How to Open Your First Brokerage Account: A Beginner’s Guide for 2025

Thinking about investing but don’t know where to start? Opening a brokerage account is the first step to growing your wealth!

My use of brokerage accounts have varied throughout life. In the beginning I just started out investing with a brokerage account along with a Roth IRA. Over the years I've used it for buying and selling stocks, options trading, and will eventually build it into a stabilized dividend portfolio that will supplement other income streams.

That's the beauty of brokerage accounts, they're flexible.

With so many options available, choosing the right broker can feel overwhelming. But don’t worry—I’ve got you covered. In this guide, I’ll walk you through everything you need to know, from selecting the best brokerage to making your first trade.

By the end, you’ll be ready to start investing with confidence!

What Is a Brokerage Account?

A brokerage account is an investment account that lets you buy and sell securities like stocks, bonds, mutual/index funds, and ETFs.

You can open a brokerage account through a brokerage firm or even your own bank if they operate their own brokerage firm. Opening a brokerage account is pretty simple (skip ahead for a step by step).

There are a few key differences between brokerage accounts and retirement accounts like an IRA or 401(k). Yes, they both allow you to hold your investments but there's a trade off to consider when it comes to the account features.

An IRA or 401(k) allows for specific tax advantages such as tax-deferred growth and then either paying for the taxes on what you pull out later as income in retirement or being completely tax free depending whether you choose Roth or Traditional.

This means if you make a sale in your retirement account you won't pay taxes now which really helps your account grow.

A brokerage account doesn't come with any tax advantages but it does come with another major benefit...liquidity. Yes, if you sell an investment at a gain you'll have to pay taxes but the point is that you can get access to the money at anytime.

No penalties for withdrawing early like in retirement accounts. Granted, the money is not as readily accessible as a bank account because you do still have to wait a few days for a trade to clear and then be available in cash.

Brokerage accounts are a great starting point if you're not quite ready to have your money locked in a retirement account for decades or you can add it to your current line up of accounts.

Also, if you're focused on passive income prior to retirement then it's a great option to start building a dividend portfolio. More on that at a later date.

Choosing the Right Broker for Your Needs

First you've got to consider how hands on you want to be with managing your investments. This is where it's good to know the differences between online vs. traditional brokers.

A traditional broker is an institute which enables purchasing and selling securities in the financial marketplace between a buyer and seller and takes a commission.

This is what we would call "full service". There's a few intermediaries, such as financial/investment advisors, but essentially you rely on other's to execute trades on your behalf. The flip side is called a discount broker which is the method I prefer.

A discount broker is a brokerage firm that executes orders for clients at a lower cost. They typically don't offer research, advice or tax planning services so this is a more cost effective route and is catered more towards the DIY investor.

Whichever route you consider to hold your account, here's a few key factors to consider:

Fees: Brokerage fees, can be charged as a percentage of the transaction, a flat fee, or a combination of the two. These fees go towards facilitating trading, managing investment accounts, or providing various services.

Full service brokers will be on the higher end while discount and Robo-advisors being on the other end of the spectrum.

Account minimums: There are plenty of brokerage accounts out there that don't have a minimum requirement but others might. Most of the time you'll see minimum investments for particular funds you may be considering adding to your account which is a separate matter entirely.

Even if there is no minimum balance keep in mind that some brokers may close accounts that don't have funds added after a certain amount of time.

Available assets: This is very important because not all brokers have the same access to certain investment assets. Most of the time this doesn't affect individual securities like stocks but there may be limitations if there are particular funds that are exclusive to the broker.

Best brokerage accounts for beginners in 2025

Aside from the factors mentioned above in choosing a broker you also want the one that is the most user-friendly. It's easy to get overwhelmed when just getting started let alone learning to navigate through a website with a range of different features and resources.

Here are a few solid options to consider:

• Charles Schwab
• J.P. Morgan
• Robinhood
• Interactive Brokers
• Vanguard
• Fidelity
• Robo-advisors

What do I use?

I hold my accounts with Charles Schwab. It's the largest brokerage firm by AUM (assets under management) and offers a very robust range of offerings.

I previously held my accounts with TD Ameritrade which was acquired by Schwab in 2023 and I'm glad they kept the very sophisticated "Think or Swim" trading platform.

