Opening An Investment Account

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Once you've shopped around a bit and satisfied yourself that one brokerage house is both reputable and pleasant to do business with, you can open your new investment account.

This costs you nothing. It is rather like opening a charge account at a department store. The broker simply needs to know who you are and what your credit is, so that he may be sure you can pay for the goods you order. And promptly. Unlike the department store, the brokerage will not send you a monthly bill. "Regular way" transactions, the kind you will meet up with most often, require that stock bought be paid for, or stock sold be delivered, within four business days.

Accordingly, the representative will want your name, address, and phone number, the name of the place where you work, and some references. Usually, the name of your bank and some of your charge accounts around town will do.

There are several kinds of accounts available to you. The basic one is the cash account, which establishes you as a bona fide customer able to buy or sell. Joint accounts may be opened by a husband and wife. Like a joint checking account in a bank, this gives the partner who survives the other the right of access to the account without waiting for an estate settlement. Investors unrelated to each other who wish to invest co-operatively may also open a joint account.

SMargin accounts are an extension of the cash account, which permits the customer to buy on margin. Since these mean the broker is willing to loan you part of the purchase price of your securities, the credit investigation is somewhat more searching.

Discretionary accounts may also be set up in special circumstances. This means giving your broker a power of attorney to decide when and what you should buy or sell.

A relatively new development permissible in 23 states, enables you to buy stocks for minors, you serving as custodian. It removes the necessity of establishing a trust, often an elaborate and expensive procedure, as was formerly the case, or, even more awkwardly, getting a court order appointing yourself your own child's guardian.

The broker's commission is exacted on both sides of each transaction. The buyer pays his broker, the seller his. In addition, the seller pays a federal transfer tax, a state transfer tax in New York, Florida, South Carolina and Texas and a Securities and Exchange Commission registration fee.

In 1958, by a vote of a majority of the members, commissions on the New York Stock Exchange were raised, on the ground that the costs of the broker's research, accounting, and other services were not being met by existing commissions.

Commissions are based on the amount of money paid, or received, for each round-lot unit of 100 shares, or odd-lot unit of one to 99 shares, of stock priced at $1 per share or more. If the sum involved is $100 or more, the minimum commission per round or odd lot unit is $6, the maximum is $75.

Investment accounts are great choices for someone who is looking to see their money grow, albeit slowly, year by year.

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