Opening a brokerage account

Set your investment goals - find your broker type

Before you start comparing brokers, first think about your investment goals. Are you specifically saving up for retirement only? Or do you just generally want to invest and grow your savings? Or maybe you want to trade actively and take some more risks in the hope of bigger short-term gains?

If long-term investing is your main goal, you should probably open an account at a stockbroker. Stockbrokers are the most common type among online brokers. They provide a wide range of asset classes, such as stocks, ETFs (exchange-traded funds), options, bonds or mutual funds.

An increasing number of brokers are specializing in forex trading or the trading of CFDs. These are geared mainly toward short-term trading and involve much higher risk than stock trading. (Note: CFDs are banned in the US.)

How to tell if a broker is a stockbroker or a CFD broker? We suggest you try our broker account comparison tool, where you can filter brokers by available asset classes, among other criteria.

Keep in mind that there's nothing stopping you from opening accounts at several brokers. So maybe you'll open a stock account at broker 'X' for your retirement savings, and another at broker 'Y' to just try your luck on the market by short-term trading of perhaps riskier products. Note that there are brokers that offer both stocks/ETFs and CFDs/forex.

Still new to the concept of brokerages? Read our introductory article on what is a brokerage.

Compare trading fees and other costs

Trading and non-trading costs are another important consideration when picking a broker. Many brokers, especially in the US, now offer commission-free stock trading. This is obviously a great feature, but you should be aware of other costs that come with trading or even just maintaining your account:

• Commissions: While trading stocks or ETFs may be free at some brokers, trading other assets such as mutual funds or options often involves a commission - either a flat charge per transaction, or a volume-based percentage fee.

• Spreads: The spread is the difference between the bid (sell) and ask (buy) price. Brokers that offer commission-free stock trading often have slightly higher spreads.

• Overnight cost / financing rate: If you trade on margin, you may be charged for holding your positions overnight. Basically, this is the interest you pay on the money borrowed from your broker.

• Currency conversion: If your brokerage account is denominated in a different currency than the asset you want to trade, a conversion fee will be charged. For example, if you hold a EUR account and trade US stocks, your cash needs to be converted into USD.

• Non-trading fees: These are fees associated with maintaining your account or transactions such as deposits or withdrawals. Most brokers will not charge you for depositing money or maintaining your account. However, quite a few brokers have inactivity fees, charged if you haven't used your account for a while, typically a year or more. Some brokers also charge a fee for withdrawing money from your account.

Information on fees and commissions is usually found on brokers' websites. If you're not up to browsing through dozens of broker sites, use our handy comparison table to narrow down your choices based on brokers' overall fee scores.

Features and services

Costs are important, but other aspects of the user experience are also worth taking into consideration when choosing an online broker account, as these can greatly influence your trading success.

• Trading platform: Most brokers offer both web-based and mobile platforms. There can be significant differences among brokers in the user-friendliness of their trading interfaces and the availability of certain features. See if the broker you're considering using offers a demo account where you can try out the platform without committing actual money.

• Education: Many brokers offer educational articles or videos on the basics of investing and trading. These can be very helpful especially for beginner investors.

• Research: Once you've started trading, you'll appreciate research tools such as charts, analyst recommendations or news tickers. It's worth noting that some commission-free brokers offer only very basic education and research tools.

• Customer service: Online trading is usually problem-free, but sometimes you'll need help locating a feature or resolving an issue. Before you commit to a broker, take a look at their contact page and see if you're OK with their customer support availability. Some brokers provide 24/7 support via chat, phone and email, while others offer only a web-based form for queries or complaints.

Once you have picked a broker, opening an account is usually a straightforward affair. At nearly all brokers, it involves the following steps:

1. In the online application form, fill in your personal data, including your name, contact information and country of residence.

2. Choose an account plan (if more than one are available) and answer some questions about your income and employment status, financial knowledge and trading experience. Brokers are required by law to ask these questions, which can help them establish your risk profile and make sure you only have access to products that you understand well enough.

