Home Finance How to decide on the appropriate brokerage account?

How to decide on the appropriate brokerage account?


For people who are only starting to become interested in investing in securities, such as shares of listed companies, bonds or ETF contracts, it will be important to know that they first have to open an investment account, referred to as a brokerage account, with a selected brokerage agency or house. However, before they do it, they should take a responsible approach to choosing such an account, which is not as simple as one may think. You need to know what to pay special attention to in order to ensure that the brokerage account meets all needs of its user.

What exactly is a brokerage account?

Before analysing different offers of investment / brokerage accounts, it would be good to know what they actually are. This will, to a certain extent, illustrate what they are for and what needs of the investor they should meet.

A brokerage account, also referred to as an investment account, is an important tool that brokerage houses make available to their clients. It can be used to invest in stock exchange assets and more. Investment companies that open, maintain and operate brokerage accounts of their clients frequently provide access to CFDs, futures or ETF contracts.

A brokerage account is a type of financial account that operates on a basis similar to a current account with a bank, but apart from monetary assets, purchased securities are also recorded on the account. Through the brokerage account, the financial institution can execute all types of transactions ordered by the investor.

The issue of choosing a brokerage account

The most important issues related to the selection of a brokerage account typically include:

  • The amount of fees and commissions related to establishing and using the brokerage account,
  • The minimum deposit amount,
  • The mode of order execution and operation of the transaction platform,
  • Real-time online access to quotations,
  • The option to use the demo version of the brokerage account,
  • Access to selected instruments.

The amount of costs to be incurred by the user is the most frequently raised issue in the context of selection of the brokerage account. Brokerage houses (like www.xtb.com) usually refrain from charging a fee for opening the account, but instead they collect specific fees for maintaining it. In addition, there are commissions for the execution of buy and sell orders for selected assets or for withdrawals from the brokerage account to the current account with the selected bank.

The minimum deposit on the brokerage account may be in the symbolic amount of USD 1, but it may also be much higher.

The mode of order execution should be convenient for the user — there should also be no delays in their execution because a delay of even a few minutes may result in real loss for the investor. Use of the transaction platform provided to the user by the brokerage firm should be intuitive. A good solution is to first set up a demo account, where one can test all functions of the platform and try to invest in securities without risking one’s own funds. Some brokerage houses enable such testing of their products and services. Finally, you need to check whether the brokerage account offers the possibility of checking quotations in one place, online and in real time. What is also important for investors is what financial instruments they will be able to invest in after opening a given brokerage account. Will they only include shares and bonds from the Warsaw Stock Exchange or also assets from foreign stock exchanges, CFDs for various instruments or ETFs, which expands the investment portfolio and promotes diversification