If you’re not investing in stocks, you’re missing out on a major opportunity to turn the money you don’t need right away into a large sum over time. The S&P 500 index, which is generally considered a measure of the broad market’s performance, is up 18% year to date as of this writing. And while the index’s value can fluctuate, it’s fair to say that stock values have soared this year and have the potential to keep climbing.
If you want to get a piece of the stock market action, your best bet is to open a brokerage account and start investing. Here’s what you need to know about opening one for the first time.
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Not all brokerages are created equal
There are a host of different brokerage accounts out there to help you grow wealth, but not all of these accounts are the same. Brokerages can have different fee structures and rules, and it’s important to do your research before putting money into one.
But generally, here are some features you’ll want to look for in a brokerage.
- No-commission trading: Some brokerage accounts charge you a fee every time you buy a stock. If you do a lot of trading, those fees could add up and eat away at your returns. These days, many brokerages don’t charge commissions, so it’s best to focus your search on those.
- No-commission ETFs: Many brokerages allow investors to buy exchange-traded funds (ETFs). These are a great tool you can use to diversify your portfolio — even more so when you find a brokerage that won’t charge you to buy ETFs. That means you’ll get to keep more of your money for yourself.
- Fractional shares: Fractional shares allow you to purchase a portion of a share of stock if a full share is out of reach for you financially or if it doesn’t fit into your investing budget. Say there’s a stock you’re interested in owning that costs $1,000 for a single share, and you only want to invest $250. If you open a brokerage account that offers fractional investing, you could buy a quarter of a share of that stock rather than having to pass on owning a piece of that company.
- No account minimums: Some brokerages make you keep a certain balance in your account, the same way some banks have a minimum balance. If you don’t want to be restricted, you’re better off looking for a brokerage that won’t impose an account minimum.
Of course, opening a brokerage account is only one step on the road to benefitting from the stock market’s gains. You’ll also need to fund that account and decide how to invest your money.
If you’re not at all familiar with investing, you may want to start off by buying ETFs, as they don’t require that much research. Individual stocks are a bit more complicated, so you’ll need some primers on how to invest in stocks. And if you’re going to buy individual stocks, aim for a diverse mix from a few different segments of the market.
The Ascent’s picks for the best online stock brokers
Find the best stock broker for you among these top picks. Whether you’re looking for a special sign-up offer, outstanding customer support, $0 commissions, intuitive mobile apps, or more, you’ll find a stock broker to fit your trading needs.
See the picks
Investing in stocks could make you a lot wealthier over time, and opening a brokerage account is your first step on that path. Take the time to compare your choices so you wind up happy with where you put your money.