Successful trading of financial instruments requires one to be fully equipped with enough information before diving deep into investing. We covered two main types of brokerage accounts and here comes the other Types of brokerage accounts.
- Hypothecation
Pledging securities as a collateral against a loan, so that the securities can be sold by the broker if the customer is unwilling or unable to meet a margin call.
- Street name registration
An arrangement under which a broker is the registered owner of a security.
The account holder is the “beneficial owner.”
Trading accounts can also be differentiated by the ways they are managed.
- Advisory account – This is where an investor pays someone else to make buy and sell decisions on your behalf. The investor is not directly involved.
- Wrap account – All the expenses associated with your account are “wrapped” into a single fee. it is therefore expensed as one in a single transaction
- Discretionary account – You simply authorize your broker to trade for you. Almost similar to the advisory account but in this case, the broker is in charge of it all.
- Asset management account – Provide for complete money management, including check-writing privileges, credit cards, and margin loans.
You may be asking yourself, is it a must to have a brokerage account for one to invest in financial securities? the simple answer is No. The long answer is that you do not need a brokerage account to invest in financial securities because a brokerage account is not a necessity. One can buy securities directly from the issuer or another alternative is to invest in mutual funds.
