WEALTH

Brokerage Basics

By Tui Alailima · 3 min read

Most people start with "what should I buy?" The real first question is: where does this money live? That place is a brokerage.

Bank vs. brokerage

Your bank holds cash for daily life. A brokerage holds investments: you move cash in, then use it to buy funds. Same idea as a bank account — different job. You'll want both.

Opening one is genuinely easy

Every brokerage follows the same flow: create a login, enter your personal details (name, address, Social Security number — required by law, not nosiness), pick an account type, link your bank, move money in. About 15 minutes. No minimums at the major firms, and trading the basics is free.

The step-by-step, and why it's all free now

How people used to invest (pre-internet)

For most of modern stock market history, regular people couldn't just open an app and buy an ETF for free.

Full-service brokers and high commissions

Historically, trading happened through full-service stockbrokers who were members of an exchange like the New York Stock Exchange (NYSE). The NYSE traces its roots back to the late 1700s and was formally organized in 1817 as the New York Stock & Exchange Board.

If you wanted to invest:

  • You called your broker on the phone or met in person.
  • Told them what you wanted to buy or sell.
  • They placed the order on your behalf on the exchange floor.

This was expensive:

  • Trades through full-service brokers commonly cost tens or even hundreds of dollars per trade, which made frequent trading or small trades unrealistic for most individuals.
  • Brokers often earned commissions based on the trade size, creating potential conflicts of interest.

Because of those high costs, investing was:

  • Something you did occasionally, with larger amounts.
  • Usually accompanied by "advice" from the broker (for better or worse).
  • Mostly out of reach for smaller investors.

Discount brokers and online trading

In the late 20th century, two big changes hit:

  1. Discount brokers showed up, charging much lower commissions and offering fewer bells and whistles.
  2. Online brokerages arrived with personal computers and the internet, letting people place trades themselves for far less than full-service brokers.

That was the start of what we're used to now: logging in from home, clicking "buy," and managing your own portfolio.

The $0 commission era

Over the last decade, competition between online brokers drove trading costs even lower. Today, the major U.S. brokerages generally offer:

  • $0 commissions on online trades of U.S. stocks and ETFs, and low per-contract fees for options.
    • Fidelity charges $0 for online U.S. equity, ETF, and options trades (options still have a $0.65 per-contract fee).
    • Schwab similarly advertises $0 commissions on online listed stock, ETF, and options trades with a standard options contract fee.
    • Vanguard also offers $0 commissions for many online stock and ETF trades, though they may charge an annual brokerage account service fee if certain conditions aren't met.
    • Robinhood built its entire brand on commission-free trading for stocks, ETFs, and options, with no account opening or maintenance fees.

Bottom line: today the barrier to entry is way lower. You don't need thousands of dollars or a "guy" on Wall Street. You need:

  • A brokerage account,
  • A linked bank,
  • And a basic sense of what you're buying and why.

How opening a brokerage usually works

Every platform looks a little different, but the flow is basically:

  1. Choose a brokerage
    • This is where the reviews below come in.
  2. Create an online login
    • Email, password, text verification, etc.
  3. Fill in your personal details
    • Name, address, Social Security number / tax ID, employment. This is required by regulation (KYC/AML).
  4. Answer a few investing questions
    • Experience, goals, risk tolerance. Mostly for compliance and internal profiling.
  5. Choose your account type
    • For first-timers, that's often "individual brokerage account" (taxable).
    • Later you might add a Roth IRA, traditional IRA, etc. (I suggest a Roth first though)
  6. Link your bank account
    • Using instant verification (Plaid, etc.) or small test deposits.
  7. Move money in
    • One-time transfer or recurring monthly transfer.
  8. Choose your investments
    • This is where your Money Hub steps and future investing pages come in (index funds, ETFs, contribution strategy).

You can absolutely do a separate step-by-step with screenshots per brokerage later if you want, but most people relax a lot once they see that it's basically "open account → link bank → transfer → invest."

Which one? They're all fine

There is no secret best brokerage. Match the vibe: want a solid long-term home with good tools — Fidelity, Schwab, or Vanguard. Want phone-first simplicity — Robinhood or SoFi, with one warning: don't let a slick app turn investing into a casino. Want global markets and pro tools — Interactive Brokers, which is not where a beginner starts.

The big names, compared

Choosing a brokerage – how I think about the big names

There's no single "best" brokerage. There's:

  • "Best for long-term index investing."
  • "Best simple phone app."
  • "Best if you want a lot of tools."
  • "Best if you want global markets," etc.

Below is a quick rundown of some of the big names I'd feel comfortable pointing people toward. You can adjust this list around your own preferences.

Fidelity

Fidelity is consistently rated as one of the strongest all-around brokers: low costs, robust tools, and strong customer service

  • $0 commissions on online U.S. stock, ETF, and options trades (options still have a per-contract fee).
  • No minimum to open a standard retail brokerage account.
  • Very solid research tools, screeners, and educational content.
  • Good app + desktop combo.

