Things You'll Need:
- Computer with an Internet connection
- Checking account number
- Social security number
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Step 1
Decide on an account type. You can buy stocks and bonds within several different types of investment accounts, including regular investment accounts (also known as taxable investment accounts) and Traditional and Roth IRAs (Individual Retirement Accounts). A taxable investment account is the most flexible type, because it offers no tax breaks. There are no contribution or withdrawal restrictions on this type of account, so they are perfect if you need instant and penalty-free access to your money. Traditional or Roth IRAs are a great way to reduce your tax burden, but there are rules governing withdrawals, penalties if you break the rules, plus income and contribution limits. You can have both an IRA and a taxable account, allowing you to take advantage of both flexibility and tax breaks.
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Step 2
Choose your investments. It may seem odd to choose investments before opening an account, but knowing what you want to invest in can guide you to the right institution for your account. There are thousands of stocks, bonds and mutual funds to choose from, and you want to open your account at the institution that offers the investments you want with the lowest possible fees and expenses. For investing in individual stocks and bonds, choose an online broker or brokerage house that offers low-cost trades and low fees. If you prefer to invest in mutual funds, open an account at the institution that manages the mutual fund you want - though the price of the fund is the same everywhere, buying from the source always saves money on fees. For instance, if you are interested in buying Vanguard mutual funds, open your account at Vanguard for the best deal.
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Step 3
Assess the size of your account. Many brokerages have steep account minimums or big fees for small accounts. If you have only a small amount to start with, make sure you choose a brokerage that has low or no account minimums. You can always move your money later, as your account grows in value.
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Step 4
Know the process. The process for opening an investment account is generally the same for both taxable and IRA accounts. Go to website of the institution you've chosen for your account and find the "Open an account" link, then follow the instructions carefully. Each brokerage has a slightly different form, but you will need to supply your name, address, social security number and other personal information for every institution. If you have questions, most brokerages offer telephone support.
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Step 5
Use your checking account. In order to fund your investment account, you will most likely be required to link an existing checking account to it. If you prefer not to electronically link your checking account, you may need to open the account with a paper application. You should be able to print an application from the brokerage's website, fill it out and send it in with a check. This takes longer than completing the application online, but is a good option for those who prefer not to use a computer for banking purposes.
