You buy stocks through a brokerage firm, either online or through a person who works for one

A brokerage is a company licensed to buy and sell stocks on your behalf. You open an account with them, deposit money, and then place orders to buy or sell shares. Most people now use online brokerages — websites or apps where you can trade yourself without talking to anyone. Some people still use full-service brokers, where a person manages your account for a fee, but that costs more and is less common for people starting out.

The brokerage holds your money and your shares in your account. When you sell a stock, the cash goes back into that account. You can then withdraw it to your bank, or use it to buy something else. The brokerage makes money by charging you a fee per trade, or by taking a small cut of your money while it sits there, or sometimes both — the fee structure depends on which firm you choose.

Key Takeaways

  • Online brokerages like Fidelity, Charles Schwab, E*TRADE, and Robinhood let you open an account and trade stocks yourself through a website or phone app.
  • Most online brokerages charge zero dollars per trade now, but some make money from other fees or by lending out your shares.
  • You will need a Social Security number, proof of address, and a bank account to link for deposits when you open an account.
  • After you open an account and deposit money, you can place your first stock order within minutes, though the trade itself settles in one to two business days.
  • Different brokerages offer different tools, research resources, and account types — comparing a few before you choose saves time later.

How to open an account at an online brokerage

The process is the same at most firms. You go to their website or download their app, click "Open an Account," and answer questions about yourself. You will need your Social Security number, a government ID, your address, and your employment status. The brokerage is required by law to verify who you are — this is called Know Your Customer verification, and it usually takes a few minutes.

After verification, you link a bank account so you can move money in and out. You can deposit by electronic transfer (usually free and takes one to three business days) or sometimes by check. Once money is in your account, you can place a stock order right away. The order goes through in seconds, but the actual trade — the moment the shares move from the seller to you — takes one to two business days to settle.

You do not need much money to start. Most brokerages have no minimum deposit. Some have a $1 or $2 minimum per trade, but you can buy fractional shares at many firms now, meaning you can spend $10 or $50 on a single stock if you want to.

Major online brokerages and what they charge

The largest and most widely used are Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Robinhood, and Webull. All of them charge zero dollars per stock trade now — that was not true ten years ago, but the industry moved to zero commissions around 2019. Some charge for options trading or for certain other products, but basic stock trades are free.

They make money in other ways. Some charge a small monthly fee if your account balance is below a certain amount. Some lend out your shares to other investors and keep part of the interest. Some offer premium accounts with extra research tools or financial advice, which cost extra. Some make money from the spread — the tiny difference between the buy price and the sell price — which happens automatically when you trade.

The differences between them matter less than they used to, because the core service is now the same: you can buy any stock, pay zero per trade, and see your holdings in real time. The real differences are in the research tools they offer, how easy their app is to use, and whether they offer things like fractional shares or automatic dividend reinvestment.

Full-service brokers and robo-advisors as alternatives

A full-service broker is a person or firm that manages your account for you. You tell them your goals, they decide what to buy and sell, and you pay them a percentage of your account balance each year — usually 0.5% to 2%. This costs much more than doing it yourself, but some people prefer it because they do not have to make decisions or watch the market.

A robo-advisor is a middle ground. It is an automated service that builds a portfolio for you based on your age and risk tolerance, then rebalances it automatically. Firms like Vanguard Personal Advisor Services, Betterment, and Wealthfront offer this. They usually charge 0.25% to 0.50% per year, which is less than a full-service broker but more than doing it yourself at a zero-commission brokerage.

For someone just starting out, an online brokerage is usually the cheapest and most straightforward. You learn by doing, and you pay nothing per trade. If you later decide you want someone else to manage it, you can move your account.

What happens after you place an order

When you place an order to buy 10 shares of Apple at the current market price, your brokerage sends that order to an exchange — usually the NASDAQ or the New York Stock Exchange. The order matches with a seller, and the price you pay is set. This all happens in seconds or fractions of a second.

The trade then enters a settlement period. For stocks, settlement takes T+2 — that means the trade date plus 2 business days. So if you buy on a Monday, the shares officially move to your account on Wednesday. Until then, you own them, but the paperwork is still processing. You can sell them before settlement is complete, but most brokerages will not let you withdraw the cash until settlement is done.

Once settlement is complete, the shares sit in your account. You can hold them forever, sell them whenever you want during market hours, or set up automatic reinvestment if the stock pays a dividend.

Types of accounts and tax considerations

Most people start with a taxable brokerage account, also called a cash account. You can buy and sell as much as you want, but you pay taxes on any gains when you sell. There is no contribution limit.

If you are saving for retirement, you might open an IRA (Individual Retirement Account) or a 401(k) instead. These have tax advantages — you either pay no taxes on gains until you withdraw in retirement, or you pay no taxes on gains ever, depending on the type. But there are rules: you can only contribute a certain amount per year, and you usually cannot withdraw before age 59½ without a penalty. Most online brokerages let you open an IRA with them.

If you are under 18, you need a parent or guardian to open a custodial account in your name. The adult controls it until you turn 18 or 21, depending on your state.

How to choose which brokerage to use

Start by listing what matters to you. Do you want a mobile app that is easy to use? Do you want lots of research and educational content? Do you want to trade options or other complex products, or just stocks? Do you want fractional shares? Do you want a human you can call, or are you fine with online chat and email?

Then visit two or three brokerages and open a practice account or read their fee schedule. Most have no fee to open an account, so there is no cost to looking around. Deposit a small amount of money — $100 or $500 — and place a test trade. See how the app feels, how fast the trade goes through, and whether the research tools make sense to you.

After a few weeks of using it, you will know whether it works for you. If it does not, you can transfer your account to a different brokerage. The transfer is free and usually takes a week or two. You do not lose money or shares in the process.

Frequently Asked Questions

Do I need a lot of money to open a brokerage account?

No. Most brokerages have no minimum deposit. You can open an account and deposit $50 if you want. Some brokerages let you buy fractional shares, so you can own part of an expensive stock with a small amount of money.

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

Some large companies offer direct stock purchase plans (DSPPs) that let you buy shares straight from them, bypassing a broker. But most people do not use these because they are slower, have higher fees per transaction, and do not let you sell easily. A brokerage is simpler for most investors.

What is the difference between a market order and a limit order?

A market order buys the stock at whatever price it is selling for right now. A limit order lets you set a maximum price you are willing to pay, and the trade only goes through if the stock hits that price or lower. Limit orders take longer or may not fill at all, but they protect you from buying at a price higher than you wanted.

Can I lose more money than I put in?

If you buy stocks with cash, no — the worst that can happen is the stock goes to zero and you lose what you invested. If you borrow money from your broker to buy stocks (called margin), you can lose more than you put in. Most beginners should use a cash account and avoid margin.

How do I know if a brokerage is safe and regulated?

All brokerages in the United States must be registered with the SEC (Securities and Exchange Commission) and the FINRA (Financial Industry Regulatory Authority). You can check the SEC and FINRA websites to verify a brokerage is real and licensed. Your account is also insured up to $500,000 by the SIPC (Securities Investor Protection Corporation) if the brokerage fails.