You can buy stocks through a brokerage firm, which is a company licensed to execute trades on your behalf

A brokerage account is the container that holds your money and your stock positions. You open one with a brokerage firm — a company regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The brokerage holds your cash, executes your buy and sell orders, and sends you statements showing what you own and what it is worth.

You do not buy stocks directly from a company or from the stock exchange itself. You buy through a broker. That broker may be a large firm like Fidelity, Charles Schwab, or E*TRADE, or a smaller firm, or a robo-advisor that automates some decisions for you. The broker charges you a fee — sometimes per trade, sometimes a flat monthly fee, sometimes nothing — depending on the firm and the account type you choose.

The first step is deciding what type of account you want, then opening it with a firm that offers that type. The account type determines tax treatment and contribution limits, not where you can invest.

Key Takeaways

  • You need a brokerage account with a licensed firm to buy stocks; you cannot buy them directly from a company or the stock exchange.
  • Account types — taxable, IRA, 401(k), HSA — determine tax treatment and contribution limits, and different brokers offer different types.
  • Most major brokers now charge zero commission per trade, but they may charge account maintenance fees, advisory fees, or fees for certain services.
  • Opening an account takes 10 to 20 minutes online and requires proof of identity, Social Security number, and bank account information for funding.
  • You can move money and stocks between brokers, though the process takes one to two weeks and may involve small fees.

Types of accounts and which brokers offer them

A taxable brokerage account is the simplest. You deposit money, buy stocks, and pay capital gains tax when you sell at a profit. There are no contribution limits and no age restrictions. Nearly every broker offers this.

An Individual Retirement Account (IRA) lets you save for retirement with tax advantages. A Traditional IRA lets you deduct contributions from your taxes now; a Roth IRA taxes you now but lets withdrawals be tax-free later. You can contribute up to $7,000 per year (as of 2024; this amount changes annually). Most brokers offer both types. You cannot withdraw money before age 59½ without penalty, with narrow exceptions.

A 401(k) is an employer-sponsored retirement plan. Your employer sets it up, you enroll through your employer, and your employer may match part of what you contribute. You cannot open a 401(k) on your own; you can only use one your employer offers. If your employer does not offer one, you cannot have a 401(k).

A Health Savings Account (HSA) is tied to a high-deductible health insurance plan. You can invest HSA money in stocks, though not all HSA providers allow it. Withdrawals for medical expenses are tax-free; other withdrawals are taxed and penalized.

If you are self-employed or own a small business, you may be able to open a Solo 401(k) or SEP IRA, which allow higher contribution limits. A financial advisor or tax professional can tell you which applies to your situation.

How to choose a brokerage firm

Most major brokers — Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Webull, Robinhood, Interactive Brokers — charge zero commission per stock trade. The differences lie in account minimums, fees for other services, research tools, customer support, and the account types they offer.

Some brokers have no account minimum; others require $500 or $1,000 to start. Some charge monthly account maintenance fees ($10 to $20) unless you meet certain conditions, like maintaining a minimum balance or setting up direct deposit. Some charge fees for wire transfers, paper statements, or talking to an advisor. Read the fee schedule on the firm's website before you open an account.

If you want to invest small amounts regularly — say, $50 per month — look for a broker that offers fractional shares, which let you buy a portion of a stock rather than a whole share. Most major brokers now offer this. If you want research tools, educational content, or live customer support, compare what each firm provides; some are more robust than others.

If you are not sure where to start, Fidelity and Charles Schwab are large, stable firms with low fees, no account minimums, and good customer support. Robinhood and Webull appeal to newer investors and have mobile-first interfaces. Interactive Brokers is cheaper for active traders but has a steeper learning curve.

Opening an account and funding it

Opening an account online takes 10 to 20 minutes. You will need your Social Security number, a government-issued ID, your date of birth, and your address. You will also need to link a bank account so you can transfer money in and out.

The broker will ask you questions about your investment experience and financial situation. These are regulatory requirements; they do not determine whether you can open the account, but they do inform what products the broker can offer you. Answer honestly.

Once your account is open, you transfer money from your bank to your brokerage account. This usually takes one to three business days. Some brokers offer a debit card or check-writing feature so you can access the money without transferring it back to your bank first.

