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. When you deposit money through an electronic transfer, it should be available in your brokerage account within a few days.
If you need professional guidance with managing your investments or planning for retirement, Bankrate’s AdvisorMatch can connect you to a CFP® professional who can help you achieve your financial goals.
Brokerage accounts offer the opportunity to invest in securities like stocks and bonds, complementing retirement savings plans such as 401(k)s or IRAs. While retirement accounts come with tax benefits, brokerage accounts allow you to invest with the flexibility of accessing your funds penalty-free if needed before retirement age. It’s important to note that investing in the stock market should typically be done with a long-term perspective due to its volatility.
If you have already established an emergency fund and are maximizing your retirement contributions, a brokerage account can be a smart way to invest any additional savings.
Frequently asked questions about opening a brokerage account:
– Can you have more than one brokerage account? Yes, you can have multiple brokerage accounts to diversify investments and cater to different financial goals.
– How much money do you need to open a brokerage account? Most major online brokers do not require minimum deposits, allowing you to start with as little as $0 and add funds as you see fit.
– What do you need to open a brokerage account? You will need personal information and bank account details to set up a brokerage account.
In conclusion, opening a brokerage account through online brokers is straightforward and can provide a platform to invest in various securities. However, it is advisable to maximize contributions to tax-advantaged accounts first before utilizing brokerage accounts where gains are subject to taxation.