Regardless of how you invest, if you’re going to
put your money into the stock market, most
people are required to use a stock account
through a brokerage.
There are a few exceptions, but these are so
technical and require so many hurdles, it’s far
easier to invest with a brokerage stock account.
Particularly today, with the ease of the Internet, the average investor can now
research in the evening, purchase in the morning, and sell older holdings by the
afternoon all in the same day.
Traditional Stock Accounts
Until computers and the Internet came along stock accounts had to be created and
held with traditional, over-the-counter brokerages. This required an investor to either
visit in person or call by phone to establish an account with such brokerages.
Once the stock account was created, it then needed to be
funded, which could take days more since it was done by
processing a check from the new account owner. When the
funds were finally deposited, then the stock account owner
could order trades by either appearing in person at the
brokerage’s office or calling in trades by phone. Many account
holders pre-established orders or trade limits to address these
needs since on the spot trade order could be so cumbersome.
As a result, it was quite common to see retirees reading the newspaper or sitting in
the main office of a brokerage since they were the only people who could spend
hours at the office waiting for the right time to trade again. The whole while, stock
brokers were making millions on commissions since trading a stock was also very
expensive (on average $50 a trade).
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