Opening Your First Brokerage Account in 20 Minutes
Three things to check, two to ignore, and one button to push.
A brokerage account is just an account that holds investments instead of cash. Opening one takes about 20 minutes. The hard part is not the paperwork - it is the (mostly imagined) fear of doing it wrong.
Which brokerage to pick
For 99% of people, you can not really go wrong with Fidelity, Charles Schwab, or Vanguard. All three:
- Charge $0 commission on U.S. stocks and ETFs.
- Offer extremely low-cost index funds.
- Are large, regulated, and SIPC-insured.
- Have decent mobile apps.
Pick whichever you feel like. The differences are minor. If you already use Fidelity for a 401(k), Fidelity for your brokerage just consolidates things.
Which account type
- Roth IRA - if you have earned income, are under the income limit, and you have not contributed to one yet this year. This is the most powerful long-term account for most low-and-middle income earners.
- Traditional IRA - similar tax-protected wrapper, but you take the deduction now and pay tax later.
- Regular brokerage account - no tax breaks, no contribution limits, no withdrawal restrictions. Use this once you have maxed retirement accounts or want flexibility.
If you are not maxing retirement accounts and you do not have an employer match to grab, start with a Roth IRA. Read our 401(k) vs IRA piece for the order of operations.
Step-by-step
- Go to the brokerage's site. Click "Open an Account."
- Pick the account type (Roth IRA is the default suggestion for most readers here).
- Provide name, address, SSN, employer info. They are legally required to ask.
- Link your bank account. They will verify with two small test deposits over 1-2 business days.
- Transfer your first contribution.
- Buy an index fund or target-date fund. Search the fund name, enter dollar amount, hit buy.
If your money is just sitting in cash
A common mistake: you transfer $500 into the brokerage and assume you are "investing." You are not. You have to actually buy something. Until you do, your money sits in the brokerage's cash account.
Automate, then forget
Set up automatic monthly transfers from checking. Set up automatic investing into your chosen fund. The whole point of this is that you stop having to think about it.
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