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What Is a Brokerage and How to Open One?

  • Writer: Felix La Spina
    Felix La Spina
  • Nov 14, 2025
  • 5 min read

Brokerage: US ACCOUNTS TAXES & RULES (Open a Brokerage) Explained

Opening a brokerage account is your starting point for buying stocks, ETFs, and other assets in the United States. Whether you want to invest for the long term or trade actively, every financial action begins with a brokerage. This guide explains what a brokerage is, how to buy stocks, how accounts work in the US, what taxes you need to understand, and how to choose a platform that matches your goals. It is written in clear, practical language with all major steps laid out for beginners.

Educational only.

What Is a Brokerage?

A brokerage is a regulated financial platform that lets you buy and sell investments such as stocks, ETFs, bonds, mutual funds, and options. When you place an order, the brokerage sends your trade into the market and handles custody, settlement, and reporting.

Brokerages range from full-service firms (with advisors) to low-cost online brokers focused on self-directed trading. In today’s market, most investors open online brokerages because of lower fees and faster execution.

Common examples of online US brokerages include: • Fidelity • Charles Schwab • Interactive Brokers • E*TRADE • Webull • Robinhood

How US Brokerage Accounts Work

When you open a brokerage in the United States, your account sits under federal regulation by the SEC (Securities and Exchange Commission) and is protected by SIPC insurance up to $500,000 for securities (not market losses). This framework protects investors and ensures the brokerage meets operational standards.

The account setup usually includes:

  1. Identity verification (KYC requirements)

  2. Funding options (bank transfer, wire, ACH)

  3. Choosing account type (taxable vs retirement)

  4. Platform selection (mobile, desktop, or web)

Once the account is approved and funded, you can buy stocks, ETFs, and other assets through your brokerage’s trading interface.

Internal Tools To Help Before You Buy Stocks

These tools from StockEducation help you evaluate stocks, research trends, and manage risk before placing trades:

These help you understand both the fundamentals and the intraday environment before making a purchase.

Types of US Brokerage Accounts

1. Individual Taxable Brokerage

This is the most common account type. It allows you to buy and sell freely, but all gains and dividends are taxable.

2. Retirement Accounts (IRAs)

These include: • Traditional IRA • Roth IRA

These accounts provide tax advantages but come with strict rules about contributions and withdrawals.

3. Margin Accounts

A margin account allows you to borrow money from your broker to buy stocks. This increases both potential returns and potential losses.

Margin rules are governed by Regulation T (Board of Governors of the Federal Reserve System). Source: https://www.federalreserve.gov/supervisionreg/regulation_t.htm

4. Cash Accounts

These accounts require you to fully fund purchases—no borrowing. They also protect you from pattern day trader rules.

How to Buy Stocks (Step-by-Step)

Buying stocks is simple, but you must understand how each order type works to avoid errors. Here is a practical workflow:

Step 1 — Research the Stock

Use tools like: • US Stock Screener • AI New Stock Analyzer • Advanced Charts

Look at: • earnings trend • volatility • volume • market news • fundamentals

Step 2 — Choose the Right Brokerage

Pick a brokerage based on: • fees • platform reliability • ease of use • execution quality • available order types • market access

Step 3 — Fund Your Account

Most brokers support: • ACH transfers • debit/credit restrictions (varies) • wire transfers

Funding times usually take 1–3 business days.

Step 4 — Decide Your Order Type

Common order types include: • Market order — buys instantly at the best available price • Limit order — buys only at a price you choose • Stop order / Stop-limit — triggers when a price level is hit

Day traders rely on limit orders for precision. Long-term investors sometimes use market orders for simplicity.

Step 5 — Buy the Stock

Place your order through your broker. You will see: • the ticker symbol • order type • number of shares • time-in-force settings (day, GTC, etc.)

Step 6 — Track and Review

Use the AI Portfolio Learning Tracker to monitor: • diversification • sector exposure • concentration • risk metrics

Taxes When You Buy and Sell Stocks in the US

US taxation depends on: • how long you held the stock • your income bracket • whether gains are short-term or long-term

Short-term capital gains

Applied when you hold a stock for less than 1 year. Taxed at ordinary income rates.

Long-term capital gains

Applied when you hold for 1 year or more. Taxed at reduced rates (0%, 15%, or 20%).

Dividend Taxes

Most US dividends are taxed in the year received. Some high-yield accounts may classify dividends differently depending on the stock or fund.

Wash Sale Rule

This IRS rule prevents you from claiming a loss if you repurchase the same stock within 30 days before or after selling at a loss.

Reference: https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/wash-sales

Choosing a Brokerage: Key Features to Look For

A brokerage must be more than a place to press buy. Look for the following:

Execution Quality

Some brokers offer faster order routing and provide better fills, which matters for both traders and investors.

Fees and Commissions

Many US brokers are commission-free for stocks, but may charge for: • options contracts • foreign stock access • margin interest

Platform Reliability

Look for platforms that remain stable during: • market opens • economic releases • earnings announcements

Research Tools

Beginners benefit from brokerages that include: • earnings information • news feeds • analyst ratings • educational content

Order Types

Quality brokers support: • stop-limit • bracket orders • conditional logic

Customer Support

Beginners often prefer brokers with phone support in addition to chat and email.

Best Brokerages for Beginners (US)

Not financial advice—educational only.

Fidelity

Strong research tools, stable platform, great customer support.

Charles Schwab

Broad access, clean execution, reliable long-term reputation.

Webull

Fast, modern interface suitable for beginners who want charts and ease of use.

E*TRADE

Strong educational resources and good charting.

Interactive Brokers

Best for advanced traders but steep learning curve for beginners.

Common Beginner Questions

Do you need a lot of money to buy stocks?

No. Many US brokerages allow fractional share purchases.

Can anyone open a brokerage?

Most US citizens and permanent residents can open one. Non-US residents may have additional requirements depending on the brokerage.

Do you need a brokerage to buy stocks?

Yes. Stocks cannot be purchased directly from exchanges without going through a regulated brokerage.

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