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Opening an Account

Now that you have a broker picked out, what is the next step? Well, that would be to actually open a brokerage account with them. This is how it all works:

The brokerage will send you an application in the mail that you need to sign and return. Along with that application you are going to have to send him a check. What is the check for? That is the money that the broker will use to buy your stock or option. Think of it as a checking account (in fact when you put money in a brokerage account, it actually does gain a minute amount of interest on the total balance). The money sit’s in YOUR numbered account, and when you want to buy a stock, the broker has your money on hand. If you start your account with say, 10,000 dollars, and then call him up and say, “I want to buy 100 shares of XYZ ” he will take out of you account the amount of money it costs to buy XYZ. (In this case XYZ is 50 dollars per share and you bought 100 shares so he would debit your account for 5000 dollars PLUS whatever that brokerage charges for commissions.) Similarly when you go to sell XYZ, the monies go right into your account, again less commissions. If you are doing it right, your account will be gaining monies each time you make a trade. So how do you get your money out? It’s as easy as a phone call. Simply call the broker and request a check be sent to you for whatever amount you choose. It generally only takes about a week to get your money.

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