How to Start a Brokerage Account

Co-authored by Hannah Madden

Last Updated: August 25, 2021 References

If you’re interested in making your money work for you, you might be looking into a brokerage account. Brokerage accounts let you buy, sell, and trade stocks to hopefully make a profit on the stock market. Setting up your first brokerage account can be a little confusing, so we’ve answered your questions about them to help you make an informed decision about your money.

Question 1

Question 1 of 6:
What kinds of brokerage accounts are there?

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Taxable brokerage account: You can deposit as much or as little into this account as you’d like. You’ll pay regular income tax and capital gains on any profit you make from your account and from any sales.^{[1]
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- In a cash taxable account, you purchase investments with the money you’ve put into the account and no more.
- In a margin taxable account, you can borrow money from the brokerage firm for leverage.
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Retirement brokerage account: This account lets you use your retirement account money to buy and sell stocks, bonds, and dividends. You’ll still deposit money into an IRA, a Roth IRA, a 401(K), or a SEP IRA. Each account has its own tax rules and contribution limits depending on the retirement account that you already have.^{[2]
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- Standard IRAs can only handle a yearly contribution of $6,000 to $7,000. Other IRAs may be slightly different, but they’re usually around the same.
- If you take money out of your IRA before you’re 59 years old, you may get a tax penalty.

Question 2

Question 2 of 6:
Is it free to open a brokerage account?

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Most don’t have up-front costs, but many charge fees as you use them. This can include transaction costs (a fee whenever you make a trade), commissions (a fee you pay the broker/dealer), account maintenance fees (monthly or annual fees to keep your account open), and inactivity fees (a fee the broker will institute if you’ve been inactive for a while).^{[3]
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Trustworthy Source
U.S. Securities and Exchange Commission
Independent U.S. government agency responsible for regulating the securities industry, which includes stocks and options exchanges
Go to source}
- Every brokerage account is slightly different, so make sure you read the terms of service when you sign up for one.
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Some brokerage accounts offer an incentive when you sign up. This means that they’ll actually pay you to start an account with them. You can hunt around for deals at different brokerage accounts.^{[4]
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- For example, you might get $50 deposited into your account if you sign up with more than $10,000.

Question 3

Question 3 of 6:
What is the best brokerage account for beginners?

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Charles Schwab is an easy-to-use account with no minimum. You can sign up for a wide range of accounts, and you can manage your money through an app or on their website. They’re one of the most well-established brokerage accounts out there, so you’ll have lots of opportunities to ask questions as you go.^{[5]
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- There are also no trade fees or robo-adviser fees.
- To sign up for a Schwab account, visit https://www.schwab.com/ and click “Open Your Account.”
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Fidelity is your best choice for a retirement account. Along with minimal fees and a wide range of accounts, Fidelity offers helpful tools and calculators so you can plan for your future. If your goal is to save up for retirement, you can use your account to help you.^{[6]
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- To open a Fidelity account, visit https://www.fidelity.com/.
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E*Trade, Public, and You Invest offer a lot of online support. These are great brokerage accounts for beginners since you can ask questions and get help if you ever need it.^{[7]
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- You Invest is a branch of Chase Banks, so you can actually stop in and get in-person help if you need it.
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Any brokerage account with an easy-to-use website or app is good. That way, you can manage your account from anywhere without much fuss. SoFi, Ameritrade, Webull, and Betterment are all good ones to check out.^{[8]
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Question 4

Question 4 of 6:
How much money do you need to start a brokerage account?

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Most brokerage accounts don’t have a minimum. This means you can put as much or as little into your account when you start as you’d like to. The more you put in, the more you can potentially get out.^{[9]
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- Many brokerage accounts will charge you an inactivity fee, though, so you should put at least a few hundred dollars into your account to start with.
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A few brokerage accounts have a minimum of $500. This includes Wealthfront and Sogotrade. Once you have $500 to transfer into you account, you can open it up.^{[10]
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- You may be able to start the application process before you have the capital to support it. Some brokerage firms allow you to set up an account before transferring your money, which is helpful if you need a little extra time.

Question 5

Question 5 of 6:
Can you lose money in a brokerage account?

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If you make a poor investment choice, yes. Brokerage accounts deal in stock and investment trading, so there’s always a potential that you could lose money. If you’re worried about making the right financial decision, you can talk to your account manager or hire a financial advisor.^{[11]
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You won’t lose money if the brokerage account goes bankrupt. Although it isn’t likely, there is a potential for the firm to go belly-up. Thankfully, the Securities Investor Protection Corporation (SIPC) protects your money up to $500,000.^{[12]
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- You’ll only get that money if the firm goes bankrupt, though. It won’t help you if you lose money on a bad trade.

Question 6

Question 6 of 6:
How do you apply for a brokerage account?

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Submit an application online. Once you find a brokerage account that you like, you can head to their website and submit your personal information. You might have to include:^{[13]
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Trustworthy Source
U.S. Securities and Exchange Commission
Independent U.S. government agency responsible for regulating the securities industry, which includes stocks and options exchanges
Go to source}
- Your name
- Your social security number
- Your address
- Your phone number
- Your date of birth
- Your driver’s license or passport
- Your employment status
- Your annual income
- Your net worth
- Your investment objectives