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How to Choose a Brokerage Account

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Alice Hoekstra
Author: Alice Hoekstra
Alice Hoekstra
Alice Hoekstra

Alice is a content strategist for Motley Fool Money, where she has worked full-time for almost five years. Throughout her five years at The Motley Fool, Alice has worked on content across a wide range of financial topics, including credit cards, brokerages, banks, mortgages, personal loans, and auto insurance, helping readers make informed decisions with confidence. Her top financial priorities are funding her world travels and giving her cat the luxurious life she deserves. When she’s not working, traveling, or watching Friends reruns, you’ll find her at the nearest concert or Broadway show.

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Nathan Alderman
Fact Checked: Nathan Alderman
Nathan Alderman
Nathan Alderman
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Choosing a brokerage can feel like trying to find the perfect pair of shoes. A great fit will have you walking on air, but the wrong choice will give you blisters. Luckily, finding the right brokerage doesn't have to be stressful. Whether you're just starting out or looking to upgrade, this guide will help you make sense of your options.

We'll walk you through the key steps to finding a brokerage that fits your investing style, goals, and budget. Let's dive in!

1. Know your goals

Before you start looking at brokerages, take a step back and think about what you want to achieve with your investing. Are you saving for retirement? Looking to trade stocks for fun? Trying to build long-term wealth? Your goals will steer you toward the right brokerage features.

For example, if retirement is your focus, look for brokerages that offer IRAs or 401(k) rollovers. These accounts often come with tax benefits that help your money grow faster. You'll also want a brokerage with simple tools for automatic deposits and no inactivity fees. Bonus points if they offer educational resources on retirement planning or an IRA match.

If you're interested in trading stocks and learning the ropes, you might prioritize tools like stock screeners, market research reports, and low fees. A platform with user-friendly charts and tutorials is a big plus if you're a beginner.

The key here is to get clear on what you need. Creating a list of your investing goals will help you narrow down your options and find the perfect brokerage for your needs.

2. Compare investment and trade types

Not all brokerages offer the same menu of investments. Some focus on stocks and ETFs, while others give you access to mutual funds, bonds, or even cryptocurrency. Knowing what you want to invest in will help you narrow down your choices.

If you like the idea of hands-off investing, mutual funds might be your best friend. They're pre-built portfolios managed by pros, so you don't have to stress about picking individual stocks. Just make sure your brokerage supports mutual funds -- not all of them do.

Want to buy a piece of expensive companies like Amazon or Tesla? Check if the brokerage offers fractional shares. These let you own a slice of a stock, often for as little as $1. It's perfect if you're starting small.

For a list of our top-rated fractional share brokerages, check out our guide: Best Brokerages for Fractional Share Investing

Interested in more advanced strategies like options or futures? Look for a broker specializing in these trades. For example, some of the best options brokers offer low fees and advanced tools. And if you're curious about trading crypto or accessing international markets, double-check that your chosen brokerage supports those, too.

The takeaway: Make sure the brokerage you pick offers the investment types you're most interested in. It'll save you from frustration down the road.

3. Compare brokerage fees and pricing

Fees are sneaky. Even small ones can eat into your profits over time. That's why it's so important to understand a brokerage's fee structure before you sign up.

Start with trading commissions. Most big brokerages offer $0 commissions on stock and ETF trades these days, but it's still worth double-checking. If you plan to trade options or futures, take a close look at the per-contract fees. These can add up quickly if you're an active trader.

Don't forget about account fees. Some brokerages charge for things like inactivity or account maintenance. If you're the "set it and forget it" type, look for a brokerage with no inactivity fees. And if you think you'll switch brokerages down the line, check for transfer-out fees -- these can be surprisingly high.

Finally, some stock trading apps charge a subscription fee. Go to our guide to get our recommendations for free investing apps: Best Free Stock Trading Apps

Look for a brokerage with low or no fees that aligns with your investing style. Every dollar you save on fees is a dollar that stays invested and working for you.

4. Compare tools and resources

Once you've narrowed down your options, it's time to dig into the tools and resources each brokerage offers. These extras can make a big difference, especially if you're just getting started or trying to level up your investing game.

Here are some popular features to consider:

  • Beginner resources: Some of the best brokerages for beginners offer tutorials or courses for new investors. These can be super helpful if you're learning the basics.
  • Research and analysis: Access to market news, research reports, and stock screeners can help you make smarter decisions.
  • User experience: Is the platform easy to use? A clean interface can save you a lot of headaches.
  • Advanced tools: If you're more experienced, you might want advanced charting tools, customizable dashboards, or real-time market data.

Think about what tools will actually make your life easier. If you're a beginner, don't get overwhelmed by platforms with tons of advanced features you'll never use. And if you're a pro, make sure the brokerage you choose has the tools to keep up with you.

5. Apply for a brokerage account

Once you've found the right brokerage, applying for an account is usually a breeze. Most applications can be completed online in just a few minutes. You'll need some basic info like your Social Security number, employment details, and a funding source (like a checking account).

After your application is approved, you're ready to start investing! Take your time exploring the platform, setting up your account, and getting comfortable with the tools.

Ready to find the right brokerage for you? Head over to our expert-curated list of the top stock brokers we've seen: Best Brokers and Trading Platforms

Final thoughts

Choosing a brokerage isn't as complicated as it seems. The key is to focus on what matters most to you: your goals, the investment types you want, fees, and tools. Take your time, do your homework, and don't rush the process. A great brokerage can make investing easier and more enjoyable, so it's worth putting in the effort to find the right one. Happy investing!

FAQs

  • A brokerage is like a middleman that helps you buy and sell investments like stocks, ETFs, or mutual funds. It's your gateway to the world of investing.

  • Nope! Some brokerages let you start with as little as $1. Thanks to fractional shares, you can own part of a stock even if it's pricey.

  • They can be! Free apps are great for beginners, but watch out for hidden fees or limited features. Make sure they have everything you need to succeed.

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