What is a brokerage account?

A stock market brokerage account is where you buy and sell real shares. The majority of broker accounts allow you to place trades online or over the phone. When trading online, some brokers allow you to place trades by logging into their website and others provide java platforms (or similar) for you to log into and trade from. Fees for trading over the phone are usually higher than online fees so it is worth getting to grips with your internet broker.

To set up a broker account you must be over 18. If you are under 18 you can still try practice trading. Unlike a practice account, setting up a brokerage account will not be instant, as personal details need to be checked and approved.

Broker fees for trading UK shares vary from around £7.50 – £12.50 flat fee. US fees vary from around $2 – $14 flat fee.

Choosing a broker account should not just be about how cheap their trading fees are, as there are several other fees you need to be aware of (listed below). Also, if you will be trading with a lot of money then trading fees will not impact as heavily on your profits, and therefore it might be more important to choose a broker whose website you find easy to use, or a broker that offers high interest rates on your idle money.

Note: There are several things you need to look out for when opening a broker account.

• Some brokers will charge inactivity fees so you need to be wary about those unless you are certain you will be trading regularly.
• Some brokers charge withdrawal fees, especially if you request a wire transfer. If you are investing in shares for a regular income and are going to be withdrawing regularly then look out for these fees.
• Some brokers charge data fees. E.g. they might give you US data feeds for free but charge £10 a month to receive UK market data.
• Their interest rates. It will be likely at times you will not have uninvested cash and therefore your money will be in an account receiving interest. Make sure you are offered a high interest rate to keep you money growing.
• Their trading platforms. Some brokers platforms or websites, where you trade the shares, can be complicated to use. The last thing you want is to accidentally misplace a trade with real money, therefore you need a brokerage account that you are comfortable with and enjoy using.

If you’re in the US, I think TD Ameritrade is an option you’d really like. They’ll even let you trade free for 60 days and offer various deposit bonuses. You can check them out here. I’ve used them myself for many years and they’ve always been really great.

Outside the US, you might like to try Plus500. They are a CFD brokerage, which is a bit different, but you might like it. They offer practice trading, so you can give it a try. You can check them out here.

View our full list of recommended brokerage accounts.