11 Apr I’m giving my daughter a brokerage account. How to choose?

Q. My daughter wants to go into finance, and I want to give her the gift of a brokerage account so she can start trading stocks. I will put $1,000 in the account. How can I choose the best one? I’m guessing sometimes she will trade frequently but sometimes just buy and hold.
— Mom

A. That’s a terrific gift for any young investor.

We’re glad you’re thinking of the best way to go.

There are two types of brokerage firms, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

“There are full-service brokerage firms like Merrill Lynch and there are discount firms like Fidelity and Charles Schwab,” he said.

With a full-service firm, you work with a Registered Representative, also called stock brokers, who will guide you, he said. The person would receive a commission on every buy and sell order, he said.

“Discount brokers are more for customers who want to manage their own finances without the assistance of a Registered Representative,” he said. “Discount brokers as the name implies do not charge full-service commissions.”

If your daughter wants to do her own research and pick her own investments I would recommend a discount broker, Kiely said.

Bill Connington of Connington Wealth Management in Paramus says when it comes to choosing investments, a buy and hold strategy using stock mutual funds, index funds and exchange-traded funds is generally a better choice for new investors.

“Usually with an amount of $1,000 you won’t be able to purchase individual shares to make it worthwhile and would involve a great deal of stock research,” he said. “Buy considering the other strategies she could focus on an industry or area that after doing her research would seem attractive to invest her money in.”

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This story was originally published on April 11, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.