Steps to Open Your First Brokerage Account

Opening a brokerage account is very simple and might feel similar to opening any regular bank account.

There are a few extra questions particularly related to investment experience and account focus (long-term holding vs. trading) but essentially you can create an account in few minutes.

Here's a quick overview of the process:

Step 1: Research and compare brokers

Step 2: Gather necessary documents (ID, SSN, bank info)

Step 3: Complete the online application process

Step 4: Fund your account (minimum deposit requirements, transfer options)

Step 5: Explore the trading platform and set up security features

Also, you can add a bank account for direct deposit so that automated future contributions happen like clock work.

Understanding Brokerage Account Fees

So I mentioned fees earlier but let's break down a few particulars to be mindful of.

Commission fees vs. zero-commission trading: A commission is the charge levied by an investment broker for facilitating the back end stuff we don't see in making a trade happen.

Levels of commission vary between different brokers depending on the asset being traded and the type of service being offered.

Fees can impact your overall investment performance especially if you're frequently buying and selling. Some discount brokers (Schwab) offer commission free trading to avoid paying these fees altogether.

Hidden fees to watch out for: Inactivity and wire transfer fees are those little things that not everybody thinks about but may run into so it's important to be mindful of them.

Inactivity fees, as the name implies, are charged when there is no activity in an account for a period of time. There's plenty that don't charge (Schwab included) so it's pretty easy to get around on the front end.

If your broker does then simply make at least one transaction per year, or maintain a minimum balance, whichever is required.

Wire transfer fees are also those little nuances that can add up if you let it. The typical fee is $15 to $50 but honestly, unless you're hard set about wire transfers, you can simply link your regular bank account via direct deposit to avoid this altogether.

Making Your First Investment

Okay so you created your account and you made your first deposit to fund it, now what?

Research and choose your first stock or index fund. There are a number ways to go about selecting either whether it's based on technical or fundamental analysis. More to come in the future on those topics.

Understanding market orders vs. limit orders is something that is not talked about enough so let me break it down. When you place an order, whether it's buying or selling, you have a couple of different options to choose from in how that trade is executed and it can make a world of difference in your overall profit or loss.

A market order means the trade will execute immediately at whatever price that asset is currently going for. This has the potential to back fire if there are any swings in price.

A limit order helps reduce the affect of those swings on your trades and maintain control. You are essentially giving instructions to buy or sell a security at a specified price or better. This means that a trade will only be executed if the market prices reaches or is better than the price you set.

Pro Tip: Always use limit orders

Lastly, it's a good idea to select the good-until-cancelled (GTC) option when placing an order. If you're like me then you have other obligations that prevent you from staring at a computer screen to execute an order.

If your target price doesn't trigger the limit order then it will expire at the end of the day and you'll have to create another order. GTC orders allow you to have the order open for whatever period of time you want and will automatically trigger when the price is met.

Understanding the importance of diversification for beginners is a crucial first step. Diversification will help ensure that you are not overly concentrated in a limited number of asset classes.

This can help reduce portfolio volatility (swings in the value of your account) while capturing better market returns over time across different asset classes.

Risk management and setting realistic expectations is really the final key for the remainder of your investing journey. A lot of people focus on the returns but you want to make sure you're not exposing your portfolio to too much risk in order to achieve those returns.

Know what the end objective is so that it guides all future choices and avoids making impulse decisions.

Common Mistakes to Avoid

Investing without a plan or strategy results in leading off with hope which is no way to assure consistent success.

Overtrading and emotional investing are in my opinion the biggest threat to success. If you're checking your investment account for any little changes all throughout the day then that's a big red flag. You want your investment plan to give you peace of mind and confidence.

Excitement in the beginning is one thing but if you're feeling ecstasy or anxiety from day to day swings in your account then it's time to readjust your plan to a more appropriate one.

Set a simple schedule to check on your account monthly and make adjusts as necessary.

Also, unless you're specifically dedicated to the profession of trading (I stress profession) then avoid excessive buying and selling.

It's easy for beginners to ignore fees and tax implications of all this activity and that can easily become a drag on your performance or worse completely blow your account.

Opening your first brokerage account is a major step toward financial independence.

Choose the right broker, understand their fees, so that you can make informed investment decisions and start setting yourself up for long-term success.

Ready to get started? Compare top brokerage accounts and take your first step toward building wealth today!