You can buy stocks through a brokerage firm, either online or through a financial advisor
A brokerage is a company that holds your money and executes trades on your behalf. You open an account, deposit cash, and then use their platform to buy and sell stocks. Most brokerages charge no commission on stock trades anymore, though some charge account fees or require a minimum balance. The main difference between brokerages is the platform itself — how easy it is to use, what research tools they provide, and whether you can talk to a human if you get stuck.
You have two paths: do it yourself through an online brokerage, or work with a financial advisor who buys stocks on your behalf. Self-directed investing costs less in fees but requires you to make the decisions. Working with an advisor costs more but means someone else is managing your account. Most people starting out choose self-directed, because the barrier to entry is low and you learn as you go.
Key Takeaways
- Online brokerages like Fidelity, Charles Schwab, E-Trade, and Robinhood let you open an account and buy stocks with no commission, though some charge monthly or annual fees.
- You will need to fund your account by linking a bank account or depositing a check, and most brokerages have no minimum deposit requirement.
- A brokerage account is different from a retirement account — stocks in a regular brokerage account are taxable when you sell them, while stocks in an IRA or 401(k) may have tax advantages.
- Financial advisors manage your account for you and charge a percentage of your assets, typically 0.5% to 1% per year, but require larger initial deposits.
- Before opening an account, decide whether you want to pick individual stocks yourself or use mutual funds and ETFs that bundle many stocks together.
How to open an account at an online brokerage
The process is straightforward and takes about 15 minutes. You visit the brokerage's website, click "Open an Account," and fill out personal information — your name, address, Social Security number, employment status, and annual income. The brokerage runs a background check and verifies your identity. Once approved, you link a bank account or mail in a check to fund the account.
Most brokerages have no minimum deposit to open an account, though some require $500 or $1,000 to access certain features or lower trading costs. After your deposit clears — usually one to three business days — you can start buying stocks. You search for a stock by its ticker symbol (for example, AAPL for Apple), enter how many shares you want, and confirm the trade. The stock appears in your account immediately, though the settlement process takes two business days.
Major brokerages and what sets them apart
Fidelity is one of the largest and oldest brokerages. It has no account minimums, no commission on stock trades, and offers extensive research tools and educational content. Fidelity also lets you buy fractional shares — meaning you can invest $50 and own a partial share of a $500 stock. The platform is more complex than some competitors, which can be overwhelming for beginners but powerful once you learn it.
Charles Schwab is known for low fees and strong customer service. It has no account minimums, no commission on stocks, and offers fractional shares. Schwab's platform is considered user-friendly and the company has physical branch locations in many cities if you want to talk to someone in person.
E-Trade offers no account minimums and no commission on stocks. It has a solid mobile app and good educational resources. E-Trade is owned by Morgan Stanley, which means you can also access advisory services if you decide you want professional help later.
Robinhood is a mobile-first app designed for beginners. It has no account minimums, no commission, and a simple interface. Robinhood makes money through payment for order flow and premium subscription features, not through trading commissions. The downside is that it has fewer research tools and educational resources than larger brokerages.
Interactive Brokers is designed for active traders and investors who want low costs and advanced tools. It charges a small commission on some trades and has a $500 minimum account balance. If you plan to trade frequently or use complex strategies, it may be cheaper than competitors, but it is not beginner-friendly.
Brokerage accounts versus retirement accounts
A regular brokerage account is taxable. When you sell a stock for a profit, you owe capital gains tax on the difference between what you paid and what you sold it for. If you hold the stock for more than one year, you pay long-term capital gains tax, which is usually lower than short-term rates. You report these gains on your tax return each year.
A retirement account — such as a traditional IRA, Roth IRA, or 401(k) — has tax advantages. In a traditional IRA, contributions may be tax-deductible and gains are not taxed until you withdraw money in retirement. In a Roth IRA, contributions are not deductible but withdrawals in retirement are tax-free. Most brokerages let you open both types of accounts, and you can hold stocks in either one.
