After you’ve established and been approved for a brokerage account, you’ll need to fund it. Here’s how you can fund your brokerage account.
Aug. 26, 2021
Funding options vary from country to country and there are some costs associated with each method.
As costs are usually fixed, it may make sense to save up a bit before you fund in order to minimize “friction”–money that is associated with investing that doesn’t actually go into the shares you own.
For example, if it will cost you $4 to transfer money to your account, sending $20 will mean you’re already down 20%. That’s not an efficient way to invest.
Rather, you should think about saving up and sending $200. That way you’re only down 2%. With fixed costs, the more money you transfer, the less detrimental these costs are to your overall returns.
If you want to be serious about investing regularly, it might be a good idea to set up an automatic transfer with your bank. That way you can have money transferred into your brokerage account just after your wages come in every month. This will ensure that you stay disciplined and don’t end up using those extra funds for needless purchases.
Remember, just because the money is in your brokerage account, that doesn’t mean you need to invest it right away. It’s always a good idea to keep some cash in your brokerage account in case there is a certain market downturn. This way you can invest in some great companies at a discount. However, don’t leave all your funds in cash. Waiting for the market to dip can easily lead you to miss out on big gains.