Investing 101: What Does It Cost to Open a Brokerage Account?

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InvestingIf you've never invested directly in the market before, the process of getting started can seem daunting. From knowing your investment style to screening and selecting stocks, it's easy to get lost in the weeds.

But if you think you may be ready to give it a shot, the first question you'll have is likely to be: How much money do I need to begin investing?

Setting Up an Investing Account

If you're a new investor with limited funds, an online, no-frills brokerage account might be just the thing you need. If you go that route, the amount you need to open an account can be below $1,000, depending on which brokerage you pick. Few require initial investments of more than $2,500, and some brokers will let you open retirement accounts with no minimum at all. Many large banks also offer brokerage services.

But the opening amount is just the beginning of the investment you'll make in your brokerage.

Other Fees

Funding the account is the first step. Once you start investing, you will have to pay other fees, including the various trading commissions to buy stocks, mutual funds, and options, as well as maintenance fees and potential low-balance penalties.

The online brokerages vary widely in terms of trading fees, self-service and broker-assisted trades, and the types of tools and research available to customers. Don't be fooled -- many online brokers will promise low trading fees or special promotions, but then hit you with an annual or maintenance fee. Use a tool like The Motley Fool's Getting Started with Brokers or Mint.com to compare brokers across a variety of screening criteria, including fees, services, and special promotions.

You may also get money back as interest earned on the cash you hold in your account. Often that cash is automatically swept into a money market mutual fund or account. While the interest rates are paltry right now, at least your idle cash earns something while you wait to make a trade.

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Test-Drive Before You Decide

Most brokerages offer an array of online services. Many are incorporating mobile access and even smartphone apps into their basic service lineups. As with any service, the level of sophistication varies depending on the broker.

If you're constantly glued to your smartphone, go ahead and download a few of the apps from brokers you're considering. You won't get account access, but you should be able to see several of the tools available and whether or not they'll meet your needs. Barring that, check out online videos of how the apps work, either on the broker's site or on YouTube, where someone, somewhere, has posted a how-to video of just about everything.

If you think you'll need a little extra help to get started, put a brokerage's customer service to the test. Some have excellent customer service, available via phone, email or chat; others have extended wait times to receive a response even to basic questions or chats that sound overly scripted and robotic.

If you want to know that you can get a real, live person when you need help, call the broker's toll-free number and say you have questions about opening an account. While one representative might not represent the entire pool of service people you'll always get, such calls are a great way to evaluate how friendly, responsive, and knowledgeable the company may be if you become a customer.



Motley Fool contributor Molly McCluskey appreciates your comments. Follow her on Twitter @MollyEMcCluskey.


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15 Comments

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Laurent Eric Hesnard

Hey guys, if you're looking for some experience investing and familiarizing yourself with the markets, check out www.sprinklebit.com. Great community, and great resources that will enable you to gain great experience.

Also be sure to check out the blog which has great content aimed at beginner investors:

http://blog.sprinklebit.com/investing-101-commodity-resources-and-stock-market-visualizers/
http://blog.sprinklebit.com/the-power-of-crowds-how-equity-crowdfunding-will-revolutionize-retail-investing/

Hopefully this helps! Sure helped me.

December 10 2013 at 4:05 PM Report abuse rate up rate down Reply
ccurt78

This is NOT a news article why is shown in a format that would indicate it is.

May 11 2012 at 3:24 AM Report abuse rate up rate down Reply
bdyftns

Your best broker. Jim Cramer on Mad Money.

May 10 2012 at 9:35 PM Report abuse -1 rate up rate down Reply
Dan Miller

First of all investing takes on many forms. Most of us started investing(401k Plans) in mutual funds through a company. This is a buy and hold strategy usually consisting of a basket of diverse mutual funds spread out amoung a few different sectors or industries. Next we can build a portfolio by using strategies Day Traders and Option Traders use. Many financial planners will tell you that Day Trading, Option Trading and Futhers Trading is Risky and they would be correct in warning you about the risks involved in trading equities. What they(financial planners ) wont tell you, but a broker will tell you is that a solid education in trading will minimze the risk factors all traders face. You shoud accept the fact that if you invest or trade you will lose money. You make money in the stock market by keeping your losses low. You can determine how much you are willing to risk or lose trading if you know and understand the rules.The cost for an education on Trading Options can be very expensive or held to a bare minimum if you want to self educate yourself by taking courses the brokerage firms have to offer at no cost. No matter how you go about getting educated the process requires a lot of dedication, commitment and hard work.
I've been trading options for four years and much of that time was spent learning how to trade by virtual trading paper money and not risking a penny of my own money. I have done very well trading options and I only enter one trade a month with my brokerage firm. I pay all my living expenses from the profits I earn from option trading. It's a good way to make a living if you don't mind a lot of up front hard work. Most of my time is spent on the golf course. Good luck !
I trade from the comfort of my home office using my laptop. Want to find out more? Go to this wesite:
parkwood capital llc and contact Dr. Kerry Given

May 10 2012 at 3:34 PM Report abuse rate up rate down Reply
mily469

what a joke. why is the united states economy based on wall street when wall street does its best when american jobs leave for slave labor markets? stronger reregulation for wall street then maybe ill invest there.

May 10 2012 at 1:37 PM Report abuse -1 rate up rate down Reply
martinru2

By the sweat of thy brow you shall earn thy bread...Where does it say anything about the stock exchange?

May 10 2012 at 10:03 AM Report abuse +2 rate up rate down Reply
thebrainbutcher

Over 40% of small time investor $ is NOT in stocks and on the sidelines because it a rigged game.

May 09 2012 at 10:49 PM Report abuse +2 rate up rate down Reply
lyleva

As the article points out, be careful of all the fees that you will get with a brokerage account. And be careful of the advice you get from a broker. Brokers and firms favor the best and largest customers. Example, try and get some IPO shares of Facebook. They will all go to, or be placed, with brokers "best customers." Only then will smaller customers and accounts get in line and most often pay a higher price. If you are willing to do research..and there is plenty available online...use the brokerage arm at a large mutrutal fund company, such as T. Rowe Price or Vanguard. Almost never pay more than $10 to buy or sell a stock investment.

May 09 2012 at 5:30 PM Report abuse +1 rate up rate down Reply
toni

buy cd's its a market but a jungle,if u don't stay out

May 09 2012 at 4:25 PM Report abuse rate up rate down Reply
GymmyKramir

There will not b any left shortly.

They all have been Marked by Daarck Knight 4 Satan in the NYC House of Satan.

They ALL bear the Mark of the Beast.

La Cosa Nostra = PIGG SEC + PIGG Hedge Funds + PIGG Brokerages

Leave NYC NOW !!!!!!!!!!!!!!!!!!!!

May 09 2012 at 3:59 PM Report abuse rate up rate down Reply
1 reply to GymmyKramir's comment
Setanta

oooooooooooooooh man--definitely to leave ALL big cities WHEN IT'S POSSIBLE as TSHTF scenario will EVENTUALLY ARRIVE either due to the collapse of the dollar or simply gubmint orchestrated via the owseee wowees etc.on top of THEIR orchestrated economic MESS--
and someday please explain the piggs and this nyc house of satan.

May 09 2012 at 5:28 PM Report abuse -2 rate up rate down Reply