How to Choose a Brokerage Account: What Beginners Should Compare

Before you can buy a single share, you need a brokerage account. With so many apps and companies to choose from, it's easy to feel stuck. This guide explains what to compare so you can make your own informed choice.

What is a brokerage account?

A brokerage account is an account with a licensed firm (a broker) that lets you buy and sell investments like stocks, ETFs and options. You deposit money, place orders through the broker's app or website, and the broker holds your investments for you.

There are a few common account types:

• Individual taxable account: the standard account. Gains and dividends are generally taxable.
• Retirement accounts (like IRAs): have tax advantages but come with rules about contributions and withdrawals.
• Cash vs. margin accounts: a cash account lets you trade only with money you've deposited. A margin account lets you borrow from the broker, which adds risk. Many beginners start with a cash account.

What to compare

1. Fees. Many brokers now offer commission-free stock and ETF trades, but options trades may carry per-contract fees. Also check for account fees, transfer-out fees and fees for other services.

2. Options approval levels. If you want to learn covered calls, you'll need options approval from your broker. Brokers assign levels based on your experience and financial information. Covered calls are typically among the lower levels, but each broker sets its own rules.

3. Tools and research. Some brokers have simple, clean apps. Others offer advanced charts, options chains, screeners and paper trading. Think about what you'll actually use.

4. Fractional shares. Useful if you want to invest small amounts in higher-priced stocks. Note that fractional shares can't be used to cover a call option, which requires 100 whole shares.

5. Account protections. In the U.S., look for membership in SIPC (the Securities Investor Protection Corporation). SIPC protects customers if a member brokerage firm fails, up to certain limits. It does not protect you from investment losses. You can look up a firm on SIPC's website and check its background on FINRA BrokerCheck.

6. Customer support. When something goes wrong, can you reach a person?

7. Ease of use. An app that's easy to use can help you avoid mistakes. Just be careful of any design that makes trading feel like a game.

Two brokers we link to

People often ask which brokers we use as examples. We link to the two below. Compare them against the list above and against other brokers before deciding.

Robinhood is a commission-free app that offers stocks, ETFs and options trading. Robinhood may offer a stock reward to new users who sign up through a referral link, under its own terms. Sign up for Robinhood. Disclosure: this is a referral link. Money Options Academy LLC may receive a reward if you sign up, at no extra cost to you.

Moomoo is a trading app that offers stocks, ETFs and options along with charting and research tools. Sign up for Moomoo. Disclosure: this is a referral link. Money Options Academy LLC may receive a reward if you sign up, at no extra cost to you.

Any promotions, rewards or features are set by the brokers themselves and can change, so check their current terms directly.

Questions to ask before opening an account

1. Is the firm a SIPC member, and what does BrokerCheck show?
2. What does it cost to trade stocks, ETFs and options?
3. What do I need to qualify for options trading?
4. Does it offer paper trading or a practice mode?
5. Can I easily transfer my account out later, and is there a fee?
6. What kind of customer support does it offer?

Opening the account: what to expect

You'll typically need to provide your name, address, date of birth, Social Security number (in the U.S.), employment information and some financial details. This is required by law for identity verification. Then you link a bank account, deposit money, and wait for the funds to settle before trading.

Start small and practice first

Opening an account doesn't mean you have to invest right away. Many learners open an account, explore the app, and practice with paper trading before placing a real trade.

Key takeaways

• A brokerage account is where you buy, sell and hold investments.
• Compare fees, options approval, tools, protections and support.
• SIPC protects against broker failure, not investment losses.
• Referral links on this page are disclosed; always check each broker's current terms.
• There's no rush. Practice and learn first.