How Do Brokerage Accounts Work?

The Basics

Brokerage accounts are basically bank accounts that are used for the purpose of investing in stocks, bonds and mutual funds. The accounts are opened either in person or on the Internet, depending on the banking institution, and the account holder can invest in stocks and bonds directly from her account. A professional broker takes the requests and invests the money as the account holder has requested.

Money Transfers

Many online brokerage accounts offer customers the ability to transfer money into their accounts via a checking account. The money can be transferred electronically or by bank wire. Once transferred, the money is available for investing. Traditional brokerage accounts can be funded just as a normal bank account would be.

Comission

They money placed into a brokerage account can be used to buy stocks and pay the commission of the professional working for you. Commissions are calculated in one of two ways. The broker can calculate a commission from a percentage of the overall sale--2 percent to 5 percent--or a flat rate fee ranging from $5 to $100, again depending on the investments.

References

• Joshua Kennon