Q: I want to start investing in stocks, but I don't have a brokerage account yet. How do I know which to choose?
There are a few things you should consider before opening a brokerage account, and while this isn't a complete guide, here's a rundown of the basic principles.
First, decide what kind of account you need. If you just want to invest for a rainy day, or just don't want your money tied up, a standard brokerage account is the way to go. On the other hand, if you want to invest for retirement, an IRA offers tremendous tax advantages.
Next, you're going to want to compare the features and costs of each brokerage you're considering. Notice that I listed costs second. If a brokerage is cheap but doesn't meet your needs, it's a non-starter. Some people just want to buy a few specific stocks and are fine with a no-frills broker, but there can be lots of value to features like stock research, representatives you can talk to, and more.
For example, Ally Invest has relatively cheap commissions but is light on certain features. Meanwhile, E*Trade's standard commission rate is $2 higher, but it has more research available, more complex trading tools for active investors, and a branch network where clients can get in-person advice.
Once you've decided on your type of account and brokerage, it's generally a simple matter of filling out a short application and adding funds to your new account.
