Investments are risks that people can take, especially if they are large multinational companies. However, this happens with any entity and investor who wants to add money to improve the services or products they market.
The investor or investors can open brokerage accounts to have their portfolio insured, either to maintain a shared or individual business, which depends on the needs of each investor and, in the case of having them, of their partners.
What are brokerage accounts?
Brokerage accounts are portfolios in which investors can sell and buy shares, negotiable funds, current deposits, bonds, mutual funds, etc. The agreement is between the person who will invest his money and a third party who will be the securities intermediary.
Thanks to these accounts, the investor can deposit and order investments for a certain company, that is to say, to invest his money in several ways so that, later, a broker executes the transaction correctly.
How do brokerage accounts work?
It is important to consider the different stock brokers to understand how brokerage accounts work, as various fees constantly change according to the official stock exchange.
To open a brokerage account, you can do it directly in a branch of the entity or broker, or it can be done online, a process that takes no more than a couple of minutes without the need to leave your home. This virtual way of accessing brokerage accounts has grown significantly during the pandemic due to COVID-19 health restrictions.
While not all require an initial deposit, once you open your brokerage account, you must fund it with a check or money transfer and then work with your investments.
Brokerage accounts are used to make investments from a brokerage account, so you can buy and sell assets whenever you want. There are two main types of brokerage accounts, which you can choose according to your needs.
So, a brokerage account is a portfolio of investments whose financial securities are executed by brokers or banks according to what the investor orders them to do.
What is an individual brokerage account?
An individual brokerage account, as the name implies, belongs to only one person (the investor), and no one else has access to it. That is to say, the account holder is the only person who can know and make movements of his portfolio. He is the only one who can make decisions regarding his investments.
This account is especially for those who are financially literate and can manage their investments responsibly and knowledgeably.
What is a joint brokerage account?
A joint brokerage account is a type of shared account, i.e., two people (investor and partner) make decisions together since both are the owners of the money and account holders, so they have a 50/50 share of the profits (or losses).
This type of account stands out because the broker is an intermediary between you and the investments. You will not have to worry about making these operations since you will be well-advised by experts on the subject.
If you open a joint brokerage account, you can decide whether to do it with your partner or spouse, which is normal for married couples. It also happens that reports are created with children, relatives, and any other type of investor.
Owners of joint brokerage accounts have the same rights to the investments. Three of the most important types of ownership arrangements are joint tenancy, tenancy in common, or tenancy by the entirety.
Joint Tenants with Rights of Survivorship
Joint tenancy means that the two investors have 50% of the total investments since they own the assets in equal shares. Each person can do what he/she wants with his/her share of the investments and withdraw and transfer money at any time.
When one of the account owners dies, the entire account becomes the property of the other investor, thus “inheriting” the report, a term erroneously used, since the survivor is also the owner of the account but only became entitled to the other half due to the death of his partner.
Tenants in Common
This account differs from the previous one because each investor owns an unequal share of the total money. If a couple invests $90,000 in claims, and one party puts in $30,000 while the second party puts in $60,000, the first party will only be able to access the total amount of money invested. That means the smaller investor will keep 1/3 of the total, while the other person has the right to use 2/3 of the portfolio’s total value.
When one of the two persons dies, their account share passes to their legal heirs, who can sell their claim to the other account owner if they wish.
Community Property
Community property is intended only for married couples, who may share ownership of their property and income through this account. The tenancy by the entirety is like a joint tenancy since the portfolio is owned equally (50/50).
The community property contract allows spouses to sell assets as long as they agree and is a consensual transaction approved by both parties.
If one of the account owners dies, his or her share, i.e., the entire portfolio, becomes the surviving spouse’s property. It is important to note that this brokerage account is unavailable in all U.S. states.
References
- O’Shea, Arielle, and Pamela Fuente. “What Is a Brokerage Account and How Do I Open One? – NerdWallet.” NerdWallet, http://www.facebook.com/NerdWallet, 13 Sept. 2019, https://www.nerdwallet.com/article/investing/what-is-how-to-open-brokerage-account.
- Saad, Amena. “What Is a Brokerage Account? Types, Features, What to Look For.” Business Insider, Insider, 26 Aug. 2022, https://www.businessinsider.com/personal-finance/what-is-a-brokerage-account.
- “Types of Brokerage Accounts | Charles Schwab.” Schwab Brokerage, https://www.schwab.com/brokerage/types-of-brokerage-accounts.
- “What Is a Brokerage Account | TIAA.” Investing, Advice, Retirement, and Banking | TIAA, https://www.tiaa.org/public/invest/financial-products/brokerage-accounts.