One question I got asked quite often regarding investing in stocks or exchange traded funds (ETFs) is whether you need to have a minimum amount of money in your account in order to buy shares.
From what I can see, people seem to be confused between the minimum initial deposit required to open a Scottrade brokerage account and the amount required to buy stocks or ETFs once the account is opened and funded. Let’s use Scottrade, a popular online discount broker, as an example to show the difference between the two.
With Scottrade, you do need to have a minimum deposit in order to open an account. Currently, the requirement is $500. This means that you need to have that amount of money deposited into your new Scottrade brokerage account at the time when you open your account. This is the requirement imposed by Scottrade. However, not every broker requires a minimum initial fund for new account. Zecco, for instance, has no minimum requirement for its brokerage account. During the account opening process, Scottrade will ask you to provide a funding method, whether it’s by wire, check, or ACH, for the account. Among all these methods, I found that ACH, which directly transfers money from your bank account to your brokerage account at Scottrade, is the most convenient way because it’s free and in most cases you can use the fund to purchase stocks or ETFs on the same day you make the transfer.
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Once the account is opened and funded, then you can go to the next step of buying stocks or ETFs of your choice from your Scottrade account. Regarding the question of stock or ETF minimum investment, there’ s actually no minimum investment requirement at Scottrade in terms of dollar amount. However, since you can’t buy fractional shares of a stock or ETF, the minimum investment would be equivalent to the value of one share of either a stock or an ETF.
BTW, if you are interested in getting a Scottrade brokerage account, you can open an account with promo code KGKP0724 and receive 3 commission free trades.
