Thursday, November 8, 2012

READY? SET? FUND!

Hello future investors! Welcome back!

So once you decide which online brokerage firm you want to use and once you are READY to get this show on the road it will be time to fund your online brokerage account. By this, I mean transferring money from your bank account to the brokerage firm in order to start trading.

REMINDER: Having money in an online brokerage account is similar to having money just sitting in your bank. If you choose a credible and legit company; your money will be secured and no one is going to disappear with it (remember to read all the security features of at least a few online brokerage companies and choose the one that makes you feel more comfortable!!). The only difference may be that you probably will be gaining very little any interest on that money (if any at all) as the main "idea" behind the online brokerage account is to use the money to invest it and make a profit not to have it sitting there. But basically, don’t be afraid to just transfer the money and leave it alone until you have done your research and decide which stock(s) you want to buy. ALSO, you dont need to use it all the money at once. FOR EXAMPLE: Lets say you transfer $100 but decide to buy a stock for $25 just to "practice"; the remainder $75 will remain there until you are ready to invest it. Same goes for any amount of money you transfer. No need to rush in to anything. REMEMBER: Trading should never be a gamble or forced via emotions. It should be a strategic approach, which is what I will be teaching you.

Lets get this show on the road…

So, generally, with every online brokerage firm there are three main ways in which you can transfer money in to the account for trading. Here they are in order of “quickness”  (or, which method allows your money to be available for trading faster);
-Wire Transfer
-ACH profile
-Mailing a Check

Wire Transfer “The quick process”
Usually, the wire transfer is initiated on the side of your bank. The online brokerage firm you choose to use will provide you with instructions regarding what kind of information you have to give to your bank in order to authorize them to “send” the amount of money that you choose to the online brokerage firm. This method is considered faster because you can easily just contact your bank, show up at your branch or go online to request the wire. As long as it all goes in proper order, your money can be available within hours or in just one business day. Something to note: Many online brokerage firms wont allow any wire transfers from foreign countries.


ACH:
ACH stands for “Automated Clearing House”. This is the method that I personally used when I first transferred money in to an online brokerage. I personally just felt more comfortable with this method. The way it works is that you enter information such as your routing number and account number in to the online brokerage account. For example: Have you ever set up a payment account online with your cable company or your credit card company just to make it easier to make payments from month to month on the internet? Well, the ACH procedure is very similar to this. Once the Online Brokerage Firm confirms your bank account information and that the account is yours (they will ask you to send in an ID and a voided check) your money can be available for trading within 3 business days on average (that’s how long it takes for the the money to “clear”). If you decide to go with ACH just remember you wont be able to trade immediately and you may have to wait a few days. There really should be no rush so I don’t see a problem with that!
Mailing A Check:
This may take a little longer but is another great option if you just feel more comfortable mailing a check. With most online brokerages, the money should be available for trading as soon as the funds and information are verified with your bank. You can choose between a cashier check or a personal bank check. Make sure to check out the “funding” instructions for the online brokerage firm you use in order to see whom the check should be made payable to, etc. With this method it may also take an average of 3 business days after the check is received for the money to “clear” and before the money is available for you to begin trading.

***
Finally, if you ever want your funds or part of your funds to be sent back to your bank account; the process is very similar. Remember that you can request funds to be transferred back to your bank accounts at any time as long as the money is not invested in stocks at that particular moment.  Lets say you made $500 on a stock and you would like to send that money back to your bank account. You can request the following:
-For the brokerage firm to send you a check
-Or, transfer the money back via wire or ACH (explained above)
This is just an overview of the general procedures. When you open a online brokerage account just go in to the “transferring money” tab (or may be called something similar) for more detailed instructions. If you are ever confused about anything you can always call the online brokerage directly (or use the chat feature if they have one). From my personal experience, the customer service team is always more than happy to answer questions and make things clear. Trust me! I was once lost and confused asking questions that seemed too obvious but no one ever made me feel like I was weird or stupid so, don’t ever feel that way.

Questions about funding? STAY TUNNED FOR THE NEXT POST! We’re about to get “fundamental”. .