Which account to open – brokerage or IIS?

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Every investing newbie asks himself this question

I don’t know why, but often in various articles it is mentioned that you need to choose which of the accounts to open.

I will immediately answer for the impatient.

There are, of course, features, but in reality, it is better to open both.

Now I’ll tell you the details.

Every investing newbie asks himself this question

A brokerage account is a special account where you can buy financial instruments – stocks, bonds, and other instruments. In the majority, all financial instruments that are traded on the exchange can be bought through an intermediary – a broker. Be careful when choosing a broker – he must have a Central Bank license in Russia.

How to open a brokerage account. A brokerage account can be opened with a bank or with a specialized broker. If you already have any bank account that you have chosen as a broker, in most cases it is possible to open a brokerage account online in your personal account or in the application.

Usually, the purchase of financial instruments is done either through a personal account or through a mobile application. You select a stock or bond, set a price (it’s better to do it this way, not how often the application suggests) and wait for the purchase to be made when the stock or bond reaches the price you selected.

You will see how many stocks and bonds you have in your account, their price and growth relative to the purchase price.

What is IIS – it is a subspecies of a brokerage account. From the money deposited on it, you can also buy shares, bonds, financial instruments and receive tax deductions (from an amount up to 400 thousand rubles at the moment, that is, you can get back up to 52,000 rubles of personal income tax paid). We talk about IIS in detail in this article.

It is also necessary to understand the limitation of IIS. Money cannot be withdrawn from it for 3 years, otherwise the tax deduction will not be provided or it will have to be returned.

Therefore, when I am asked whether it is necessary to open a regular brokerage account, if there is an IIS, then I answer – yes. In different cases – for example, if you have short-term goals of up to 3 years and you decide to build a portfolio for such a short period, you’d better choose a brokerage account for such a portfolio. If your goal is located on the horizon for more than 3 years, you can also choose IIS. By the way, we will talk about the timing of investing in one of the future articles.

What to buy on the IIS if it is about the fact that money cannot be withdrawn from it for 3 years. This is a question that needs to be answered, knowing the individual goals of each, the specific investment period and the attitude to risk.

Let’s summarize:

Broker account

  1. You can buy and sell fin. tools at any time.
  2. You can withdraw money from your account at any time.
  3. Opens for any period – no minimum or maximum restrictions.

IIS

  1. You can buy and sell financial instruments at any time (the main thing is not to withdraw money ahead of time).
  2. You can withdraw money from the account three years after the opening of the account.
  3. Opens for at least three years with higher restrictions.

And 4 general point – you can open both – depending on the goals and the desire to receive a tax deduction.

I will comment on the point that you can buy and sell on IIS. This is one of the common delusions of newcomers – since you can’t withdraw money, maybe you can’t sell shares on your account? No, you can buy and sell financial instruments on IIS. You just can’t withdraw money for up to 3 years.

Are there any differences in taxation between a brokerage account and an IIA?

There are no differences in taxation. There are only differences in deductions, which I already wrote about above.

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