We detail the 9 easy steps you need to take to open an online brokerage account, all from the comfort of your home.
1. Gather Your Personal Information
All legitimate online brokers will ask for personal details such as:
- Name
- Address
- Ask if you are a U.S. Citizen
- Social Security Number
Be prepared to provide such details to the online broker, as it is impossible to open an account without them.
2. Select The Appropriate Type of Account
Many online brokers, such as Webull and Public, offer several types of accounts, such as taxable brokerage, Traditional and Roth IRA accounts, custodial accounts, and even 529 plans.
The type of account you should open depends on your needs and investing goals.
For example, Traditional and Roth IRA accounts (individual retirement accounts) are commonly used by individuals looking to invest for the long term, i.e., for retirement. Meanwhile, taxable brokerages are more commonly used by individuals who are more active traders. Lastly, custodial accounts are opened by individuals who are looking to invest on behalf of an individual, e.g., a parent may open a custodial account for their child.
Note: Some brokerages may offer multiple types of accounts, while others only offer a taxable brokerage, be sure to check.
3. Review Features and Benefits
Look into the various online brokerages that are available. Research their fees, account types, investment options, customer service, platform usability, and educational resources. Some popular online brokerages include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, and Robinhood.
Nowadays, online brokerages offer varying levels of features and benefits. Generally speaking, many full-service and discount brokers offer commission-free stock and ETF trading, and while commission-free trading may seem appealing, I wouldn’t recommend that be your determining factor because it’s fairly common.
Features to consider include:
- Customer Service
- Fees
- Account Types
- Investment Options
- Platform Usability
- Educational Resources
4. Fill out the application form
You’ll need to provide some personal information. This will usually include your name, address, Social Security number (or other tax identification number), employment information, and financial information. Some brokerages may also ask about your investment goals and experience.
5. Set up funding for your account
You’ll likely be asked to link a bank account so that you can transfer money into your brokerage account. This usually involves providing your bank’s routing number and your account number.
6. Review and submit your application
Double-check all the information you’ve provided to make sure it’s correct. Then, submit your application.
7. Wait for approval
The brokerage will review your application. This can sometimes happen instantly, or it may take a few days. Once you’re approved, you’ll get an email with information on how to access your new account.
8. Deposit funds
Once your account is set up, you can log in and deposit funds.
9. Start investing
Now you can start buying and selling stocks, bonds, ETFs, mutual funds, or whatever other securities your brokerage offers.
Frequently Asked Questions
Is it hard to open a brokerage online?
No. Opening a brokerage account is as straight forward as opening a checking account at your local bank.
Should I consider a robo-advisor?
Considering a robo-advisor involves evaluating its algorithmic investment strategies, low management fees, and ease of use for portfolio management.
These digital platforms can help automate investing, making them suitable for beginners or those with less time to manage their finances actively. However, understanding its limitations, like lack of personalized advice and potential for technical glitches, is also crucial to making an informed decision.
