If you’ve tried to sign up for a brokerage account, you may have looked at the second page, where it asks for “account type”, and been bewildered at the choices. You probably didn’t even know that so many different account types existed. So, depending on the reason you are investing money, here is a breakdown of the type of brokerage account you should consider.
For most traders, you will probably want to get a margin account, such as the trading accounts from Alpari UK. The reason you want to get a margin account is that a margin account allows you to trade on margin (or credit) issued from the brokerage. This is essential for shorting stocks or other investments, or for doing complicated options trades. You can also leverage margin to get bigger returns by investing with credit. However, investing in margin can be risky, so make sure that you are a skilled trader before doing anything. Also, keep in mind that a margin account has no special tax benefits, and so any gains you make while trading in the account can be taxed normally. If you are a big time trader, this could add up to a huge tax bite.
The Long Term Investor
If you are investing for the long term, you most likely want to stick to tax deferred accounts like Individual Retirement Accounts (IRAs). There are several different IRA accounts, depending on your thoughts about taxes, as well as your employment situation. It is important to remember that most IRAs have income limits to contribute to the account and receive the tax benefits, so make sure you check if this applies to you.
The two main types are Traditional IRAs and Roth IRAs. With a traditional IRA, you invest pre-tax money, and pay taxes on your withdraws at retirement. This can save you from paying taxes now. With a Roth IRA, you use after-tax money, but pay no taxes when you retire. The big gamble is whether you think taxes are higher for you now, or will be higher for you later.