How to Choose a Brokerage Account
A brokerage account is where you buy and hold investments outside, or alongside, your workplace retirement plan. Here's what to compare, the account types available, how your money is protected and how to open one.
By Pond.com editors Updated 2 min read
Quick answer
- A brokerage account lets you buy stocks, bonds and funds; you can open a regular taxable account or an IRA.
- Compare fees, fund choices, account minimums, fractional shares, automatic investing and ease of use.
- Most large online brokerages charge no commission to trade US stocks and ETFs.
- Robo-advisors build and manage a portfolio for you for a small yearly fee.
- SIPC protects up to $500,000 per customer if a brokerage fails, but not against investment losses.
To invest outside a workplace retirement plan, you'll need a brokerage account. Opening one takes about 15 minutes online, and most large brokerages are low-cost. The right choice depends on how hands-on you want to be.
This article is general information, not investment advice.
Account types
- Taxable brokerage account: for any goal. No contribution limits or withdrawal rules, but you pay tax on dividends and gains.
- Traditional or Roth IRA: for retirement, with tax benefits. See retirement accounts explained.
- Custodial account: investing for a child, who takes control as an adult.
What to compare
| Feature | What to look for |
|---|---|
| Fees | No account fees and no commissions on stocks and ETFs; check fund fees and transfer-out fees |
| Investment choices | Low-cost index funds and ETFs, including the company's own funds |
| Minimums | No minimum to open |
| Fractional shares | Lets you invest small amounts in any fund |
| Automatic investing | Regular investments on a schedule |
| Ease of use | A clear app and website, and good customer service |
| Extras | Cash interest rates, research tools, other account types |
Popular online brokers for everyday investors, compared on fractional shares and what each does best.
How we chose these
We included large, well-known US online brokers suited to everyday investors, using each broker's own website and independent reviews. Brokers are listed alphabetically. All are members of SIPC, which protects your account if the broker fails, but not against investment losses. Pond.com isn't paid by any broker listed here.
All the brokers listed charge $0 commission for online US stock and ETF trades and have no minimum to open a standard brokerage account. Other fees can apply, for example for some mutual funds, options, broker-assisted trades or transfers out.
For information only, not a recommendation. Rates and terms change often and may depend on where you live; check the details with the provider before you apply. Pond.com isn't paid by any provider listed here.
Do-it-yourself or robo-advisor?
- Do-it-yourself: you choose your funds, for example one target-date or a few index funds. It's the cheapest option.
- Robo-advisor: you answer questions about your goals and it builds and rebalances a portfolio for you, usually for a small yearly fee.
- Human advisor: for complex situations. Look for a fee-only planner, who doesn't earn commissions.
How your money is protected
- SIPC protects up to $500,000 per customer, including $250,000 in cash, if a member brokerage fails. It doesn't protect against investment losses.
- Check the firm on FINRA BrokerCheck before you open an account.
- Use strong security: a unique password and two-step verification.
How to open one
- Choose the account type, for example a Roth IRA or a taxable account.
- Apply online with your Social Security number, ID and bank details.
- Link your bank and transfer money in.
- Choose your investments, and set up automatic contributions.
Common questions
An IRA is a type of account with tax benefits for retirement, and you usually open it at a brokerage. A regular brokerage account has no tax benefits but no contribution limits or withdrawal rules. Many people have both at the same company.
If the brokerage is a SIPC member and fails, SIPC protects up to $500,000 per customer, including up to $250,000 in cash. That doesn't cover losses from your investments falling in value. Check that the firm is registered on FINRA BrokerCheck.
A robo-advisor can be a good choice if you want investing done for you. It asks about your goals, picks a mix of low-cost funds and rebalances automatically, usually for around 0.25% a year. If you're happy choosing a target-date or index fund yourself, you can avoid that fee.