What is the difference between a brokerage account and a bank account?

A brokerage account is for investing in financial assets like stocks and bonds, aiming for growth, while a bank account (checking or savings) is primarily for holding cash, managing daily expenses, and earning minimal interest. Brokerage accounts carry market risk, whereas bank accounts are typically FDIC-insured.

Are brokerage accounts safe?

Yes, brokerage accounts are generally safe. They are regulated by government bodies like the SEC and FINRA. Additionally, your investments are protected by the SIPC (Securities Investor Protection Corporation) up to $500,000 (including $250,000 for cash) in case the brokerage firm fails, though this does not protect against market losses.

How much money do I need to open a brokerage account?

Many modern brokerage firms have no minimum deposit requirements, allowing you to start investing with any amount. Some may have minimums for specific types of investments or premium services, but you can often open a basic account with as little as $0.

Can I lose money in a brokerage account?

Yes, you can lose money in a brokerage account. The value of investments fluctuates with market conditions, and there is no guarantee of returns. While brokerage accounts offer potential for significant growth, they also carry inherent risks, including the possibility of losing your principal investment.

How are brokerage account investments taxed?

Profits from investments held in a standard brokerage account are subject to capital gains taxes. Short-term gains (investments held for one year or less) are taxed at your ordinary income rate, while long-term gains (held for over one year) are taxed at lower preferential rates (0%, 15%, or 20% for most investors in 2026). Dividends and interest are also typically taxable.

Should I prioritize a brokerage account or a retirement account?

For most individuals, it's advisable to prioritize tax-advantaged retirement accounts (like a 401(k) or IRA) first, especially if your employer offers a 401(k) match, as this is "free money." Once you've maxed out or contributed sufficiently to retirement accounts, a brokerage account is an excellent next step for additional long-term savings and financial flexibility.

What are common fees associated with brokerage accounts?

Common fees can include expense ratios for mutual funds and ETFs, advisory fees if you use a managed portfolio service, and sometimes fees for specific actions like wire transfers, paper statements, or account transfers. Most major brokers offer commission-free trading for stocks and ETFs in 2026.

Brokerage Account Guide: Investing for Beginners | One…