What's a Brokerage Account & How to Open One

Different from a retirement investment account, a brokerage account is an account you can open and manage in order to buy stocks, bonds, mutual funds and other investments. According to recent statistics, about one third of Americans have brokerage accounts.

If you have a Wealth Stack account then you technically have a brokerage account. The same goes for any other popular online brokerage account you open via investment apps. This includes Robinhood, Stash, or Ellevest.

While you don’t technically have to download an app to open a brokerage account, it can certainly make the process of opening and managing one easier. Here’s what to know about brokerage accounts, why it’s helpful to have one, and how to open one in a few simple steps.

Wanna skip the talk and go straight to opening your brokerage account? Download the Wealth Stack app today to get started.

What is a Brokerage Account?

A brokerage account is an account that holds securities, such as stocks and bonds. A brokerage firm acts as the middleman in trades between investors and companies. Brokerage accounts can be used to invest in a company's stock or to buy shares of mutual funds offered by different companies.  

There are many different types of brokerage accounts. However, one major distinction is between traditional brokerages which require payment for transactions (such as commission) and discount brokers. With the latter, you only pay transaction fees when your trade goes through.

Traditional brokerages typically have more features than discount brokers. So, it really depends on what you're looking for in terms of services provided. The type of investment vehicle held within the account will also affect how much you pay for commissions; this includes stocks.

Why You Should Have a Brokerage Account

At a very basic level, brokerage accounts are very useful because they allow investors to buy and sell stocks easily. They are also less expensive than paying commissions when you trade online or over the phone with your broker. 

In addition, brokerage accounts offer a variety of other benefits. You get access to research reports and financial analysis tools. And, that's on top of the tax-deferred growth on investments that you're able to make.

Finally, some people prefer that their assets are held separately from those of their employer in case they ever lose their job or retire early. So if any of these things sound appealing then maybe it's time for you to open up an investment account.

Ready to open your account? Download Wealth Stack today for free to get started.

Types of Brokerage Accounts Available

When it comes to choosing a brokerage account, there are many different types of accounts to choose from. The type of account that is right for you depends on your goals. There are three main types of brokerage accounts: full-service, discount and online brokerages. 

Full service brokers offer more personalized advice while the other two do not provide as much help with investment decisions. 

Discount brokers have lower fees but they do not offer research or advice so you will need to be proactive in knowing which investments would work best for your portfolio and what approaches should be used when investing in certain securities.

Online brokerages can save you money but their customer service is limited and they generally don't have a physical location where customers can come into the office if needed. Investment apps such as Wealth Stack fall into the category of online brokerages. However, despite being an online brokerage, Wealth Stack does offer customer service along with free investing courses and access to some of the industry’s top finance professionals.

It’s important to note that a retirement account is technically a brokerage account. However, the difference is that retirement accounts are tax-advantaged whereas standard brokerage accounts offer no tax advantages for investing. As a tradeoff, though, you can invest as much as you want and access the cash in a standard brokerage account any time you want; that’s not the case with something like a 401(k).

How to Open a Brokerage Account

Opening a brokerage account in 2021 is typically free. However, you need to keep in mind that you’ll need to put money into the account in order to start investing. And, you will need to have some personal information on hand, too.

At the very least, you’ll need to provide your social security number, along with some other personal information. You might need to answer questions about your annual income or your investing preferences (if you have any), but that’s about it. After you create the account, you’ll be prompted to link a bank account so that you can transfer funds back and forth for buying and selling.

How to Use Your Brokerage Account

What you choose to invest in depends on your timeline and goals. Here at Wealth Stack, we promote investing as a long-term game. We want you to learn how to truly invest wisely. Then, we want you to let those good investments accrue compound interest over time.

When learning about brokerage accounts and how to open one, we suggest first ensuring that you ask yourself what your goals are. If you’re a beginner investor then you’re definitely going to want to open an account with a company that offers educational videos, training, or advice. It’s even better if they offer you direct access to investment pros. These people can help answer your questions and guide you through learning how to invest as a beginner.

Also consider the fees involved in managing the account. And, make sure you enjoy interacting with the content they’re delivering to you as you start your investment journey. Which brokerage does this? Wealth Stack does.

​​Through its video-based approach, Wealth Stack guides you through personal finance basics while also teaching you everything you need to know about investing for beginners. The app also acts as an invaluable investment tool itself. It allows you to create a brokerage account for stocks, ETFs, and crypto investing while you track all of your investments in one place.

Finally, you can count on customized 1-on-1 guidance from professional finance experts. They'll be matched with users based on a common background. As well, users who subscribe to receive updates will be able to receive real-time guidance on when to buy or sell shares.

Ready to start your investment journey with Wealth Stack? Download the app for free today.