Glossary of Brokerage Terms

Account Minimum
The minimum amount a Fool must invest to open an account. Typically, anywhere from $1,000 to $5,000, though some accounts (particularly IRAs) have no minimum.

Broker's Call Rate
Interest rate that brokers pay to borrow from banks to cover the positions of their customers who buy on margin (see also Margin Rate).

Certificate Fees
The fee the broker charges for sending share certificates. Once certificates are received, the shares are in your sole possession.

Dividend Reinvestment Plans
Some brokerages will reinvest dividends in additional shares for you for free -- but others charge for this service, so watch out.

Inactivity Fees
The fee the broker charges when you have not made a buy/sell during a specified period of time.

IRA Custodian Fees
The fee the broker charges for maintaining your IRA. May also be called an IRA maintenance fee. Brokers may also charge an initial IRA setup fee. Keep an eye on these fees as they can add up. Many brokers charge no fees for maintaining your IRA.

Limit Order
When a Fool wishes to buy/sell shares at some predetermined price. For example, if you wished to purchase Microsoft at no more than $90 per share and it is selling at $95 now, you can place a limit order on Microsoft at $90. Some brokers charge a higher commission for limit orders than for market orders.

Margin
Borrowing money from your broker using your portfolio as collateral. Margin is usually used to purchase additional securities.

Margin Rate
Brokers will typically charge their margin customers an interest rate above the brokers call rate, depending on their account balance. This is called the margin rate.

Market orders
When a Fool buys/sells shares at current market price (compare to Limit Orders).

Online Commission
Amount the broker charges you for placing a trade online.

Phone (Touchtone) Commission
Amount the broker charges you for placing a trade through a touchtone phone ordering system.

Phone (Human) Commission
Amount the broker charges you for placing a trade through a conversation with a human being.

Securities Investor Protection Corp. (SIPC)
Nonprofit corporation that insures the cash and securities in the accounts of brokerages up to $500,000 in the event of a firm failure. All brokers and dealers registered with the Securities and Exchange Commission (SEC) must be SIPC members.

Stock Option
An option to purchase or sell a stock at a specified price, and by a specific date. Also called equity option. Options on stocks are offered by brokerages, just as any other investment vehicle. Instead of buying the stock of a company, an investor may buy options of various kinds. The simplest kind is a "call option," in which investors buy the right to purchase shares at a certain price.

Transfer of Accounts
Amount the broker charges you for transferring existing funds into and out of your account.

Wire Transfer Fees
Amount the broker charges you for wiring transfers into and out of your account.