You can buy stocks through a brokerage firm, either online or through a traditional broker who works with you directly

A brokerage is a company licensed to buy and sell stocks on your behalf. You open an account with them, deposit money, and place orders to buy shares. Most brokerages today operate online and charge little or nothing per trade — a major shift from 20 years ago when a single stock purchase could cost $50 or more.

The brokerage holds your account, executes your trades, and keeps records for taxes. They do not own your stocks; you do. If the brokerage fails, your holdings are protected by the Securities Investor Protection Corporation (SIPC), which covers up to $500,000 per account.

You have two main paths: open an account at a discount brokerage (usually online, self-directed) or work with a full-service broker (usually a person who advises you, often for a fee). Most new individual investors start with discount brokerages because the barrier to entry is low and costs are transparent.

Key Takeaways

  • Discount brokerages like Fidelity, Charles Schwab, and E*TRADE let you open an account online with a small initial deposit and trade stocks for no commission.
  • Full-service brokers employ advisors who recommend stocks and manage your portfolio, but typically charge higher fees or require larger account minimums.
  • Robo-advisors are automated services that build and rebalance a diversified portfolio for you based on your goals and risk tolerance, with lower fees than traditional advisors.
  • Your brokerage account is separate from a bank account; you must transfer money into it before you can buy stocks.
  • All major brokerages are regulated by the SEC and FINRA, and your holdings are protected by SIPC insurance up to $500,000.

Discount Brokerages: The Most Common Choice

Discount brokerages are online platforms where you manage your own trades. You decide what to buy and when, and the brokerage executes the order. Examples include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Webull, and Robinhood. Most charge zero commission per trade and have no minimum account balance to start.

Opening an account takes 10 to 15 minutes online. You provide your name, address, Social Security number, and employment information. The brokerage verifies your identity and approves you the same day or within 24 hours. You then link a bank account and transfer money into your brokerage account — this transfer usually takes one to three business days.

Once money is in your account, you can place orders immediately. You search for a stock by ticker symbol (like AAPL for Apple), choose how many shares you want, and submit the order. The order executes during market hours (9:30 a.m. to 4 p.m. Eastern Time on weekdays) or is queued for the next market open if you place it after hours.

The main trade-off is that you are responsible for your own research and decisions. Discount brokerages provide tools — stock screeners, research reports, educational articles — but no personal advisor. If you make a poor choice, the brokerage will not stop you.

Full-Service Brokers: Advice and Higher Costs

A full-service broker is a person or firm that recommends stocks and manages your portfolio for you. They work at companies like Merrill Lynch, Morgan Stanley, or UBS, or as independent advisors. You meet with them (in person or by phone), discuss your goals and risk tolerance, and they build a strategy.

Full-service brokers charge in several ways: a percentage of assets under management (typically 0.5% to 1.5% per year), a flat fee, or a commission on each trade. Many require a minimum account balance — often $100,000 to $1 million — to open an account. These costs add up quickly, so full-service brokers make sense mainly if you have a large portfolio or want hands-off management.

The benefit is personalized guidance and someone who monitors your holdings. The downside is cost and less control — your advisor makes the decisions, and you are paying for that service whether the stocks perform well or poorly.

Robo-Advisors: Automated Portfolio Management

A robo-advisor is an automated service that builds and manages a diversified portfolio for you based on a questionnaire about your goals and risk tolerance. Examples include Betterment, Wealthfront, and Vanguard Personal Advisor Services. You answer questions about your age, time horizon, and comfort with risk, and the robo-advisor allocates your money across stocks and bonds automatically.

Robo-advisors typically charge 0.25% to 0.50% per year in fees — much less than a full-service broker — and have low or no minimum account balance. They rebalance your portfolio periodically (selling winners and buying losers to maintain your target allocation) without you having to do anything.

The trade-off is less personalization. A robo-advisor follows a formula; it does not know your specific life circumstances or adjust for major changes unless you tell it. Some robo-advisors offer access to a human advisor for an additional fee if you want that option.

Employer-Sponsored Plans: 401(k) and Similar Programs

If your employer offers a 401(k), 403(b), or similar retirement plan, you can buy stocks (and mutual funds and bonds) through that plan. You choose from a menu of investments the plan offers, and money is deducted from your paycheck before taxes. The employer may match a portion of your contribution, which is assistance programs.

These plans are not brokerages in the traditional sense — you cannot buy individual stocks directly in most cases. Instead, you buy mutual funds or exchange-traded funds (ETFs) that hold many stocks. The plan administrator (often Fidelity, Vanguard, or Schwab) handles the mechanics.

The advantage is tax deferral and employer matching. The disadvantage is limited investment choices and higher fees than you might pay at a discount brokerage. If you leave your job, you can roll the account to an IRA at a brokerage of your choice.

IRAs: Tax-Advantaged Individual Accounts

An IRA (Individual Retirement Account) is a tax-advantaged account you open at a brokerage to save for retirement. You can open a Traditional IRA or a Roth IRA; the main difference is when you pay taxes. You choose the brokerage (Fidelity, Schwab, Vanguard, etc.), and then you can buy any stocks, mutual funds, or ETFs that brokerage offers.

IRAs have annual contribution limits (the limit changes each year) and rules about when you can withdraw money without penalty. They are not a separate place to buy stocks — they are a type of account at a brokerage that gives you tax benefits. Most people open an IRA at the same brokerage where they have a regular taxable account.

What to Look for When Choosing a Brokerage

Compare brokerages on commission (most now charge zero), account minimums, available investments, research tools, and customer service. If you plan to trade frequently, look at whether the brokerage charges for options trading or margin accounts. If you want to buy fractional shares (less than one full share), confirm the brokerage offers that.

Check whether the brokerage is regulated by the SEC and FINRA, and whether your account is covered by SIPC insurance. All major brokerages meet these standards, but it is worth confirming. Read reviews from current users, but remember that people who are very happy or very angry are more likely to leave reviews than those who are satisfied.

Consider whether you want a brokerage with educational resources and a mobile app, or whether a basic web platform is enough. Some brokerages offer fractional shares, which lets you buy a portion of an expensive stock with a small amount of money. Others do not.

Frequently Asked Questions

Do I need a lot of money to start buying stocks?

No. Most discount brokerages have no minimum account balance. You can open an account and buy a single share of stock with $100 or $200. Some brokerages offer fractional shares, so you can invest even smaller amounts. The only limit is the price of the stock you want to buy.

What is the difference between a brokerage account and a bank account?

A bank account holds cash and is insured by the FDIC. A brokerage account holds stocks, bonds, and cash, and is insured by SIPC. You must transfer money from your bank to your brokerage account before you can buy stocks. The transfer usually takes one to three business days.

Can I buy stocks directly from a company without a brokerage?

Some companies offer Dividend Reinvestment Plans (DRIPs) or Direct Stock Purchase Plans that let you buy shares directly. These are uncommon and usually require you to already own at least one share. For most investors, opening a brokerage account is simpler and faster.

What happens if my brokerage goes out of business?

Your stocks are protected by SIPC insurance up to $500,000 per account. SIPC does not protect against losses from bad stock picks — only against the brokerage failing or mishandling your account. If a brokerage fails, SIPC transfers your holdings to another brokerage so you do not lose access to your stocks.

Is it better to use a robo-advisor or a discount brokerage?

A robo-advisor is better if you want a diversified portfolio managed automatically and do not want to make individual stock picks. A discount brokerage is better if you want to choose your own stocks or if you prefer lower fees and more control. Robo-advisors charge 0.25% to 0.50% per year; discount brokerages charge zero commission but require you to do the research.