Best Brokerage Accounts for Beginners of May 2024 - NerdWallet (2024)

Do you need a brokerage account to invest?

You may already be investing through other accounts —for example, if you have a 401(k) or other retirement account at work, that's an investment account. But an online broker allows you to invest outside of that account, with access to a wider investment selection and more tools and resources, including a trading platform. Through an online brokerage account, you can begin to purchase investments and make trades on the stock market.

How do brokerage accounts work?

To buy and sell assets like stocks, bonds and mutual funds, you need to open an investment account through a broker. That account is called a brokerage account, and it holds the cash you’ll use to buy and sell investments, as well as the investments themselves once you own them. (Learn more about how brokerage accounts work.)

If you have a 401(k) or other employer-sponsored retirement account, you already have one kind of investment account. Many investors find it beneficial to open additional stock brokerage accounts when:

  • Saving for retirement. If you want or need to save for retirement in an account separate from your employer, you can open an IRA. These come in two flavors: a traditional IRA or a Roth IRA. (Read more about the differences between Roth and traditional IRAs.)

  • Investing for other goals. If you’re saving for a goal other than retirement or you’ve topped off your 401(k) and IRA contributions, a standard taxable brokerage account is a good option. It's called a taxable account because it doesn't come with the tax benefits that many retirement accounts offer, but that also makes it more flexible to be used for various goals.

Is money safe in a brokerage account?

The Securities Investor Protection Corporation insures cash and securities up to $500,000, with a $250,000 limit on cash losses. But this protects you only in the event your stock broker fails. Many investments, including stocks, carry the risk of loss, and you're not protected if an investment you purchase goes down in value. You should expect the value of your investments to fluctuate, but over a long time horizon, the stock market has historically returned an average of 10% per year before inflation.

How much does a broker cost?

The brokers on our list generally have low fees as a requirement to appear here, and they don't charge commissions to trade stocks or most other investments. It also doesn’t take a lot of money to get started —many online stock brokers allow you to open an account with no minimum deposit requirement.

To begin investing, you will need enough money to purchase the investments you choose. Stock share prices can vary widely, but some brokers allow you to purchase fractional shares, which are a smaller slice of a stock. We have a list of the best brokers for fractional shares. Other investments, like mutual funds, may have investment minimums, but generally speaking, you can find options that don't — especially at the brokers we've chosen to appear here.

» Have $500? Learn how to invest it

What’s the difference between a full-service broker and a discount broker? Which is best?

The difference between a full-service stock broker and a discount stock broker comes down to the level of service and how much you want to pay for that service.

Traditional full-service stock brokers do more than assist with the buying and selling of stocks or bonds. They often offer a wide array of services and products, including financial and retirement planning, investing and tax advice and regular portfolio updates. But they can charge substantial fees and transaction costs that can erode long-term investment gains.

If you have more money than time, a full-service broker may be for you. For most investors, however, it can pay to look at discount stock brokers. These brokers allow you to buy investments online through their website or trading platforms. You'll pay less in trading commissions and fees at a discount broker.

Other brokers, called robo-advisors, offer a combination of access to financial planners and automated investing technology. Companies in this category include Betterment and Wealthfront, and they build your investment portfolio for you for a fee. If you want a service to make investment decisions for you, robo-advisors are a good option.

What's the best trading platform for a beginner?

For beginner investors, we look for trading platforms that are easy to understand and navigate, but can also grow with you as you begin to move away from "beginner" status and start feeling more comfortable with investing and trading. Brokers that scored highly for both ease of use and their platform's capabilities include Fidelity, Charles Schwab and Interactive Brokers. However, we selected Charles Schwab as the best platform for beginners because it stood out for its paper trading capabilities and ease of use.

Can you cash out an online brokerage account?

Yes, but it will take more time than getting cash from your ATM — often a few business days. Your broker may need to sell securities (like stocks, bonds or mutual funds) equivalent to the amount you want to withdraw, so it's not as simple as removing cash from a savings account.

If you're taking all of your money out, whether transferring to a different stock broker or cashing out to move to Tahiti, there may be account closing fees as well.

More resources for beginners

  • Need some background? Read our guide to how the stock market works.

  • Unsure of how to build your portfolio? Learn more about how to invest in stocks.

  • Interested in instant diversification? Understand how investing in mutual funds can help.

  • Want to join the passive investing crowd? Consider index funds.

