How to Open an Online Brokerage Account

One of the advantages of the Internet is now you have the opportunity to buy and sell stocks online, using an online brokerage account.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Internet Access
• Computers
• Wall Street Journal
• Financial Calculator
• Brokerage Accounts

1. Decide what your individual financial needs are: How much information about stocks do you need? Do you need to be able to reach a live person by phone? Are you more concerned with ease of use and speed?
2. Decide which online broker is best for you based on your needs. Visit Gomez.com for an excellent, up-to-date comparison.
3. Decide how much money you'd like to put into your new account. Some brokers have minimum requirements. Some people start with a few hundred dollars, others with $100,000 or more; the amount depends on your financial situation.
4. Complete an account application for your selected broker. Most brokers have an online application, but you will probably have to send in some paperwork with your signature as well.

Tips & Warnings

• Peter Lynch, a successful money manager and author of several books about investing, recommends that you never put any money into a brokerage account if you are going to need the money in the next six months.
• If you're new to investing, select a broker that provides telephone service as well as online service. A live person to speak with can be a real comfort when you're just starting out.
• Focus on smart picks and good timing, not on commissions. Very few people lose their money because of paying high fees. They almost always lose money because of bad stocks or bad timing.
• Some online brokers allow you the option of wiring money instead of sending a check, which can allow you to open your account right away.
• Not all online brokers provide telephone service with online trading. Be sure your broker offers that option if you want it.
• Some online brokers that provide telephone service can have prohibitively long wait times to get through. Test by calling the 800 number and checking the wait time yourself. If it's longer than 30 seconds or so, choose another broker.