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How to Start Investing: Best Brokerage for Beginners

Wall Street, here I come!

OK, so you’ve read all about market risk, you’ve figured out your investment profile and you’ve completed the courses on how to analyze a stock. But how do you start investing?

If you’re like most people, that’s exciting—but also a bit scary. After all, up to now it’s all been about theoretical investments and imaginary portfolios. From this point on, though, it’s different. It’s about money. Real money. YOUR real money.

OK, we don’t want to spook you, but it’s important to proceed with caution. You’re still learning the ropes and we want you to start off on the right foot.

How to Start Investing? With a Brokerage.

Figuring out how to start investing begins with choosing a brokerage. A brokerage is simply an authorized dealer of financial products like stocks and bonds. And the only way you can buy and sell them is through a brokerage.

“Hold on a second, here!” you might say. “I thought free markets were all about the freedom to buy and sell. Who says I have to hire a broker to do that for me?”

Well, the reason brokerages exist is because if they didn’t, all hell would break lose. Imagine all the millions and millions of investors calling up the New York Stock Exchange every day. Who would keep track of all their orders? How would you verify who was a legitimate caller and who was just a kid playing a prank? And how would you make sure investors didn’t default on their orders if they changed their minds?

No, free markets aren’t free-for-alls. In order to make the stock market work, exchanges hand all that work over to trusted brokers that they’ve vetted. And that’s why the only way for you to get into the stock market is through a broker.

Before You Make The Call…

Now before you hire your broker, there are a few things you need to do. (We’ve put them in a convenient checklist.)

How to Start Investing: Your Pre-Brokerage Checklist

  • Review everything you’ve studied so far. Make sure you understand how the stock market works and what kinds of things can affect your investments.
  • Write out your financial goals.
  • Determine your risk profile (e.g., low, moderate, high).
  • Establish your investment goals (e.g., long-term growth, steady income, preservation of capital).
  • Decide how much money you want to invest, and how you want to allocate it between asset types (cash, bonds, stocks).
  • List the stocks you would like to have in your portfolio and why. (This is a good time to reexamine why you have made the choices you’ve made.)

Now hold your breath and get ready to jump in. You’re about to pick a brokerage and enter the stock market!

Best Broker for Beginners: Robinhood

Robinhood started when a couple of Stanford roommates, Vlad and Baiju, moved to New York and made a life building software companies that helped larger firms hedge their stock funds.

During this experience they started to realize that the average American can be charged around $10 for each stock trade that they make.

So they designed an app and a website that guide people through the process of signing up and trading with a confident simplicity.

Signing up and beginning to participate in Robinhood is fast, and keeps your attention the whole time.

Robinhood: Account Minimum

Robinhood account minimums are set at $0.

When ready, people can then easily add money to the system and start trading.

If you set up a margin account with Robinhood—a type of account that basically allows you to trade with borrowed money—then you’ll have to pay interest on the margin that you’re borrowing on, so this is an additional fee.

But, you can fully sign up and get set up without paying any money! If you like it, you can easily add money to invest.

Robinhood: Investment Options

Robinhood has the goal of keeping investment simple and offering the kind of stocks and investments that people really want.

You’ll have the opportunity to score individual, popular stocks like Amazon and Apple. You can get individual stocks, ETFs, and options contracts for a variety of U.S. ETFs and stocks.

In another bid to appeal to a younger audience, Robinhood has also opened up the world of cryptocurrency in a much easier setting that searching the web for random sites to buy bitcoin on.

Robinhood: Fees

Robinhood famously offers commission free trading, which allows users to get caught up in the drama of moving around stocks without spending all of their hard-earned trading money paying off commissions.

There is still a small fee paid to stock market regulators, but this is a lot less than a more traditional commission paid for a stock order.


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