buy and sell stocks, bonds and mutual funds. The stock account remains the most basic investment account type.

Rules

  • In accordance with Federal Reserve Board Regulation T, stock account holders must pay for purchased securities within two days of the transaction's execution date.

Advantages

  • Cash account holders do not risk borrowing money from the brokerage firm to purchase stocks. The account must hold enough cash to cover the purchased amount.

Disadvantages

  • The amount of cash in a stock account limits its buying power. Margin accounts use leverage to buy more stock than what the available cash in the account can buy.

Availability

  • The increased number of online, discount and bank brokerage firms has increased the accessibility and variety of stock trading accounts.

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