With any research I have done on google, people will explain investing with the assumption that people have a basic understanding on the different types of financial systems. *I don’t*. With a brokerage account, do I just put the money in and let it sit to accrue interest, or do I need to do anything else?
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A brokerage account is NOT a bank account. It is an account with a broker (also called a stockbroker). In days of olde, you had a single literal broker who you would call (or who would call you) and you’d direct them (or they’d make suggestions to you) about what investments to buy or sell. These were usually stocks (hence, a “stockbroker”) but could include all sorts of investments.
These days, you’re far less likely to have an individual broker at the other end of the phone. Instead, you have an online account and a brokerage firm that more or less manages your account through various algorithms. If you’re wealthy enough, or you intentionally seek one out, you may get an actual person who is “your” broker. But even then, they are likely following some program created by the firm they work for more than they are giving you individual attention.
What actually happens is you open a brokerage account and fill out a form that asks you questions about your investment timeline (you need this money in 3 years or 30 years?), risk tolerance (are you prepared to lose a lot if it means you may gain a lot?), types of investments you’re comfortable with (stocks, bonds, mutual funds, foreign investments, options/puts/calls, etc.), etc. Depending how you answer those questions and the amount of money you have to invest, you’ll get a recommendation regarding what things to invest in, which you can accept or tweak or ignore completely.
And then the brokerage firm invests your money as you direct, and you’ll be able to see what’s happening with those investments whenever you like by checking your account online. And if you start making lots of money, or if you borrow money to invest (called margin investing – DO NOT DO THIS AS A NOVICE!!), you’ll get actual phone calls from someone at the brokerage firm who want to make sure you’ll stick with them rather than go to another broker. They may also try to direct you to other investments, some of which may be good for you, but ALL of which will be good for them (because of commissions or fees).
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