The best brokerage accounts in 2021 depend on a trader’s style, personality, and brokers’ regulations. Many traders find it challenging to choose the best brokerage accounts to trade in a friendly environment. There are numerous aspects that can impact the trading experience, such as ease of use, access to analysis tools, news updates, and more.
Therefore, in this article we'll guide you through the best brokerage accounts and provide a list of reliable account types.
Our List of the Best Brokerage Platforms
Brokers work as a bridge between traders and liquidity providers. Every trader should choose a reliable broker that places an investment order on their behalf.
In this section, you will discover a list of the best brokerage accounts in 2021. Each provider is hand-picked considering traders’ needs depending on their experience and the broker’s features.
What Are Brokerage Accounts?
A brokerage account is a taxable investment account where you can trade stocks, bonds, forex, mutual funds, and other assets. Traders usually enjoy different trading functions when using a brokerage platform due to separate account types. For example, if you are a new trader, you may get fewer functions because of lower deposits.
In the meantime, an experienced trader may deposit higher amounts and get full access to the platform. Most brokers offer multiple trading account types to match traders’ requirements, from beginners to professionals.
Therefore, if you are a new trader, you should focus on trading accounts with low deposit requirements. However, to get the maximum benefits from a broker at the lowest cost, you should invest higher amounts, which, unfortunately, is often impossible for new traders.
Furthermore, brokers usually provide one-to-one support to traders who invest higher amounts. Some brokers set a dedicated customer support manager for those who select a top-tier account.
How Do Brokerage Accounts Work?
You have to select the account type as soon as you open a new trading account with a broker. When registering, you have to provide information that includes your trading experience and the type of account you want to open.
The main aim of a broker account is to transfer your trading order to the liquidity provider. If you are interested in trading on a short-term basis, this is the most efficient way. You have to open the trading order from the broker account, and the broker will transfer the order for you and charge a small fee.
The charge may depend on which account type and broker you choose. The starter account types are suitable for new traders that require a lower deposit. The starter account’s benefit is that it does not require impressive amounts of capital. In the case of most brokers, you can open starter accounts with a deposit between $50 and $100.
Later on, when you are more experienced, you can upgrade the account type by opening an additional account or upgrading the current one. Make sure that your investments and trading activities remain the same when you upgrade the trading account.
Key Features to Look For in Brokerage Accounts
The perfect brokerage account depends on traders’ personality, experience, and expectations. It is difficult to cover all requirements and features, but most of them have the same fundamental characteristics.
Here is the list of key features that you should consider while choosing a brokerage account:
If you are a new trader, you should start with lower deposits. Therefore, you may want to choose a trading account that supports smaller amounts. In that case, any beginner or starter account type will meet your requirements.
The spread is the difference between the bid price and ask price. This is the fee that the broker often charges you. A lower spread is always good for the trader, but not all trading accounts provide them. Moreover, there are other fees like:
- Annual fee
- Inactivity fee
- Deposit/withdrawal fee
So, you should opt for a broker that does not charge these unnecessary fees.
A trading platform is a software program where all trading activities happen. Therefore, the availability of trading platforms is a matter of consideration when choosing a brokerage account.
In a brokerage account, you should find some of the typical investment options as mentioned below:
- Individual stock
- Exchange-traded funds (ETFs)
Currently, ETFs and mutual funds are popular investment choices for portfolio diversification. So, it is recommended to find a broker where you can purchase them without any fees.
Pros & Cons of Using Brokerage Accounts
How to Choose the Best Brokerage Accounts for Me?
If you want to invest in the short term, choosing a brokerage account would be the best option. However, a brokerage account does not have any tax advantage that you should consider. You also have to pay taxes on profits you make or dividends you get.
If you agree to make short-term investments, you should find brokers overseen by your country’s regulatory authority. Then, you need to compare broker accounts and see which broker provides maximum benefits according to your trading style.
Make sure to consider the deposit and withdrawal methods, leverage, minimum deposit requirement, and margin privileges when choosing the account types.
There are both cash and margin trading accounts; margin accounts allow you to borrow money to buy stocks. However, you have to consider that there is some inherent risk involved in the margin accounts.
How to Safely Use the Best Brokerage Accounts to Make Money Online Trading?“ Traders should focus on what they want from a brokerage account by matching their trading experience. If you are new in forex trading and don’t know much about how trading works, you should not take a high-leveraged account. On the other hand, you can get the maximum benefit from the leveraged account if you are experienced. While trading, you should follow a well-defined trading strategy to get the maximum benefits. If you can follow a profitable trading strategy with appropriate money management, you can use your brokerage account safely. ”- Mircea Vasiu
Considering the discussion above, we can say that a brokerage account is suitable for both beginners and experienced traders. Moreover, brokerage accounts have a direct relationship with a trader’s trading performance.
First, you should start trading with beginner accounts where the minimum deposit requirement is low. Later on, as you get more experienced, you can start trading using top-tier account types to reap all the benefits of your investments.
Frequently Asked Questions
All brokerage accounts should be regulated and registered with the relevant authorities.
The best brokerage account depends on your needs, preferences, capital, and trading strategy. You can check out our list of recommended brokerage accounts to find the best ones right now.
Yes, you can access forex, stocks, indices, commodities, or cryptocurrencies through brokerage accounts, among others.
Yes, you have to follow some easy steps to open brokerage accounts. You need to provide personal information, then wait for your account to be verified.
Apart from retirement accounts, all brokerage accounts are taxable. The income generated is taxed, but it depends on the type of investment income you earn. For instance, capital gains are taxed depending on how long you had the investment. All short-term gains, defined as one year or less, are taxed as ordinary income.
Depending on your country, brokerage accounts may be insured, but regulations vary. For instance, in the United Kingdom, the Financial Services Compensation Scheme (FSCS) provides partial protection. In the US, brokerage accounts are insured by FDIC. However, these do not cover investment losses.