If you are just starting out, you do not have to choose between them. Many people open a regular brokerage account first to learn how stocks work, and then open a retirement account once they understand the tax implications. The money in each account is separate, and you can contribute to both in the same year.
Working with a financial advisor instead
A financial advisor manages your account and makes investment decisions for you. You meet with them, discuss your goals and risk tolerance, and they build a portfolio of stocks, bonds, and other investments. They rebalance your portfolio periodically and adjust it as your life changes.
Advisors typically charge one of two ways: a percentage of assets under management (usually 0.5% to 1% per year) or a flat fee. Some charge by the hour. The percentage model means you pay more as your account grows, but you also benefit if the advisor makes good decisions. The flat fee model is more predictable but may not make sense if you have a small account.
Most advisors require an initial deposit of $25,000 to $100,000, though some have lower minimums. The advantage is that you do not have to learn about stocks or spend time managing your account. The disadvantage is that you pay ongoing fees and have less control over individual decisions. For beginners with limited time or confidence, this can be worth it. For people who want to learn and stay involved, self-directed investing through a brokerage is usually the better choice.
Mutual funds and ETFs as an alternative to individual stocks
Instead of buying individual stocks, you can buy mutual funds or exchange-traded funds (ETFs), which are bundles of many stocks. A mutual fund might hold 100 or 500 different stocks, so you own a piece of all of them with one purchase. This spreads your risk — if one company performs poorly, it does not hurt your overall investment as much.
Mutual funds are managed by a professional who picks which stocks to include. ETFs are usually designed to track an index, like the S&P 500, which means they hold the same stocks as that index. ETFs typically have lower fees than actively managed mutual funds. Both are available through any brokerage, and you buy them the same way you buy individual stocks.
For beginners, mutual funds and ETFs are often a better starting point than individual stocks. You get diversification without having to research and pick individual companies. Many people build their entire portfolio from ETFs and never buy individual stocks at all.
What happens after you buy your first stock
Once you own a stock, you see it in your account with the current price and your gain or loss. You can hold it forever, sell it whenever you want, or add to your position by buying more shares. If the company pays a dividend — a cash payment to shareholders — it will be deposited into your account automatically.
You do not have to do anything to maintain your account. The brokerage holds your stocks safely and keeps your account secure. At the end of each year, the brokerage sends you a tax form showing your gains, losses, and dividends, which you use to file your taxes. If you sell a stock at a loss, you can use that loss to offset gains from other stocks, which can reduce your tax bill.
Most beginners make the mistake of checking their account too often and reacting to short-term price swings. Stocks fluctuate daily, but historically they trend upward over years and decades. If you are investing for the long term, ignore the daily noise and focus on whether your overall strategy still makes sense.
Frequently Asked Questions
Do I need a lot of money to start investing in stocks?
No. Most brokerages have no minimum deposit, and many let you buy fractional shares, meaning you can invest $10 or $50 and own a piece of an expensive stock. Start with whatever amount you can afford to leave invested for at least a few years.
What is the difference between a stock and a share?
A share is a single unit of ownership in a company. A stock is the general term for ownership in a company. When you buy one share of Apple stock, you own one piece of Apple. If you buy 10 shares, you own 10 pieces.
Can I lose all my money investing in stocks?
Yes, it is possible, though unlikely if you diversify. If you buy one stock and the company goes bankrupt, you can lose your entire investment in that stock. If you buy a mutual fund or ETF with hundreds of stocks, one company failing will not wipe you out. This is why beginners are often advised to start with diversified funds rather than individual stocks.
How much should I have in an emergency fund before I start investing?
Most financial advisors recommend having three to six months of living expenses in a savings account before you invest in stocks. This protects you if you lose your job or face an unexpected expense. Once you have that cushion, you can invest money you will not need for at least five years.
What is the difference between a brokerage account and a bank account?
A bank account holds cash and is insured by the FDIC up to $250,000. A brokerage account holds stocks, bonds, and other investments, and is protected by SIPC insurance up to $500,000. Money in a brokerage account is not may provide and can go up or down in value. You use a brokerage account to invest; you use a bank account for everyday spending and emergency savings.