3. Verify your identity and residency by uploading documents such as your ID card, driver's license or utility bills. Brokers require this to make sure that you are who you claim to be, and to prevent abuse such as money laundering or identity theft.

4. After submitting your online application, wait for the broker to approve and activate your account. This can take as little as a few hours to as long as three days, depending on the broker.

5. You're done! You are ready to deposit money and start investing.

Want to try out in practice how to open an investment account, make a deposit and buy your first stocks? Check out our My First Stock Trade Quest tool, where we guide you through, step by step, the process of online broker account opening and making your first stock trade.

Account types

Most brokers offer several account types, and your investment goals will mostly determine which one is best for you.

If your primary goal is saving for retirement, you should consider tax-advantaged brokerage accounts. Depending on the regulations of your country, these accounts allow you to invest in the financial markets without having to pay capital gains taxes or dividend taxes. Typical examples include IRA accounts in the US and ISA accounts in the UK. Not all brokers offer such accounts, so if retirement saving is your main goal, this should be among your top criteria when selecting a broker.

If you simply want to invest some money on a regular or ad hoc basis, and occasionally take some profits, it's best to open a simple cash account. This is a default standard account type available at all stockbrokers. With a cash account, you simply deposit money to your account, which you can then use to buy stocks or other assets.

Investors who are willing to take a bit more risk may consider opening a margin account. If you have a margin account, you can borrow money from your broker which you can then use for trading. Trading on margin can amplify your gains, but also your losses, therefore you should carefully consider how much risk you're willing to take.

A big advantage of online trading is that you can now open an account from the comfort of your home, at any broker around the world. Well, almost any. Most brokers place some restrictions on which countries they accept clients from. Some brokers are available in nearly all countries of the world; while some may be limited to a single country such as the UK, the US or India. Still others are available globally but won't accept traders from the US or Canada because of differences in financial regulations.

To see brokers that are available where you live, start with our broker finder tool.

Your decision where to open a brokerage account should also be guided by what assets you want to trade, on which markets. For example, some US-based brokers only provide access to US stocks, or offer only a limited selection of overseas assets to trade, often at a higher cost. A good international broker account will allow you to trade on dozens of stock exchanges around the world.

Regulation is also an important factor. Brokers - at least the ones we recommend here at BrokerChooser - are regulated by one or more financial authorities, based on where they operate. This, and the country of your residence, will determine whether you are eligible for investor protection.

How old do I need to be to open a brokerage account?

Generally, you need to be 18 years or older to be able to open an account. During account opening, brokers will ask for your documents to verify your identity, including your age. For those under 18, many brokers have custodial accounts, where adults can open an account on behalf of a minor - for example, parents saving for a child's higher education.

How much does it cost to open a brokerage account?

Brokers generally don’t charge anything for opening an account, so in theory you can open as many accounts as you want. The vast majority of brokers also don't charge a monthly fee. However, some brokers do require a minimum initial deposit.

How much money do you need to open a brokerage account?

In most cases, you don't need any money to open a broker account, as the majority of brokerages do not require an up-front deposit. However, you do of course need to deposit money if you want to start investing. You can do this via a simple bank transfer, or, at some brokers, also by credit/debit card.

Can I open a brokerage account with $100?

Yes, you can open a stock brokerage account with just $100. In fact, simply opening an account usually doesn't cost anything. Just be aware that many stocks are priced more than $100 per share, so you won't be able to buy them just yet. If you do want to invest in such high-priced stocks, look for a broker that offers fractional shares.

Can I open a brokerage account with $500?

Yes, you can absolutely open a broker's account with $500. Opening a trading account is generally free, and many of the most popular stocks on the biggest US and European exchanges cost less than $500, so you can start investing right away.

Which trading account is best for beginners?

A good brokerage account for beginners should have low fees, a user-friendly mobile app and quality education materials. Based on these and other important criteria, we have put together a list of the best brokers for beginners.