How to open a brokerage account
Last updated August 2026
Short answer
The application takes minutes and the defaults it offers are not always the ones you want, particularly on margin.
Choosing a firm
Check registration in FINRA BrokerCheck and confirm SIPC membership before anything else.
Compare on the cost of what you will actually hold, since commissions on stocks and ETFs are widely zero and fund expense ratios are where the money goes.
Look at whether fractional shares, automatic investing and the specific funds you want are supported, because those differ more between brokers than headline pricing does.
Cash or margin
A cash account settles trades with money you have. It cannot borrow, and it cannot be liquidated to meet a call.
A margin account permits borrowing against your holdings, and the agreement allows the broker to sell your positions without asking if equity falls too far.
Choose cash unless you have a specific reason not to. Margin can generally be added later, and the reverse conversation is harder.
Ownership type
Individual accounts are the default and pass by your beneficiary designation, which is worth completing during the application.
Joint with rights of survivorship passes automatically to the surviving holder, which is convenient and gives both holders full control while both are alive.
Transfer on death registration is a useful middle path on an individual account, since it names a beneficiary without giving anyone access now.
Try it in Walnut
Walnut connects to your brokerage account and reads what you hold, which is what makes analysis of your own portfolio possible rather than generic.
Funding and investing
Link a bank account and transfer. Money arrives in a settlement fund and is not invested until you place a trade.
Set up automatic investing if the broker offers it, so contributions are put to work without a decision each month.
Deciding on the allocation before the money arrives avoids the common pattern where cash sits waiting for a better moment that never announces itself.
What is different about a taxable account
Dividends and interest are taxed in the year received, and gains are taxed when you sell, so tax arrives without you doing anything.
Keeping records matters more here than in a retirement account, since cost basis determines the eventual bill and brokers do not always have it right.
In exchange, there are no age rules, no penalties and no required distributions. The money is simply available.
Settings worth changing on day one
Turn off automatic dividend reinvestment if you want dividends available for rebalancing, or leave it on if you want compounding without decisions.
Set the cost basis method deliberately. Specific identification gives the most control at sale, and most brokers default to first in, first out.
Enable two-factor authentication, preferring an authenticator app over SMS where the broker supports it.
Sources
Registration can be checked at FINRA BrokerCheck, and coverage limits are published by SIPC. Tax treatment of dividends, interest and sales is in IRS Publication 550. Walnut is informational and is not an investment adviser. This guide is educational and not personalized investment advice.
FAQ
How do I open a brokerage account?
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Choose a firm, complete an online application with your identity and employment details, agree to the account terms, link a bank account and transfer money. There is no income test and no contribution limit.
What do I need?
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Social Security number or taxpayer ID, date of birth, address, employment information and a bank account. US brokers are required to verify identity, so a mismatch in any detail can delay approval.
Should I choose cash or margin?
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Cash, unless you specifically need margin. A cash account cannot borrow, which removes the possibility of a margin call entirely. Margin can usually be enabled later if you decide you want it.
Individual or joint?
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An individual account is yours alone. A joint account with rights of survivorship passes to the other holder automatically. Joint accounts also give each holder full control, so the decision is about more than convenience.
How much do I need to start?
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Most major brokers have no minimum, and fractional shares mean a small amount can be fully invested. The constraint is your own budget rather than the account.
Is my money protected?
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SIPC covers up to $500,000 per customer, including $250,000 for cash, if the brokerage fails and assets are missing. It does not protect against investments falling in value.
What tax forms will I get?
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A consolidated 1099 each year covering dividends, interest and sales. Unlike a retirement account, dividends and realised gains are taxable annually, so the form matters even in a year you did not sell anything.
Should I open one before maxing my IRA?
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Usually the IRA comes first, because its limit does not carry forward and the tax shelter is worth more the longer the horizon. A brokerage account is the right home for money you may need before 59.5 and for amounts beyond the IRA limit.
Which cost basis method should I choose?
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Specific identification gives the most control, because it lets you nominate which lots to sell and therefore which gain to realise. Most brokers default to first in, first out, which sells your oldest and often lowest-basis shares first.
Can I have more than one brokerage account?
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Yes, as many as you like, and there is no aggregate limit of any kind. Splitting across two firms is one way to stay inside SIPC limits on a large balance, though it also means two sets of statements and two cost basis records to keep straight.