What is a brokerage account?
A brokerage account is a trading account that allows you to buy and sell stocks, mutual funds, bonds, exchange-traded funds, etc. You can open this account with any bank or brokerage firm and trade in listed securities. With the help of a brokerage account, you get access to the stock market and can freely invest in various investment tools.
Brokerage houses and banks offer an array of brokerage accounts specifically designed to meet your investing needs. Understanding the various brokerage accounts available is better so that you can choose one that matches your needs. So, let's understand.
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What are the different types of brokerage accounts in India?
The various types of brokerage accounts available in India are:
- Self-Directed Online Accounts: Self-Directed Online accounts act as a user interface between the investor and the stock market. The investors must solely take the investment decisions under this account. With the help of the various analysis and research tools available online, the traders are expected to undertake the stock deals and develop investment portfolios by themselves.
- Full-Service Accounts: Full-Service Accounts provide full financial services like investment counseling and other related investment services to the traders. These services usually come at a higher price than other brokerage accounts. The brokerage firms assign a full-time financial advisor to the investor, who is wholly responsible for the investment decisions undertaken in this portfolio.
- Discount Brokerage Accounts: Discount brokerage accounts are those that come at a comparatively low rate and are available for account opening through both offline and online portals. Casual traders generally open these types of accounts. Discount brokerage account holders must make all the investment decisions like research and selection of the stock, planning, and placing trades on their own.
- Cash Brokerage Accounts: Cash Brokerage Accounts do not extend any cash lending to the traders, making it impossible for them to invest in short stocks. Cash Brokerage accounts are conventional accounts that expect the trader to settle their stock purchases within a specified date. Parking of funds is not allowed in this account. You can only make cash deposits in this account for a particular trade.
- Margin Accounts: Margin accounts permit the investors to borrow some money from the brokerage house at certain interest rates, enabling them to undertake advanced trade options such as shorting. The brokerage houses lend money to the traders against the parked funds or securities in their existing brokerage accounts.
Closing Thoughts
So, it will be beneficial to select a brokerage account based on your investment needs, investment amount, experience in the investing field, and the assistance you may require. Thereafter, open the account and get maximum benefits with a good return potential.
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