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How does a brokerage work?

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Quick answer

A brokerage is a company that lets you buy and sell investments like stocks and bonds. It connects your orders to the markets, holds your investments in an account, and may earn money through fees, commissions, or interest on cash.

Step by step

  1. It lets you buy and sell investments.
  2. It routes your orders to the financial markets.
  3. It holds your investments in a brokerage account.
  4. It earns from fees, commissions, or interest.

People also ask

How does a brokerage work?
It connects your buy and sell orders to the markets and holds your investments in an account for you.
How do brokerages make money?
Through trading fees, commissions, account fees, interest on cash, or routing orders to market makers.
What's the difference between a full-service and discount brokerage?
Full-service offers advice and planning at higher cost; discount brokerages just execute trades cheaply.