After the money arrives, you can place an order to buy a stock. You enter the stock ticker symbol (like AAPL for Apple), the number of shares, and the type of order — usually a market order (buy at the current price) or a limit order (buy only if the price drops to a certain level). The order executes during market hours, usually within seconds.

Moving money and stocks between brokers

You can move your account to a different broker if you want to. This is called a transfer or rollover, depending on the account type.

For a taxable account, you can request an ACAT transfer (Automated Customer Account Transfer). You tell your new broker you want to transfer your account; they handle the paperwork with your old broker. The stocks move as stocks, not sold and repurchased. This usually takes five to ten business days. Some brokers charge a transfer fee ($0 to $100); some waive it if your account is large enough.

For an IRA or 401(k), the process is similar but called a rollover or direct transfer. The money or stocks move directly from the old account to the new one without you touching it. If you take the money yourself, you have 60 days to deposit it in a new account, or it counts as a withdrawal and you owe taxes and penalties.

You do not have to move everything at once. You can keep one account open while you test a new broker, or split your money between two brokers if you prefer.

Understanding fees and costs

Commission per trade is now zero at most brokers, but other fees still exist. A monthly account maintenance fee ($10 to $20) is common if your balance is below a certain threshold, though many brokers waive it for new accounts or if you set up automatic deposits. A wire transfer fee ($15 to $35) applies if you move money out by wire rather than ACH transfer. Some brokers charge for paper statements, expedited transfers, or talking to an advisor.

When you buy a stock, you also pay the bid-ask spread — the difference between what buyers are willing to pay and what sellers are asking. This is not a fee the broker charges; it is built into the market price. For stocks, this spread is usually small (a few cents). For less-traded stocks or other securities, it can be larger.

If you buy mutual funds or exchange-traded funds (ETFs), you pay an expense ratio — a small annual percentage that covers the fund's operating costs. This is deducted from the fund's value automatically; you do not pay it separately. Expense ratios range from near zero (0.03%) for index funds to 1% or more for actively managed funds.

What happens after you buy

Once you own a stock, your broker sends you a statement showing your holdings, their current value, and your total account balance. You can log in anytime to check prices and place new orders.

If the company pays a dividend, the cash goes into your account automatically. You can reinvest it by buying more shares, or leave it as cash. If you sell a stock at a profit in a taxable account, you owe capital gains tax — short-term if you held it less than a year, long-term if you held it a year or more. Long-term rates are usually lower. Your broker will send you a tax form (Form 1099-B) at the end of the year showing your sales and gains.

If you hold stocks in an IRA or 401(k), you do not owe tax on gains or dividends while the money is in the account. You owe tax when you withdraw it in retirement.

Frequently Asked Questions

Do I need a lot of money to start investing in stocks?

No. Most brokers have no account minimum, and many offer fractional shares, so you can start with $1 or $10. However, if you plan to make frequent small trades, commission fees (if your broker charges them) or account maintenance fees could eat into your returns. Start with what you can afford and add to it over time.

Can I buy stocks from my phone?

Yes. Every major broker has a mobile app that lets you open an account, deposit money, and place trades from your phone. The app works the same way as the website. Some brokers, like Robinhood and Webull, are designed primarily for mobile use.

What if I want someone else to manage my money?

You have two options. A robo-advisor (like Betterment or Vanguard Personal Advisor Services) uses algorithms to build and rebalance a portfolio for you, charging 0.25% to 0.50% per year. A financial advisor manages your account personally, usually charging 0.50% to 1.50% per year or a flat fee. Both require you to open an account with them, not with a separate broker.

Can I lose more money than I invested?

With stocks alone, no — the worst case is the stock goes to zero and you lose your entire investment. With options, margin accounts, or short selling, you can lose more than you invested. As a new investor, stick to buying stocks outright with cash you have on hand.

What is the difference between a stock and a mutual fund?

A stock is a share of ownership in one company. A mutual fund is a pool of money from many investors, managed by a professional, that buys stocks, bonds, or other securities. When you buy a mutual fund, you own a small piece of everything in the fund. Stocks are more volatile; mutual funds spread risk across many holdings.