What is a broker account and why it is worth opening it
The brokerage account is the invoice with which the individuals can buy and sell promotions, bonds and other financial instruments on stock markets.
By law, federal law from 22.04.1996 N 39-FZ "On the securities market" directly participate in the auction is entitled only legal entities, that is, brokers. Therefore, if you want to make transactions in stock markets, you need an intermediary.
The requirement of legislation was realized in the following infrastructure: Exchange – Broker – You. Such a three-stage system allows you to distribute systemic risks among a large number of market participants, create competitive services at the level of brokers and "save" the stock exchange from communicating with millions of individuals who trade on it.
The broker account is needed so that you can enroll money on it, and the broker is to take them from there, when on your behalf conducts transactions in the stock market. In the other side, it works similarly: the broker sells on your behalf, for example, stocks, and money returns to the account.
The standard brokerage account differs from iis
Individual Investment Account (IIS) – a variant of the brokerage account for which special conditions apply. In particular, you can get unique tax deductions. But there are additional restrictions.
The essential differences between these two accounts consist here:
- On IIS you can translate to one million per year, there is no restrictions for the brokerage account.
- From the brokerage account you can freely output money, in the case of iis – no, it will mean closing the invoice. At the same time, in order to take advantage of tax deductions, IIS should exist at least three years.
- For IIS, a set of financial instruments available for purchase is limited by law, for a brokerage account – no, it all depends on the broker.
How safe is brokerage accounts
A pair of brokerage usually opens a depositary account. On it all your assets are stored in electronic form. If a broker goes wrong with something, you will save the right to your securities and can translate them to the depository of another broker. Or make a new brokerage account if the depositary is initially open from another legal entity.
But the risk of losing money from the brokerage account, if the broker go bankrupt or gets into other troubles, there is because insurance is not provided. So it is worth choosing a proven mediator and do not store large amounts on a brokerage account, but translating money into assets.
How to open a brokerage account
You will have to go through a few steps.
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1. Choose broker
This is a very responsible stage. The safety of your finance will depend first of all from it. There are several criteria for which you need to evaluate your future representative on the stock exchange: for example, if he has a license, how long has he been on the market and access to which exchanges provides.
Many companies are ready to conclude service contracts online. This is an option for those who are used to do everything remotely.
Brokerage services are often offered banks through their subsidiaries. So choose from the companies you see for the first time, optionally, you can trust familiar brand.
2. Determine the view of the account
Normal brokerage or iis. If you want to use tax deductions and ready for three years not to withdraw money, you can consider IIS. If you need more freedom, then the standard brokerage account will be better.
3. Pick up the tariff
Brokers usually offer different options, depending on how actively you will trade in securities. As a rule, if you just start, then something simple and cheap will come. You need time to understand how everything is arranged, so there is no point in overpay.
4. Prepare documents
To open a brokerage account, you will need:
- certificate of tax accounting (INN);
- Insurance certificate of compulsory pension insurance (SNILS).
You will also be asked to fill out the application and the questionnaire in the form of the company.
What is the brokerage account for more
Trade on the stock exchange without a brokerage account will not work, so without it can not do if you are planning to invest in securities available on stock exchanges. However, he can come in handy not only for this.
Anyone who plans to create his capital is worth opening a brokerage account. With it, you can not only buy and sell securities, but also, for example, perform exchange operations with currency on the stock exchange rate, which is often more profitable than in the usual exchange office.