The first step to building your portfolio is to open a brokerage account. These accounts are tools that allow you to purchase and sell stocks, bonds, mutual funds, and other investments.   It can be managed by you (discount broker option) or by an investment professional (full-service broker).   A couple of key things to think about when opening these accounts are:

1.  The fees associated each time you buy and sell a product are called trade commissions.  This is how brokerage accounts make money.  They will charge you every time they help you execute a transaction.  Fees can range from $5 dollars to upwards of several hundred dollars.

2.  There are two types of brokers:  an online discount broker or a full service broker.   A traditional brokerage firm offers a wide range of personalized services with a price tag to match.  They go through the process of understanding all the things we mentioned in the getting started section, i.e. what your investment goals are, time horizon, and investment objective.  The broker and his/her team can offer advice as to what investments might be right for you based on your “investment” profile. Discount brokers are companies that cater to investors who are looking to make investment decisions on their own.  Brokerage accounts, on the other hand, don’t offer advice as to where to invest your money.  Instead they provide you tools to help you make your own financial decisions.  As a result, brokerage account charges you lower fees, but you have more responsibility with your money investment decisions.

3.  Account minimums.  Brokerage accounts may come with a minimum investment amount.  Meaning you need to transfer a minimum amount of money into the account from your checking or savings account before you can open one.  In opening a new account, the minimum amounts to deposit can vary, usually ranging from $500-$1,000.

4.  Funding your account.  Funding is generally done via a check you mail to the brokerage company or by ACH transfer from your bank’s checking or savings account to the brokerage company.  They make this process easy because they are looking to gather your cash from you to begin trading and for them to begin charging you commissions!

Once you have opened an account, you have the ability to start investing your money. All brokerages give you the option of setting up automatic monthly withdrawals, which will transfer an amount you specify each month from your savings or checking account to your brokerage account.