3 Myths That Could Be Keeping You From Opening a Brokerage Account

by Maurie Backman | Published on Oct. 3, 2021

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Don't let these myths stop you from investing.

If you have money on hand that you don't need to put into savings for emergencies, and you're already steadily funding a retirement plan, then it could pay to put your spare cash into a brokerage account. That way, you can invest the money you aren't using. And if all goes well, you might grow it into a larger sum over time.

But there's a fair amount of misinformation out there about investing, and the last thing you want is for it to stop you from growing wealth. Here are three myths that could be stopping you from opening a brokerage account that you shouldn't believe.

1. You need a lot of money to open an account

Some brokerage accounts do impose an account minimum or charge fees if your account balance falls below a certain number. But many brokerage accounts don't have such requirements. This means that even if you're only sitting on $100 or $200, you can open a brokerage account and start investing.

Keep in mind that a growing number of brokerage accounts these days let investors buy fractional shares. Fractional shares allow you to invest in a company even if you can't afford a whole share of its stock. For example, say a company's stock is trading for $400 a share, but you only have $100 to get started with. In that case, you could buy one-fourth of a share of stock if your brokerage allows you to purchase fractional shares.

2. You need to know a lot about stocks

Buying stocks on a company-by-company basis does require some knowledge and research. If you're intimidated by that idea, there's another option to look at -- ETFs.

Short for exchange-traded funds, ETFs are funds that include several stocks. The great thing about ETFs is that a single investment gives you a portfolio that's instantly diverse, and when you buy ETFs, you don't have to research companies individually.

Another thing you should know is that many brokerage accounts come with educational resources that are free to account holders. So even if you start out knowing very little about stocks, that could easily change once you start exploring the features your brokerage account offers. It pays to grow your investing knowledge even if you intend to fall back on ETFs to start out with.

3. You'll pay costly fees to invest

These days, it's easy to find a brokerage account that doesn't charge a fee every time you purchase a stock. That means you can trade to your heart's content without having to worry about fees eating away at your profits.

That said, too much trading isn't always a good thing. Some people who trade often end up losing money by selling stocks too quickly when they're down or not holding them long enough to see their value rise. But if you want the option to trade without incurring fees, it's there.

Opening a brokerage account could get you closer to meeting your financial goals. It pays to explore the different accounts out there and see which is best for you.

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