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Step 1
Determine the amount you plan to initially invest. Before creating an online account, it is important to determine whether you have money that can be devoted to the online account. As a general principle, money that is needed in the next five years is not well suited to investments in stock or bond markets---it may be better used to pay down debts or deposited in savings accounts. Also, some online brokerages set minimum initial deposits for the creation of the account.
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Step 2
Assess your current portfolio. An online brokerage account can be very useful to help increase exposure to the stock market. However, not everyone needs to add exposure to the stock market. For example, people with limited cash savings and heavy investment in 401k accounts may find it preferable to build up cash savings before opening an online brokerage account.
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Step 3
Determine your financial goals. An online account can be a very useful tool when it is used to execute a well-considered strategy. Conversely, an online account can be dangerous if it is used for haphazard speculation on stocks. Every time that a stock is bought or sold, a commission is paid. By determining the plan from the outset, the amount in commissions is lessened and you, as an investor, are benefited.
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Step 4
Determine your tolerance for risk. An online brokerage account may not make sense if you are exceptionally risk averse. In order for an online account to be practical, one should be comfortable with the level of risk inherent in stocks and bonds. Moreover, one should be able to show self restraint in periods of downturn. Online accounts, much more than traditional brokerage accounts, leave power in the hands of the individual investor.
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Step 5
Create an online brokerage account. There are several major online brokerage firms from which to choose. Shop based on the costs of commissions, administrative fees and the services that they provide. Also, some publications offer critiques of the various online brokers.
