How to open a brokerage account: Step-by-step instructions
Key takeaways
- A brokerage account allows you to buy and sell securities such as stocks, bonds and ETFs.
- Generally, opening a brokerage account makes sense once you’ve saved for an emergency fund and maximized retirement contributions in tax-advantaged accounts.
- Opening and funding a brokerage account is a fairly straightforward process that can be done in 15 minutes from your phone, making investing more accessible.
A brokerage account is an account that allows you to buy and sell securities like stocks, bonds, mutual funds and ETFs. By investing in these assets through a brokerage account, you can build significant wealth over time.
Opening a brokerage account makes sense for people who have additional savings after building an emergency fund, or anyone investing for retirement or their children’s education.
How to open a brokerage account: 3 easy steps to get started
1. Select a broker
You have a few options when determining where you’d like to open your brokerage account. For most people, opening an account with an online broker such as Charles Schwab or Fidelity Investments may make the most sense. Online brokers typically have no account minimums and offer commission-free trading on stocks and ETFs. Check out our online broker reviews to determine which ones may best fit your needs.
You could also open an account with a full-service broker, which will give you a financial professional who oversees your account. While it can be helpful to talk through questions with a knowledgeable professional, full-service brokers typically work with higher-net-worth clients and may charge hefty commissions for placing trades.
Robo-advisors are another option for people who prefer a more hands-off approach and aren’t looking to make their own trading decisions. Betterment and Wealthfront are examples of top robo-advisors that can build diversified portfolios for you based on your risk tolerance and financial goals. These accounts typically come with low account minimums and the fees are typically much less than that of a human financial advisor.
2. Open your account
Once you’ve decided on a broker, it shouldn’t take long to open an account. For online brokers, you’ll just need to provide some basic personal information about yourself and any other people on the account such as a spouse or partner. The whole process shouldn’t take more than 15 minutes.
3. Fund your account
After opening an account, you’ll need to put money in it before you place any orders and start building your portfolio. Most likely, you’ll set up an electronic transfer, which will move the money directly from your bank account to the broker. You may be able to write a check and mail it to the broker to deposit in your account too.
Once you’ve linked your bank account, you’ll also be able to send money from your brokerage account back to your bank if you ever need the money for something else. In addition, you can send money from your bank to your brokerage account to add more funds. Money deposited through an electronic transfer should be available in your brokerage account within a few days.
Need expert guidance when it comes to managing your investments or planning for retirement?
Bankrate’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.
Who should open a brokerage account
Brokerage accounts allow you to invest in securities like stocks and bonds beyond what you might be doing through retirement savings plans such as 401(k)s or IRAs. Retirement accounts come with significant tax benefits that you won’t find with brokerage accounts. You’ll pay taxes on any capital gains, interest payments received and dividends you generate through your investments in a brokerage account.
For most people, it makes sense to maximize your retirement contributions before turning to a taxable investment account, because of the tax implications. However, if you think you might need the money before retirement age, a brokerage account can allow you to invest while still being able to withdraw the money penalty-free if a need arises. In general, money invested in the stock market shouldn’t be relied upon for at least five years because the volatility of stock prices makes returns uncertain in the short term. But over longer time periods stocks tend to rise.
If you’ve already built up an emergency fund and are maxing out your retirement contributions, a brokerage account can be a good way to invest any additional savings you have.
Frequently asked questions about opening a brokerage account
-
Yes, you can have more than one brokerage account. In fact, some people use different brokerage accounts for different investing goals. Having more than one brokerage account may also be a good way to diversify investments and add additional account options.
-
Though account minimums do exist, most major online brokerages don’t require them. You can open a brokerage account with $0 or even just a few dollars if you want, then add money as you’re ready to invest at whatever amounts work for you.
-
Once you’ve picked a broker, you’ll need to have your personal information (address, Social Security number or tax ID, etc) handy if you’re using the platform for the first time. You will also need your bank account information (bank name, account type, routing number, account number) to fund the account.
Bottom line
Brokerage accounts are fairly simple to open through online brokers and can be a great way to invest in securities like stocks, bonds and ETFs beyond what you are contributing to retirement accounts. But consider maximizing contributions to tax-advantaged accounts first before turning to brokerage accounts where realized gains will be taxed along the way.
