4 Questions to Ask Before Opening a New Brokerage Account

by Maurie Backman | Published on Aug. 27, 2021

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Before you pump money into a brokerage account, make sure you do your research.

If you have money on hand that you don't need to sock away in a savings account for emergencies, then you may be interested in opening a brokerage account. That way, you can invest your money and potentially grow it into a much larger sum. There are many brokerage account options you can choose from, so run through these questions to find the right one for you.

1. What are the fees involved?

Some brokerages charge a commission for each trade you make, and that's just one of several fees you might encounter when you open a new account. Be sure to figure out what those fees entail and compare brokerages so you can minimize yours. After all, the more fees you pay, the more they can eat away at any returns you generate in your account. And if you expect to do a lot of trading, those fees can really add up.

Keep in mind that it's pretty easy these days to find a brokerage that won't impose fees for buying regular stocks. However, most brokers do charge fees for buying mutual funds.

2. Is there a minimum balance I need to maintain?

Some brokerages require you to put a certain amount of money into your account when you open it. And similarly, some require you to maintain a minimum balance at all times or face costly fees. That said, not every brokerage imposes a minimum, and some minimums are easier to manage than others.

You don't necessarily have to write off a brokerage account if it has a minimum balance requirement, because that number may be a reasonable amount for you to work with. For example, if a given brokerage has a $500 minimum and you were planning to open an account with $1,500, that's not problematic. Plus, that brokerage may come with other features you find appealing. But the point is to look around so you can find the account that works best for your budget.

3. Are there any sign-up bonuses being offered?

Many people are familiar with credit card sign-up bonuses, where you get a certain amount of points or cash back for spending a specific amount shortly after opening an account. Some brokerage accounts offer their own perks for signing up, like a specific number of free trades or even extra cash in your new account to trade with. It pays to do some research and see what offers are out there.

4. Does the brokerage offer any investment guidance?

If you're new to investing, the idea of picking stocks can be overwhelming. Some brokerages offer educational resources that could help you grow your knowledge and make smart decisions with your money, so this feature is worth looking out for.

Finding the right brokerage could mean avoiding costly fees and steering clear of other hiccups that make investing more complicated than it needs to be. Spend a little time finding the ideal brokerage account for you -- it'll be worth it in the long run.

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