You buy stocks through a brokerage firm, which acts as the middleman between you and the stock market

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. The brokerage executes those orders on the stock exchange (usually the New York Stock Exchange or NASDAQ) and holds the shares in your account.

You cannot buy stocks directly from a company or from the stock exchange itself. Every trade goes through a brokerage. The brokerage makes money through commissions, fees, or by lending out your shares — the structure varies by firm.

The main choice you face is which brokerage to use. Different brokerages charge different fees, offer different tools, and serve different types of investors. Some are designed for beginners with small accounts; others cater to active traders or people managing large portfolios.

Key Takeaways

  • You need a brokerage account to buy stocks; you cannot purchase them directly from companies or exchanges.
  • Most brokerages now charge zero commission per trade, but they may charge other fees like account maintenance, wire transfers, or inactivity fees.
  • Online brokerages (like Fidelity, Charles Schwab, E*TRADE) are the most common route for individual investors and typically have lower minimums than traditional firms.
  • Your brokerage holds the shares in your account and sends you statements showing what you own and what it is worth.
  • Before opening an account, compare fee structures, minimum deposit requirements, and the research tools or educational resources each firm offers.

Types of brokerages and how they differ

Full-service brokerages employ advisors who help you pick stocks and manage your portfolio. They typically charge higher fees — either a percentage of your assets under management or a commission per trade. Examples include Merrill Lynch and Morgan Stanley. These firms are most common if you have a large portfolio or want personalized guidance.

Discount brokerages offer lower fees and fewer services. You make your own decisions and place your own trades. Most online brokerages fall into this category: Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Robinhood, and Webull are all discount brokerages. They typically charge no commission per trade but may charge other fees.

Robo-advisors are automated investment services offered by some brokerages (Vanguard, Schwab, Fidelity) or as standalone platforms (Betterment, Wealthfront). They build and manage a portfolio for you based on your goals and risk tolerance, charging a percentage of assets rather than per-trade fees.

For most people starting out, an online discount brokerage is the practical choice because the barrier to entry is low, fees are transparent, and you have full control over what you buy.

What you need to open a brokerage account

Opening an account takes 10 to 20 minutes online. You will need:

  • A valid government-issued ID (driver's license or passport)
  • Your Social Security number
  • Your date of birth
  • Your address
  • Employment information (some brokerages ask this)
  • A bank account to fund your brokerage account

The brokerage will verify your identity and run a background check. Most accounts are approved within one business day. Once approved, you can deposit money by linking a bank account, transferring funds via wire, or mailing a check (though wire and check deposits are less common now).

Many brokerages have no minimum deposit requirement, though some require $500 to $2,500 to open. A few still require $10,000 or more, but these are less common among online firms. Check the specific brokerage's requirements before you start the application.

How to place a stock order once your account is funded

After you deposit money, you log into your account and search for the stock you want to buy by its ticker symbol (a one- to five-letter code like AAPL for Apple or MSFT for Microsoft). You enter the number of shares you want and choose an order type.

A market order buys the stock immediately at the current market price. It executes within seconds during market hours. A limit order lets you set a maximum price you are willing to pay; the order only executes if the stock drops to that price or lower. Limit orders can take days or never execute if the price never reaches your limit.

Most brokerages also let you set up automatic investments, where a fixed amount of money is transferred from your bank account to your brokerage and invested in stocks or funds on a schedule you choose (weekly, monthly, etc.). This is common for people building long-term portfolios.

Once your order executes, the shares appear in your account. You own them immediately, and the brokerage holds them for you. You can sell them anytime the market is open by placing a sell order the same way.

Fees and costs to understand before you choose

Most online brokerages charge zero commission per trade, meaning you do not pay a fee when you buy or sell a stock. This was not always the case — until around 2019, most brokerages charged $5 to $10 per trade — but competition drove commissions to zero.

However, zero commission does not mean zero cost. Watch for:

  • Account maintenance fees: Some brokerages charge $10 to $25 per month or year to keep an account open, though many waive this if you maintain a minimum balance or set up automatic deposits.
  • Wire transfer fees: Moving money out of your account to your bank may cost $15 to $30.
  • Inactivity fees: A few brokerages charge if you do not trade for a set period (usually 12 months), though this is rare now.
  • Margin interest: If you borrow money from your brokerage to buy stocks (called buying on margin), you pay interest on the borrowed amount.
  • Mutual fund fees: If you buy mutual funds or exchange-traded funds (ETFs), the fund itself charges an annual fee (called an expense ratio), which is separate from any brokerage fee.

Read the fee schedule on the brokerage's website before you open an account. Most brokerages publish this clearly, and you can compare across firms in 15 minutes.

What happens to your stocks if the brokerage fails

Your stocks are protected by the Securities Investor Protection Corporation (SIPC), a government-backed insurance program. If your brokerage goes bankrupt or commits fraud, SIPC covers up to $500,000 per account (including $250,000 in cash). This protection applies to stocks, bonds, and mutual funds held in the account.

SIPC does not protect you against investment losses — if you buy a stock and it drops 50%, SIPC does not reimburse you. It only protects you if the brokerage itself fails or steals your money.

Most major brokerages also carry additional insurance beyond SIPC. Fidelity, Charles Schwab, and others typically carry $600 million to $1 billion in additional coverage. This information is usually on the brokerage's website under "Security" or "Protection."

Frequently Asked Questions

Can I buy stocks through my bank?

Many banks offer brokerage services, but you are usually better off opening an account directly with a dedicated brokerage. Banks often charge higher fees and offer fewer research tools. If your bank does offer brokerage services, compare their fees and features to standalone brokerages before deciding.

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

No. Most online brokerages have no minimum deposit, and you can buy a single share of any stock. If a stock costs $150 per share and you have $50, you cannot buy a full share at that price, but many brokerages now offer fractional shares, letting you invest any dollar amount.

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

A regular brokerage account has no contribution limits and no tax advantages — you pay taxes on gains and dividends each year. A retirement account (like an IRA or 401(k)) has contribution limits but offers tax breaks: you may deduct contributions, or withdrawals in retirement are tax-free, depending on the account type. Many people use both.

Can I lose more money than I invested?

In a regular brokerage account, your loss is limited to what you invested. If you buy $1,000 worth of stock and it goes to zero, you lose $1,000. However, if you buy stocks on margin (borrowing money from your brokerage), you can lose more than your initial investment because you owe back the borrowed amount plus interest.

How long does it take to sell a stock and get the money?

The sale executes within seconds during market hours. The cash appears in your brokerage account immediately. However, if you want to transfer that cash to your bank account, it typically takes one to three business days depending on the brokerage and your bank.