Best Brokerage Accounts for Beginners of May 2024 - NerdWallet (2024)

FAQs

What is the best brokerage account to start with? ›

NerdWallet's Best Brokers for Beginners of June 2024
  • Robinhood: Best for beginner crypto investors.
  • Charles Schwab: Best for trading platform for beginners.
  • E*TRADE: Best for educational content.
  • J.P. Morgan Self-Directed Investing: Best for in-person customer support.
  • Vanguard: Best for index funds and ETFs.

Which broker is best for trading for beginners? ›

10 Best Brokers for Beginners| Most Popular Brokers
BrokerDeliveryAccount Opening
ZerodhaFreeOnline Rs 200 (Eq+Curr), Rs 300 (Eq+Curr+Com)
Groww0.05% or Rs 20 whichever is lowerFree
ProStocksFreeFree
Angel OneFreeFree
7 more rows

How much money do I need to invest to make $3,000 a month? ›

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

Is Charles Schwab good for beginners? ›

Here's what you need to know about Charles Schwab: A broker is good for beginners if it has low fees and an easy-to-use platform. Charles Schwab has a user-friendly mobile platform. Charles Schwab has Low transaction costs and a minimum deposit of $0.

Is Charles Schwab or Fidelity better? ›

Fidelity's robo advisor is better for investors who are getting started, but Schwab may be more affordable if you have a higher balance. Passive investors can pick either firm, but if you want to take a more active, trading-based approach, Schwab's Thinkorswim platform is hard to beat.

Which investment firm is the best for beginners? ›

  • TD Ameritrade — BEST ONLINE BROKER FOR BEGINNERS.
  • Fidelity Investments — Runner Up, Best Online Broker for Beginners.
  • Charles Schwab — Best Online Broker for Customer Service.
  • Fidelity — Runner Up, Best Online Broker for Customer Service.
  • TD Ameritrade — Best Online Broker for Educational Resources.
May 1, 2024

What should a beginner start trading with? ›

Start Small

As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding prospects is easier with just a few stocks. It's now common to trade fractional shares.

Which trading account type is best for beginners? ›

Mini and micro accounts are ideal for beginners. This is because they give you an opportunity to take small positions without risking a lot of money, even as you learn how to trade.

How to pick a brokerage account? ›

Choosing the right online broker requires some due diligence to get the most for your money.
  1. Step 1: Know Your Needs. ...
  2. Step 2: Narrow the Field. ...
  3. Step 3: Figure Out the Fees. ...
  4. Step 4: Test the Broker's Platform. ...
  5. Step 5: How Well Does the Stock Broker Educate Its Clients? ...
  6. Step 6: Ease of Depositing and Withdrawing Funds.

How much money a month to make $100,000 a year? ›

$100,000 a year is how much a month? If you make $100,000 a year, your monthly salary would be $8,333.87.

How much should I invest to make $500 a month? ›

To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.

How much do I need to invest to make $1,000 a month? ›

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

Is Charles Schwab or Vanguard better? ›

Vanguard could be a better choice for passive investors who want index funds; Charles Schwab offers more features that appeal to active investors. Ultimately, the better brokerage is dependent on how you invest.

Is Fidelity good for beginners? ›

Is Fidelity right for you? Fidelity is the rare broker that can serve both active traders and beginner retirement investors. The company brings it on every level, starting with a mutual fund selection that stacks up to any other broker and even includes free offerings.

Should I use Charles Schwab or Etrade? ›

Final take

However, Charles Schwab has been around longer and ranked No. 1 in the J.D. Power 2023 Full-Service Investor Satisfaction Study. That said, with its robust trading platform, E*TRADE is a great option for active traders. Both platforms provide an impressive array of educational and research materials.

What brokerage should I use to start day trading? ›

After hundreds of hours of comprehensive research, data analysis, and live broker platform demos, Interactive Brokers (IBKR) is our best overall online brokerage for day trading because of how it optimizes its pricing, user experience, and content to suit the needs of highly-active day traders.

Which trade is best for beginners? ›

Overview: Swing trading is an excellent starting point for beginners. It strikes a balance between the fast-paced day trading and long-term investing.

How do I choose a good brokerage account? ›

Choosing the right online broker requires some due diligence to get the most for your money.
  1. Step 1: Know Your Needs. ...
  2. Step 2: Narrow the Field. ...
  3. Step 3: Figure Out the Fees. ...
  4. Step 4: Test the Broker's Platform. ...
  5. Step 5: How Well Does the Stock Broker Educate Its Clients? ...
  6. Step 6: Ease of Depositing and Withdrawing Funds.

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