How to Open an Investment Account?

Opening an investment account is important decision: you may be thrilled by the prospects of earning dividends, but you also risk losing your money. For this reason, it is important to examine the terms and conditions under which you will be opening an investment account. Before you decide on investment firm to go with, it is wise to consider the type of investment and investment strategies, the brokerage location, and the risk level, among others.

You have to decide if you will collect interest from your account periodically or you will let it compound. Another point to consider is if you prefer making a one-time deposit or you will be making periodical deposits. Such questions will determine the type of investment you make. In terms of investment strategies, you may go with the stocks of established companies or you may buy and sell options on shares of certain companies. You may get advice from a broker or handle transactions on your own. Once you have given a thought to these issues, you need to consider the risk you are willing to take. In general, stock investments fall into 3 broad categories: high, moderate, and low risk. If you prefer to watch your investment growing gradually, you will probably opt for the low risk category. If you are high risk investor, however, you may either gain high profits or lose your money over a short period of time. In terms of brokerage location, it all depends on how you prefer to contact your broker or brokerage firm. If face-to-face contact is what you require, you will probably not choose a large investment corporation. Finally, consider if you want to play an active role in the investment process or you will be happy to let the broker manage your account.

You may open an investment account with a bank, insurance company, brokerage house, or an investment firm. Typically brokerage houses charge smaller fees than other providers. While the choice is entirely up to you, it is a good idea to compare the set up and maintenance fees of different companies. You may ask them if there are any extra costs as well as special deals. Other details to consider are the minimum required account balance, and fees for ‘no transaction fee funds’ and ‘transaction fee funds’. If you call the chosen company by phone, pay attention to the time it takes to reach a representative and if they are helpful and polite.

There are various types of accounts: business investment accounts, guaranteed investment accounts, money market investment accounts, etc. Other options are money market and margin investment accounts. Canadian residents may open such accounts in RBC Direct Investing or ING Direct, among others. The type that is suitable for you depends on the type of investment you make, together with your investment strategies. These decisions are essential, but it is most important to remember that wise investors don’t invest more that they can afford to lose.