How To Open A Stock Account

Before you can start buying stocks for the first time, you need to open a broker account. Its the first and most important step you make in your investing career because many people never even get that far! It is always easier to do nothing and investing in stocks does take time and can be a bit intimidating. Saving enough money (I’d recommend at least $2000) and then actually opening an account can be a big deal. 

I’m Using TD Ameritrade

In conjunction with this blog, I’ve opened an account with TD Ameritrade as they consistently rank near the top in Barron’s yearly review of online discount brokers. I wanted a broker that would be good for my long term investing goals and one I could confidently recommend to my readers. Click the chart for a readable picture size of Barron’s 2013 online broker rankings:

  Best Online Brokers 2013You can see that TD Ameritrade ranks 4th overall and was rated very high in customer service satisfaction. That is good enough for me as I have also heard good things about them for years.  

They charge $9.95 per trade which I think is a reasonable price for the service and platform. You can get lower  pricing with some other brokers but honestly, if you are stressing over a couple of dollars per trade you are focusing on the wrong thing. Please take a look at my more in depth TD Ameritrade review.

Open An Online Discount Broker Account

Opening an online stock account with any broker will take about 15 minutes to a half an hour. In my example I am using TD Ameritrade but any broker you choose should be very similar.  You will need to give your real name, address, phone number, Social Security Number, and answer a handful of questions. The questions regarding your job, income, net worth etc. have to be filled in but you don’t have to be truthful about those if you don’t like (I elaborate more about that in the video below).

Your SSN is necessary because all brokers are required to supply information to the IRS at year’s end that should match your tax return. The IRS doesn’t want you cheating on your taxes and so they have made it the law that all stock brokerages must report the buy and sell information you compile during each year. Please watch my short video that shows most of the new account sign up process with TD Ameritrade: 

Funding My Stock Account

For funding I chose to send TD Ameritrade a personal check through the US mail to the address they specified and it was in my account in 3 business days. Quite impressive! However, most people would likely choose the electronic transfer of funds from a bank account into their new stock account. Electronic transfer should make the funds visible and available the next business day I would think.

I did get a $300 bonus for funding the account with $150,000 along with 500 free trades that are good for 60 days. You can also see that when you first open an account all your money will be listed under “Cash balance” until you buy your first stock:

$150,000 portfolio

Obviously, it is unlikely you will be investing as much as I did so the bonus you will be eligible for will be less. You get 60 days of free trading for funding with anything less than $25,000 and then you get an additional cash bonus if you deposit $25,000 or more. Most brokers will give you the same exact bonuses TD Ameritrade gives which you can see below:

TD Ameritrade deposit bonus

17 Responses to “How To Open A Stock Account”

  1. Amr says:

    Hi Bruce,

    I just started reading your blog and I am getting inspired and most importantly I am beginning to understand the concept of trading stocks. I have an important question before I dig deep into your blog in vain, I am neither an american nor live in america. I am actually Egyptian. Can I use trade stocks the same way you do? I mean using the same online broker, the same account type, buying same shares and etc..

    Thanks
    Amr

  2. Robert says:

    I would like to transfer an LPL Financial account to an online discount brokerage account such as TD Ameritrade. LPL seems pretty scummy ( maybe just from my 7 year long experience/or this specific broker). Can you offer any advice on how to proceed without difficulties?

    • Bruce Alan says:

      Robert,
      Any online discount brokerage you choose should have a 1-800 number you can call for questions and assistance. I would pick a broker and find the number (usually under the “Contact US” link at the bottom of the brokers home page) and then call then to see what they say. You are a new client and they should be happy to assist you by giving you instructions on how to transfer your account.

      • Robert says:

        Bruce,

        Thanks for the quick reply, and suggestion to just pick up the phone. Sometimes I waste so much time on the internet (trying to unearth information) that the simplest solution aludes me!

        And I want you to know how fortunate I feel to have found this site. Very few, if any, contains such clear, straightforward information. I finally feel like I can take control of my own investments without fear. It would be very hard to do worse than this guy has. (I read somewhere that people envision their brokers sitting vigilantly in front of their computers…carefully monitoring their stocks all day long. The real truth is they’re busy drumming up new clients and more commissions!)

        Anyway, I greatly appreciate your efforts to inform people such as myself. Hope you keep this up!

        Best wishes!

  3. Britney U. says:

    Hi Bruce! Thank you for the information, as I have been interested in investing in stocks and I am 25. I have read a lot of useful information and just wanted to read some more information to become more knowledgeable. I want to see if you could recommend any literature to read up on? I need to understand the terminology. Thank you kindly.

  4. Paul says:

    First of all thanks for this website, I only wish I knew most of these when I was in my 20s. My question is if TD Ameritrade is rated #4, why them and not any of the brokers rated btw #1 and 3?

    • Bruce Alan says:

      Paul,
      For something as important as my money, I guess I prefer to use a broker I have at least heard of before. On that chart, I have never heard of #1 and #3 so I chose not to use them. #2 is set up for traders who make a lot of trades and I am not that kind of investor. So I chose #4 which also happens to be a well known brokerage company that I knew was well respected in the industry.

  5. Denise M says:

    Thanks for this information and the video — very helpful. I’m trying to decide if I want to go with E-trade or TD Ameritrade now… but that, like you said, is the biggest hurdle — actually signing up!

    Denise

  6. B. C. says:

    Can I “sell” or transfer money that is in an existing mutual fund to buy individual stocks? Or can I direct purchases of individual stocks from that existing fund?

    B.C.

    • Bruce Alan says:

      You can sell all or part of a mutual fund to get cash to buy individual stocks. You cannot buy individual stock from an existing fund because the fund is run by a manager and you are paying them to pick the stocks and run the fund!

      • B. C. says:

        So its the same penalty, taxes, fees for selling a mutual fund as a cash out, I’d just be using it for stock purchase. I was wondering if there were any way to “redirect” those pretax funds to stock without the big hit.
        Glad I didn’t buy Tesla today…but maybe tomorrow!

        • Bruce Alan says:

          If you are talking about penalties, I assume you have money in a mutual fund that is in an IRA. I’m sorry but I don’t have the experience to address any of that as I only buy individual stocks and have no money in and little experience with mutual funds.

  7. Grifter says:

    IS an SSN an absolute requirement? do you need to be an American citizen? are there alternatives for non-American citizens? :)

    • Bruce Alan says:

      I’m not entirely sure about the SSN issue with the different brokers. I think the best advice would be to find a 1-800 number (TD Ameritrade’s number is 1-800-454-9272) for the online broker you wish to open an account with and ask them what their policy is. I do know that not all brokers have the same requirements so depending on what country you live in, you might be able to sign up with one broker and not another.

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