Cash balance: $200. Stock holdings: $0.
Your transfer is complete, yet you own no shares of the company you chose. Moving money into an account and buying a stock are separate instructions.
Our example is a US cash brokerage account: $200 deposited in US dollars, no borrowing and no fees yet. It is worth $200. That total does not tell you what you own or how much is ready to spend.
Cash arrived; the stock did not
A brokerage account lets a brokerage firm hold cash and investments for you and carry out transactions you authorize. A holding is an investment you own in the account, such as shares of a company.
A cash sweep automatically moves unspent cash into a bank deposit or a money market fund, which invests in short-term debt and cash. Either can earn income while you decide what to do. Neither buys your chosen stock.
Check the account currency and any deposit holds. “Buying power,” “cash available to trade” and “cash available to withdraw” can differ. A broker can let you trade a deposit before you can withdraw it.
Read the firm's balance definitions. Settlement, the exchange of cash and shares that completes a trade, also affects when you can withdraw sale proceeds.
The balance tells you an amount. The holdings list tells you what that money is in.
Who holds the shares
Custody means safeguarding assets and keeping ownership records. Your broker may do this itself or use a separate carrying firm. The statement identifies who holds your assets, even if that firm's name differs from the app's.
With street-name holding, an intermediary such as a broker is the registered owner: the name on the company's books. The broker records you as the beneficial owner. You receive any dividends and gain or lose as the shares change value.
Your ownership can be real even when the company does not list your name. Direct registration puts your name on the company's books instead, where that option is offered.
Check permissions, fees and cash
- Cash account: You pay the full purchase price without borrowing from the broker.
- Margin permission: The agreement lets you borrow against eligible assets. Enabling it does not mean you already owe money.
Check the actual setting. A margin account's buying power can include money you would have to borrow. The optional margin lesson explains the costs and risks.
Taxable and retirement accounts answer a separate question about taxes, covered in the optional investment accounts (US) lesson.
Read the fee schedule for commissions, subscriptions, maintenance, currency conversion and transfers out. Say the transaction fee is $2. Out of a $200 budget, that leaves $198 for the investment: $2 ÷ $200 × 100 = 1% spent on the fee.
Zero commission still leaves other costs, including the bid–ask spread, the gap between the best quoted buying and selling prices.
Cash left with the broker instead of swept elsewhere is called a free credit balance. Find where your cash sits, what rate it pays and how you can access it. The default option need not pay the best rate.
You can hold part of a share
A fractional share is less than one whole share. Buying a fraction depends on the broker's program and which investments it supports.
Harbor Coffee, our fictional coffee business, has a year 3 price of $66 a share. At that price, a $33 allocation would buy half a share before fees.
$33 ÷ $66 = 0.5 share. You need half the money to own half a share. The percentage price risk stays the same: if the share price falls 10%, a half-share holding loses 10%, too.
The program sets which stocks qualify, which order types you can use, when trades happen and how quantities are rounded. Check those terms and any fees before relying on dollar-based buying.
Voting also depends on the program. A share class can have voting rights while your fraction carries no vote. Fractions generally cannot move intact to another broker; transferring the account may require selling that portion.
Protection has a specific job
In the US, the Securities Investor Protection Corporation (SIPC) helps restore eligible missing cash and securities when a member brokerage fails.
Suppose a stock holding falls from $200 to $180 because its share price fell. You still own the shares; they are worth $20 less. SIPC does not repay that market loss. It also does not cover bad investment advice or every loss caused by fraud.
SIPC's limit is $500,000 per customer in each ownership capacity, including up to $250,000 for cash. Capacity means how the assets are legally owned. Two individual accounts in your name at the same brokerage share that limit.
The Federal Deposit Insurance Corporation (FDIC) has a different job: insuring eligible bank deposits against bank failure. Where your cash sits determines which protection to check.
| Cash location | What it is | Protection to check |
|---|---|---|
| Broker balance | Cash for investing | SIPC cash rules |
| Bank sweep | Bank deposit | FDIC deposit rules |
| Money market fund | Fund shares | SIPC for missing shares |
FDIC's standard limit is $250,000 per depositor, per insured bank, per ownership category. Bank-sweep deposits count together with your other deposits in that category at the destination bank. Money market funds are not FDIC-insured, and SIPC does not cover their investment losses.
The account's country and actual carrying firm matter. Holding US dollars or US-listed shares does not by itself give you SIPC protection; living outside the US does not by itself exclude you.
Is the account ready?
Open Investor.gov's professional-search tool yourself. Look up the legal brokerage firm and any representative, then read their registration and disciplinary records. The tool routes broker records to FINRA's BrokerCheck database.
Check the carrying firm's membership through the List of Members on SIPC.org. A familiar app logo cannot replace these checks; the investment-scams lesson covers impersonation.
Before inspecting an order, check five things:
- Firm: Verified legal broker and carrying firm, account country and relevant protection.
- Permissions: Cash or margin, and whether the chosen investment is supported.
- Money: Currency, cash you can use, fees and any deposit hold.
- Cash destination: Broker balance, bank sweep or fund, with its rate and access terms.
- Fractions, if needed: The program's buying, voting and transfer terms.
With only the opening two lines, the decision is to wait. They show $200 arrived, but say nothing about the legal firm, fees or cash destination. Find those answers before going further. A pending deposit or unclear borrowing permission also calls for a pause.
Once the checks pass, examine the bid and ask to see the prices on offer. That comes before choosing order instructions or sending the $200 purchase.
In short
- A deposit alone does not prove you own the stock you chose.
- Buying power can include borrowing; check the account's permissions.
- The cash destination determines which protection to check.
- SIPC helps recover eligible missing assets when a member broker fails; it does not repay market losses.
- An unverified firm or unclear account term is a reason to wait.