Who I'd send here:

Someone who wants a long-term home for investing, likes to poke around in research tools, and wants low friction on costs.

Charles Schwab

Schwab is another "core" brokerage with a strong reputation, especially for customer service and ease of use.

What stands out:

  • $0 online commissions on U.S.-listed stocks, ETFs, and options, with a standard per-contract fee for options.
  • Schwab One brokerage has no account minimum.
  • Solid in-house ETFs and index funds.
  • Integration with Schwab Bank (checking, ATM fee reimbursements, etc.) if you want everything under one roof.

Who I'd send here:

Someone who wants one of the big, stable platforms, especially if they like the idea of linking banking and investing.

Vanguard

Vanguard is basically the home base of low-cost index investing. A lot of long-term "buy and hold" people spend their entire investing life here.

What stands out:

  • Founder John Bogle pioneered the first index fund for individual investors in the 1970s.
  • Focus on index funds and ETFs, with some of the lowest expense ratios in the industry.
  • Online stock and ETF trades can be $0 commission, but Vanguard charges an annual service fee (around $25 per brokerage account) unless certain conditions are met or you opt into e-delivery.
  • Many Vanguard mutual funds have minimum investments (for example, $1,000–$3,000).

Who I'd send here:

Someone whose plan is essentially "own a few Vanguard index funds for 20–30 years and not mess with it much," and who doesn't care about fancy trading tools.

Robinhood

Robinhood popularized the "invest from your phone, $0 commissions, no account minimum" experience.

What stands out:

  • Commission-free trading for stocks, ETFs, and options with no account opening or maintenance fees.
  • Very simple, app-centric interface; feels like a consumer app, not old-school finance software.
  • Extras like fractional shares and extended-hours trading.

Watch-outs:

  • The app design encourages frequent checking and trading, which can be dangerous behavior-wise for new investors.
  • Fewer traditional research/reporting tools than big full-service brokers.

Who I'd send here (with caveats):

Someone who absolutely wants a phone-first experience, but I'd still stress long-term, low-churn investing rather than constant trading.

SoFi Invest

SoFi is a fintech platform that mixes banking, loans, and investing in one ecosystem.

What stands out:

  • Commission-free trading on stocks and ETFs in its Active Investing accounts.
  • Option for automated portfolios (robo-advisor style) and self-directed trading in the same app.
  • Tight integration with SoFi banking, credit, and loans.

Who I'd send here:

Someone who likes the idea of a "financial super-app" and wants basic investing without dealing with a more traditional brokerage interface.

Interactive Brokers (IBKR)

Interactive Brokers is kind of the opposite of Robinhood in terms of vibe: extremely powerful, global, and feature-rich, but with more complexity.

What stands out:

  • Access to a huge number of global markets and asset classes from a single account.
  • Very competitive margin rates and advanced trading tools.
  • Designed with active traders and professionals in mind.

Who I'd send here:

Not beginners. This is for people who already know they want global access, advanced order types, and are comfortable with more complexity.

How I'd help someone pick one

If someone calls you and says "Which brokerage should I use?" you can keep it simple and map it like this:

  • "I just want a solid place to invest for the long term." → Fidelity, Schwab, or Vanguard.
  • "I like apps and want something really simple." → Robinhood or SoFi (plus a big warning about not turning it into a casino).
  • "I want to trade lots of stuff in lots of countries." → Interactive Brokers (but this is not where most first-time investors need to start).

Once your brokerage is open and linked to your bank, the hard part isn't the website anymore. The hard part is sticking to a plan.

Your first buy screen

Here's the screen that intimidates everyone the first time. Tap each part — there are only four:

A buy screen has four parts: the ticker (the fund's nickname, like VTI), the amount (enter dollars — $100 buys $100 worth, fractions included), the order type (market means buy now at the going price — all a long-term investor needs), and a review step to double-check before submitting.

A typical buy screen. Tap each label. Market order, dollar amount — that's the whole trick.

Once the account is open and linked, the hard part is never the website again. The hard part is sticking to a plan — which is what the rest of these guides are for.

Terms you now know

  • Brokerage — the company (and account) that holds your investments.
  • Taxable account — the flexible default account; you pay taxes as you go.
  • Market order — buy now at the going price; the long-term default.
  • Limit order — only buy at a price I set; trader tool, safe to ignore.
  • Fractional shares — buying by dollars instead of whole shares.

Check yourself

What's the difference between your bank and your brokerage?

The bank holds cash for daily life; the brokerage holds investments. You move cash from bank to brokerage, then buy funds with it.

Which order type should a beginner use, and why?

Market order — it buys right away at the going price. Limit orders are for traders trying to time entries, which is exactly what a long-term investor doesn't do.

Does it matter much whether you pick Fidelity, Schwab, or Vanguard?

Not really. All three are excellent long-term homes with $0 trades and no minimums. Picking one and starting matters far more than which one.