Choosing a Brokerage#

Before you can buy your first stock, you need a brokerage account. A brokerage is a financial institution that executes trades on your behalf and holds your investments. Choosing the right broker is an important first step in your investing journey.

A brokerage account is your gateway to the stock market. Without one, you cannot buy or sell stocks.

What to Look for in a Broker#

When evaluating brokerages, consider these key factors:

1. Trading Costs#

Until recently, paying $5-10 per trade was common. Today, most major brokers offer:

Commission-free stock trading: No charge for buying/selling stocks and ETFs
No account minimums: Start investing with any amount
Transparent fee schedules: Know what you'll pay upfront

While commission-free trading is now standard, always check for other fees like account transfer fees, wire transfer fees, or fees for options trading.

2. Account Types#

Different brokers offer various account types:

Account Type	Tax Treatment	Best For
Individual Taxable	Pay taxes on gains annually	General investing, no withdrawal restrictions
Traditional IRA	Tax-deferred growth, taxed at withdrawal	Retirement savings, tax deduction now
Roth IRA	Tax-free growth, no tax at withdrawal	Retirement, expect higher taxes later
401(k) Rollover	Transfer from employer plans	Consolidating retirement accounts
Joint Account	Shared ownership	Couples, family investing
Custodial (UGMA/UTMA)	Minor's account	Investing for children

3. Platform and Tools#

Consider how you'll interact with your investments:

Mobile app quality: Is it intuitive and reliable?
Web platform: Does it have the features you need?
Research tools: Stock screeners, analyst reports, news
Educational resources: Learning materials, webinars
Customer support: Phone, chat, email availability

4. Investment Options#

Not all brokers offer the same products:

Investment Type	Availability
Stocks	All brokers
ETFs	All brokers
Mutual Funds	Most brokers
Options	Most brokers (may require approval)
Bonds	Many brokers
International Stocks	Some brokers
Cryptocurrency	Some brokers

Types of Brokers#

Full-Service Brokers#

Personal financial advisor assigned to you
Comprehensive financial planning
Higher fees (may charge 1%+ of assets annually)
Best for: Those wanting hands-on guidance with significant assets

Examples: Morgan Stanley, Merrill Lynch, UBS

Discount/Online Brokers#

Self-directed investing
Commission-free trading
Robust research and tools
Best for: Most individual investors

Examples: Fidelity, Charles Schwab, TD Ameritrade, E*TRADE

Mobile-First Brokers#

App-centric experience
Simplified interfaces
Commission-free trading
Best for: Beginners, mobile-focused investors

Examples: Robinhood, Webull, SoFi, Public

Which Should You Choose?

For most beginners, a major discount broker (Fidelity, Schwab, etc.) offers the best combination of low costs, reliable platforms, and educational resources. Mobile-first brokers are convenient but may have fewer features.

Opening an Account#

The process is straightforward:

Choose your broker based on the factors above
Gather information: Social Security number, employment info, bank account details
Complete application: Usually online, takes 10-15 minutes
Fund your account: Link a bank account and transfer money
Start investing: Once funds settle (usually 1-3 days)

Required Information#

You'll typically need:

Full legal name and date of birth
Social Security number
Home address
Employment information
Bank account for transfers
Answers to regulatory questions (investment experience, goals)

Account Security#

Protecting your brokerage account is crucial:

Strong passwords: Use unique, complex passwords
Two-factor authentication (2FA): Enable this feature
SIPC protection: Brokers are insured up to $500,000 per account
Beware of phishing: Never click suspicious links claiming to be from your broker

SIPC Protection

SIPC (Securities Investor Protection Corporation) protects you if your broker fails—not if your investments lose value. It covers up to $500,000 per account, including $250,000 for cash.

Popular Broker Comparison#

Broker	Commission	Account Min	Best For
Fidelity	$0	$0	Overall quality, research
Charles Schwab	$0	$0	Customer service, tools
TD Ameritrade	$0	$0	Powerful trading platform
Robinhood	$0	$0	Simple mobile experience
Vanguard	$0	$0*	Low-cost index funds
E*TRADE	$0	$0	Options trading

*Some Vanguard funds have minimums

Making Your Decision#

For beginners, we recommend:

Start with a major discount broker (Fidelity, Schwab, or TD Ameritrade)
Open a taxable account first unless maxing out retirement accounts
Use their educational resources to learn as you go
Start with index funds or ETFs before picking individual stocks

You can always open multiple brokerage accounts. Many investors have a main account at one broker and a secondary account elsewhere. There's no rule saying you can only have one.

Key Takeaways

A brokerage account is required to buy and sell stocks
Most major brokers now offer commission-free trading
Consider platform quality, tools, account types, and customer service
Full-service brokers provide advice but charge more; discount brokers are self-directed
Opening an account is straightforward and can be done online in minutes
Enable security features like two-factor authentication
For beginners, major discount brokers offer the best combination of features and value