How to open a brokerage account: step-by-step instructions

Think about what you want to accomplish: saving for retirement , building a nest egg for your kids, creating an income stream or safely storing your assets. You should also determine how much risk you’re willing and able to take on.

“Investment goals are typically based on one’s tolerance for risk, in addition to their investment timeline,” said Richard Gardner, CEO of Modulus, a technology company serving the fintech and finance community. “Those in their late 20s typically accept higher risk than those about to retire, for example.”

If you’re having trouble identifying your goals, you might need help from a financial advisor . Where and how much you’ll invest is a personal decision, so don’t feel pressured to follow in others’ footsteps.

“While friends and family may have copious amounts of advice to offer, it's important to remember that your situation is likely different than theirs and, therefore, what worked for them may not be right for you,” said Daniel Colston, a certified financial planner and the founder of Upward Financial Planning.

“Consider factors such as your financial objectives, time horizon, and how comfortable you are with market fluctuations. These considerations will help you make informed decisions about the type of brokerage account and investment strategies that suit your needs.”

There are several types of brokers, each with different features, services and fee structures. Three of the most common are:

• Full-service brokers: These provide a wide range of services, including personalized investment advice, executing trades on specific securities, managed investment accounts and more. They often have higher commissions and fees since they’re so personalized.
• Discount brokers: This type won’t give you investment advice. Rather, the broker serves as an intermediary and helps execute trades at stock exchanges when you give a buy or sell order. Since discount brokers mostly do what you ask, they charge lower commissions and fees than full-service brokers.
• Robo-advisor: This is an automated system that can help you identify your investing goals, make investments, monitor your portfolio and automatically adjust it as needed. In essence, it’s an investing platform that uses algorithms to make decisions. Since it’s digital, the costs are often much lower than the other two options.

If you have a complex portfolio or investing goals or want a lot of one-on-one assistance and don’t mind paying higher fees, a full-service broker might be right for you. Conversely, if you have simple investing goals, the automated features of a robo-advisor may be enough.

» MORE: Best investment apps for beginners

There are two basic brokerage account types to choose from: cash accounts and margin accounts.

• With a cash account , you must pay for the total amount of the securities you want to buy with the money available to you. You can’t borrow money to make the trade.
• With a margin account , you can trade using the money you borrowed from your brokerage firm. The securities you purchased are collateral for the loan your brokerage firm made to you.

When you sell the securities you bought on margin, you must repay your brokerage firm the borrowed amount plus interest. Remember that since you’re using borrowed money to make trades, margin accounts have more risk than cash accounts.

“Brokerage accounts can come with various fees and commissions, including trading fees, account maintenance fees, and advisory fees,” said Colston.

“Some brokerages may offer commission-free trades for certain assets or have tiered pricing based on account balance or trading activity. It's crucial to understand the fee structure of the brokerage account you choose to avoid any surprises down the road.”

You should also consider the costs in the context of your overall financial plan.

“Be sure the fee structure matches your goals, otherwise it may significantly affect your returns,” said Gardner.

The application process will depend on the brokerage firm you’ve selected, but you can usually do this online or in person. It typically takes only a few minutes to complete if you do it online.

You’ll need to provide personal information such as:

• Name
• Address
• Social Security number
• Employment details

“Additionally, you may need to answer questions related to your investment experience, goals and risk tolerance to help the brokerage comply with regulatory requirements,” said Colston.

You can fund your account by electronically transferring money or even by writing a check. With most brokerage firms, you can directly connect your bank account to your brokerage account. This allows you to easily fund transfers in both directions.

You can usually start using your account as soon as the funds are available. Depending on your financial institution, brokerage firm and the funding method you use, your funds may be available as soon as the same day, or they may take as long as 14 days to clear.