published 2022-06-01 13:00:00 3 What Is a Brokerage Account and How to Open One? /content/thumbnails/p-11-brokerage-accounts-1-small.webp brokerage-accounts Openning a brokerage account is one of the first steps for building your investment portfolio. Learn what a brokerage account is and how to open one.

What Is a Brokerage Account and How to Open One?

To buy securities such as company stocks and other types of investments you will need to open a brokerage account, also called a securities account. It is one of the first steps required for building your investment portfolio.

Already know the basics? Go to the list of brokers.

How to Open a Brokerage Account

What is a Brokerage Account?

A brokerage account is a broad term for investment accounts that let you buy and sell a variety of investments, such as stocks, bonds, mutual funds, and ETFs. You can think of a brokerage account as a bank account that lets you trade and hold your investments. The money and investments in this account would be your investment portfolio.

Brokerage accounts can be taxable or tax-advantaged. The investments held in different types of accounts will have different tax and withdrawal rules. You can open several types of accounts, such as your tax-deferred retirement accounts and taxable accounts with your portfolio of stocks and bonds, at the same brokerage firm.

If you want to keep all your investment accounts in one place, make sure that the brokerage offers both taxable and tax-advantaged accounts.

A brokerage account can be opened at a range of financial institutions called brokerage firms or simply brokerages. Large banks offer brokerage accounts as well.

How to Open a Brokerage Account?

Most brokerages let you open an account online, the same way as you would create any other online account. Most brokerages don't require an initial deposit, so you can familiarize yourself with the inner works of their platform and the account offerings before committing. To open an online brokerage account, all you have to do is visit a brokerage's website and follow the instructions. The process is typically easy and quick, but expect to provide your personal information and upload documents that verify your identity.

What Should You Look for When Choosing a Brokerage?

Brokerage firms are usually divided into two categories: "full-service stockbrokers" that, in addition to trading compatibilities, offer educational materials and assistance in decision-making, and "online brokers" or "discount brokers" that are just venues for executing trades at a lower cost or no commission at all.

One type is not necessarily better than the other. Discount brokers may be more suitable for beginner investors who contribute small amounts and want to keep their fees low. Full-service brokerages may be better for people with large portfolios who require comprehensive market research data, educational resources, consulting services, and other perks that smaller brokers don't offer.

When choosing a brokerage, pay attention to the commissions, expense ratios, transaction fees, and other costs, especially costs related to the investments which you plan to use the most.

Some brokerages offer account bonuses based on the size of your initial deposit, so this may be a deciding factor. Other brokerages offer sign-up bonuses, so you may want to keep an eye out for that. But always mind the fees as they will be impacting your investments.

How to Fund Your Brokerage Account

To fund your account you can simply link your bank account to your brokerage account and transfer money back and forth as needed. Some brokerages provide an option to wire transfer money to your account or deposit checks via their apps.

Most Popular Brokerage Companies

Discount Brokers

Company Overview Company Website
Robinhood Learn More Visit Site
Acorns Learn More Visit Site

Full-Service Brokers

Charles Schwab
Fidelity Investments
TD Ameritrade

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