adminA brokerage trading account is a taxable investment account held at a registered brokerage firm in which securities may be bought and sold.
The account offers access to a range of investments such as stocks, bonds, futures, options, mutual funds, Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs). There are different types of brokerage accounts and we shall focus on cash accounts.
Cash account
This is a basic type of brokerage account which allows traders to use cash to purchase financial securities such as stocks, mutual funds and fixed income products.
The biggest advantage of cash trading is that there is no set time limit for buying and selling the stocks.
When trading in cash segment a trader can hold the stocks for as long as they want until the desired profit.
The downside of cash trading is that there is less potential of increase in value of an investment. For long-term buy-and-hold investors, a cash account is the safer and simpler choice.
With a cash brokerage account, an investor is required to deposit cash and securities in full by the time the trades settle in order to engage in transactions.
Although it may seem impractical at times, it surely restrains an investor from going beyond their limit.
Capital needed for buying the securities is done on a cash-to-cash basis and does not involve any loans. Stocks held in a cash account are not lent out by the brokerage firm to short sellers.
In cash trading, after buying securities, the investor must pay the amount in cash within a stipulated number of days. When buying securities in a cash account, the investor must deposit cash to settle the trade or sell an existing position on the same trading day.
Upcoming AGMs/EGMs
Axia, Chapman Golf Club, Eastlea, Tuesday November 26, 2019, 8:15am
Truworths, Boardroom, Prospect Park, Stand 808 Seke Road, Thursday November 28, 2019, 9am.
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