What Does a Broker Do?
A broker is the platform that lets you buy and sell stocks, bonds, and funds on your behalf. You open an account, fund it, and place orders through their app or website. The broker executes trades on exchanges like the NYSE and NASDAQ and holds your securities.
How Trading Works
- Open an account — Provide ID, SSN, and employment info. Most brokers approve within a day or two.
- Fund the account — Link your bank and transfer money. ACH transfers usually take 1–3 business days.
- Place an order — Choose the ticker (e.g., AAPL for Apple), number of shares, and order type. A market order executes immediately at the current price; a limit order waits until the price hits your target.
First-time investor
Don't rush. Open one account, fund it with an amount you're comfortable with, and place a small test trade. Get familiar with the interface before adding more.
What to Look For in a Broker
Fees
Most U.S. brokers charge $0 for stock and ETF trades. But watch for:
- Mutual fund transaction fees — Some brokers charge to buy funds from other families (e.g., buying Vanguard funds at Fidelity may incur a fee).
- Account fees — Inactivity fees, minimum balance fees. Many have waived these.
- Options and margin — Advanced features may have different fee structures.
Account Minimums
Many brokers have $0 minimums, so you can start with $100 or less. Vanguard historically had minimums on some funds but now offers many with $0. Fidelity and Schwab let you start small.
Tax-Advantaged Accounts
If you want an IRA or Roth IRA, ensure the broker offers them. Most major U.S. brokers do. You can have both a 401(k) at work and an IRA at a broker.
Customer Service
Especially important for beginners. Schwab and Fidelity have strong phone support and local branches. Robinhood and other app-first brokers rely more on chat and help centers.
Research and Tools
Some brokers offer screeners, research reports, and educational content. Fidelity and Schwab are known for robust tools. Simpler apps like Robinhood focus on ease of use over depth.
Popular U.S. Brokers at a Glance
| Broker | Commission | IRA Available | Good For |
|---|---|---|---|
| Fidelity | $0 | Yes | All-in-one, research, zero-fee index funds |
| Vanguard | $0 | Yes | Low-cost index funds, long-term investors |
| Schwab | $0 | Yes | Beginners, service, no-minimum funds |
| Robinhood | $0 | Yes | Simple, mobile-first, fractional shares |
| E*TRADE | $0 | Yes | Active traders, tools |
Scenario: Which Broker Fits You?
- You want simplicity — Robinhood or Schwab.
- You want the lowest-cost index funds — Vanguard.
- You want strong support and research — Fidelity or Schwab.
- You already have a 401(k) at work — Open an IRA at the same firm for consistency, or choose a different broker for flexibility.
Pro tip
If your employer offers a 401(k), start there first—especially if there's a match. That's free money. Open a brokerage IRA for additional investing.
You Can Always Switch
If you choose a broker and later want to change, you can transfer your account. Most brokers offer ACAT transfers (free in many cases) to move your holdings without selling. It may take a few days.
Choose one that fits your style and get started. Perfection isn't required—action is.