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Brokerage accounts connect investors to the stock market. They're offered by brokerage firms, which act as the intermediary. It shouldn't cost you anything to open a brokerage account, and most brokerages don't require a minimum account deposit to start investing. However, fees vary depending on the type of brokerage you use. Here's what you need to know about opening a brokerage account.
How Much Do You Need to Open a Brokerage Account?
Many brokerages don't have minimum starting deposits or ongoing balance requirements. That means you could open a brokerage account and start investing with whatever funds you have—whether that's $100 or $1,000. These investment accounts allow you to purchase stocks, bonds, exchange-traded funds (ETFs), mutual funds and other securities. You might even earn interest on your uninvested cash. Brokerage accounts can help grow your wealth as you save for short- and long-term financial goals. They can also supplement your retirement nest egg.
Many brokerage accounts don't have initial deposit requirements, but some do. T. Rowe Price, for example, requires $2,500 to get started. With T.D. Ameritrade, there's no minimum to open a new brokerage account, but a $2,000 deposit is required for margin trading. Margin accounts allow you to buy securities using borrowed money from the brokerage. Your portfolio assets are used as collateral. With a cash brokerage account, you fund the account yourself.
When shopping around for a brokerage account, be sure to compare fees and opening deposit requirements. That can help you find one with $0 account minimums.
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Different Types of Brokerages
It's worth noting that balance requirements and fees vary depending on the type of brokerage you use. Below is a rundown of what you can typically expect:
- Full-service brokerages: These usually offer the most hands-on guidance. They may provide personalized financial advice and manage your portfolio, which might include making trades on your behalf. Full-service brokerages generally charge an annual fee that's equal to a percentage of your portfolio's value. That can range anywhere from 0.20% to 1.5%.
- Online brokerages: You can use an online brokerage platform to buy and sell securities on your own. There usually aren't any service costs, though you may be charged an annual fee. There might also be commission fees for trading certain types of securities.
- Robo-advisors: These use algorithms to create and manage your investment portfolio based on your risk tolerance, age and financial goals. It's all automated. Annual fees for robo-advisors can be anywhere from 0% to 0.5% of your balance.
What Else You'll Need to Open a Brokerage Account
Before getting started, take the time to gather what you need to open a brokerage account. That typically includes the following information:
- Government-issued identification (driver's license, passport or military ID, for example)
- Contact information
- Social Security number
- Date of birth
- Employment and income information, including your net worth
Also be prepared to answer questions about your risk tolerance, investment timeline and liquidity needs. These details can help the brokerage provide resources and account services that are right for you.
How to Open a Brokerage Account
1. Find the right brokerage for you. Think about the level of involvement you want from a brokerage. That might include individualized investment advice from a human stockbroker, or the ability to manage trades yourself. If you don't want to take an active role in your portfolio, a robo-advisor might be a good fit.
2. Compare brokerages. Once you've determined the type of brokerage you want, shop around and compare fees, minimum account balance requirements, service options, account resources and customer service ratings. Weighing these details can help you find the right brokerage for your needs.
3. Open a brokerage account and begin trading. You can probably do this online, or you might prefer to do it in person if the brokerage has a brick-and-mortar location. From there, you'll just need to fund your account. Cash brokerage accounts are linked to a bank account you can use to add funds as needed.
The Bottom Line
Some brokerage accounts require a minimum initial deposit, but there are many that don't. That can allow you to invest as little or as much as you like. It's still wise to compare account fees and services to make sure you're getting the most out of your brokerage account. Once your account is open, you can use it to invest in all kinds of securities.
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