Opening a brokerage account is exciting especially for first-time investors. The truth of the matter is, the potential is endless— anyone who opens a brokerage account can earn from their investments through different types of stocks, mutual funds, even real estate investment trusts, all with the help of a stock brokerage firm.

Like many other major investments, there are certain precautions that first timers must take note of before attempting to create a brokerage account. Is the brokerage firm legitimate? What do you need to know when opening an account? How will you really maximize your money?

Take a look at these helpful tips to give you a headstart about the world of brokerage.

Verify the Broker’s Identity

Verifying the broker’s identity is extremely important. The brokerage industry is, after all, becoming more popular that a lot of bogus brokers suddenly show up, claiming that they can create an account on your behalf. Illegitimacy is quite common nowadays, and oftentimes these may lead to fraud.

The first step when attempting to verify a broker’s identity is to ask for the following:

  • Broker’s License
  • Government Issued Identification: Passport, Driver’s License, etc.
  • Personal Details, including Contact Details

If the broker can provide all these details in an instant, you can more or less determine that your partner is legitimate.

Prepare the Necessary Paperwork

Once you open an account, you will need to provide identification, together with the “new account” application form. You will most likely be asked to provide the following as brokerage firms are obligated to provide details of your investments to the Internal Revenue Service (IRS), and follow certain federal laws:

  • Social Security Number/ Tax Identification Number
  • Government Issued Identification: Passport, Driver’s License, etc.
  • Proof of Employment Status and Financial Information
  • Contact Person

As you sign the “new account” form, you certify that all the information you have provided can be verified so make sure you submit only update documents to avoid any mishaps.

Ask Questions and Be Prepared to be Asked Questions

You are investing hard earned money, so it is only right that you scrutinize where your investments go. Asking the proper questions will help you avoid investing mistakes, so here is a list to get you started:

  • What type of brokerage account do I really need for myself? Do I need a margin account or a cash account? What are the pros and cons of each type?
  • What features should I be aware of? Can you tell me more about interest rates and federal charges?
  • Apart from myself, who else has decision-making powers in my brokerage account?
  • How often will I get charged for my account? Annually, semi-annually, or quarterly?

Monitor Your Account Always

As soon as you open an account, make it a point to monitor your activities regularly. It is important for you to take that second peek at any account statements or trade confirmations that may have errors or were not authorized.

Should you see any unauthorized discrepancies, notify your broker or your brokerage firm’s supervisor immediately so they can investigate. Some firms may ask you to write a complaint letter, so make sure you communicate with them effectively.

In the long run, make sure you also monitor your account’s growth. Are your investments in line with your financial goals or do you need to re-evaluate your expectations? These are some of the most basic questions you should be asking yourself.

Remember to be wise about your money, but you may find out more about stock brokerage before making finance-related decisions.