Saturday, November 3, 2012

Filling out the Online Brokerage Application

Hello again! We are very close to going fully in to investment techniques but before we get in to that we have to get through the 'application' process of the online brokerage firms.



As you may understand; the questions may vary slightly from brokerage to brokerage. However, a lot of the questions are pretty standard. So, this post will provide clarification on some of the questions that may seem odd or confusing.

Individual or Joint Account?
If you plan to invest your money yourself and monitor the account yourself go with "individual". They also give you the option of having a "joint" account. Lets say for example you want to "join forces"  and invest together with your friend, your boyfriend/girlfriend, husband/wife, significant other, family member, a perfect stranger; you get the point. Well, you can do that. However, for anything you do in that account you will need permission from the other person and have to have him/her sign off on certain things (ie: to transfer money in and out, etc.)

Margin Account?
Say NO! to this option. A margin account means you agree to "borrow" money from the online brokerage firm to do trades. It would be like a loan with its corresponding ridiculous interest rate. So, for example, lets say you are super excited about a stock and you're sure is going to skyrocket so you "borrow" money through the online brokerage via the margin account and buy 100 shares. Well, lets say the next day all hell breaks loose and the stock goes down to rock bottom. Well guess what, whatever margin money you borrowed you will have to pay back no matter what (or the brokerage firm will just deduct it from whatever money you have available in the account). So, avoid margin at all cost! Choose CASH account which means that at all times you will be investing with you own money.

Other Details:
  • You must enter your social security number mainly for tax purposes and to make sure that you are a "real person". You may also use an E-Tin number (tax identification number) if you have that instead of a social.
  • Are you a resident? Yes. This question is just looking to confirm that you live in the United States, anywhere.
  • You will get the option to choose from multiple different "types" of accounts. Go with a GROWTH account. As your goal is to steadily grow the value of your portfolio/your wealth.
  • You'll also get asked about your "net worth" or how much you are "worth" how much money you have in general. This is a question that they are required to ask you by law and is only for informational/record purposes. No need to be super specific here!