Whether you are interested in passive investing or day-trading, firstly you need effective tools. The basis of investing is a broker account, that is, an account where your stocks, CFDs and ETF shares will be recorded. What is a brokerage account, how to set it up and what type to choose?

What is a brokerage account?

A broker account, also known as an investing account, is an account by which you communicate with global markets. As with the SWIFT system, individual investors do not communicate directly with each other. They use brokers, that is, institutions that broker stocks and other investment instruments.

Thus, it can be said that an investment account resembles a bank account, but instead of money, you mainly keep stocks there. Of course, you can also keep cash there, for example, to invest it, but you can't transfer money to other investors.

How to open brokerage account?

Before we get into the list of best brokerage accounts, it is worth focusing on formalities and some details. If you are a novice investor, you need to know about the following rules:

  • You must be of legal age to invest money. Regulations may vary depending on where you live, but this rule applies to the U.S., Europe and Japan, among others.
  • Investing borrowed money is not advisable. You have to take into account that you will make losses at the beginning, and the interest rate on the loan can drastically reduce the profitability of your investment.
  • You can set up an investment account with a different bank than the one you use on a daily basis. There are no restrictions on having accounts, you can have several and many times it is more profitable.
  • You have to pay tax on the money you earn on the stock market. If you know how much you should pay, it's a good idea to get help from an accountant.

If you continue reading this article, you can probably open a brokerage account, so it's time for instructions on how to do that.

Choice of broker

The first step is to choose which company you will use. Some choices would be Etoro, XTB and Trading 212, among others, but the choice is much wider. When choosing the ideal offer, you should consider commissions, the availability of investment instruments and the level of security. The better your analysis, the more enjoyable investing will be.

You also need to determine how to invest. An individual brokerage account is used for saving, for example, for retirement. The number of formal requirements is significantly less than for a business brokerage account, which you will need to invest your company's capital. If you invest as a legal entity, you may be able to get an individual offer from a bank.

Creating a brokerage account on platform

If you have already chosen an institution, it's time to register. You will need to provide your information, including your address, and submit a declaration of your tax residency. Many brokers also require the new user to send some documents confirming residence, such as electricity bills.

Once an investing account is established, it will be confirmed within a few days. Expect a phone call from a brokerage employee or a letter. The paperwork is quite complex, but you should have no problem going through it.

Sending an ID and pictures

After confirming your intention to set up an individual brokerage account, many companies will ask you to send a scan of your ID. This is a normal procedure, known as KYC, required in Europe, among other countries. You don't have to worry about your privacy, as your data is very well protected. Very often, you will also be asked for a photo of your face in several positions.

Money deposit

The final step is to deposit the money in your account. In most cases, a few tens of dollars will suffice, but due to the amount of commissions you should allocate $500 or more. Of course, you don't have to invest your money right away, your account can wait for a longer period of time. Inactivity fees are rare, and there are often additional fee discounts offered on brokerage accounts for beginners.

Best brokerage accounts

Choosing an account is a very individual matter, as a lot depends on where you live. If you are a beginner and looking for a safe option, start with one of our suggestions. You may make a different decision after time, but it's good to start somewhere.

Fidelity investments is an American company with vast experience. It was founded in 1946 and has been growing its client base almost continuously ever since. The total value of stocks, ETFs and CFDs of Fidelity users is almost $12 trillion. NerdWallet's rating is 5.0, which is the maximum.

Interactive Brokers IBKR lite

Interactive Brokers is a younger company, but at this point, it owns the largest trading platform in the world. It has offices in 12 countries, but serves clients in 200 countries. You can open an account in one of 24 currencies. IBKR is a perfect choice for frequent traders, as well as for institutions.


XTB is a Polish broker, established in 2002. In a short time, the company has managed to gain status as one of the largest FX and CFD such brokers in the world. XTB's main focus is on European clients, but it is expanding rapidly and offering its services to people from all over the world.

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