1. Determine the type of brokerage account you need
What are your investment objectives? Are you saving for a short-term goal, or do you plan on holding your investments until you retire? For example, to save for a rainy day or short-term goal, you probably want to open a taxable brokerage account. This account type doesn't have tax advantages -- you may have to pay tax on investment profits and dividends -- but you are free to withdraw your money anytime penalty-free.
Traditional brokerage account: Cash vs. margin
If you choose a traditional brokerage account, your broker will likely ask if you want a cash account or margin account. Opening a margin account means that you can borrow money to buy stocks, with the stocks in your portfolio serving as collateral. You'll pay interest on the borrowed money, and there are other risks to investing on margin.
However, there are reasons you may want to open a margin account even if you don't plan on borrowing money. For example, if you sell a stock or make a deposit, a margin account can make those funds available far sooner.
Retirement brokerage account
Individual retirement accounts (IRAs) are best for saving for retirement. Traditional IRAs can get you tax deductions when you contribute to them, but you won't be able to use your money until age 59 1/2. Contributions to Roth IRAs don't give you a tax benefit when you make them, but qualified Roth IRA withdrawals will be tax-free. Plus, you can withdraw Roth IRA contributions (but not your investment profits) whenever you want.
There are special account options best-suited to self-employed persons, including SIMPLE IRAs, SEP IRAs, and individual 401(k)s. Compare the pros and cons of each to pick the best IRA for you.
Many people choose to open multiple brokerage accounts, such as a taxable account and an IRA, to keep money in separate baskets. You can open multiple accounts to efficiently save for different goals.
2. Compare the costs and incentives
These days, virtually all of the major discount brokers offer commission-free stock trading. Your broker may give you discounts and bonuses for special actions, such as transferring over a large investment account from another broker.
Review brokerage firm fees to get the best prices. This is doubly important when you trade investments other than stocks (options, mutual funds, ETFs, bonds, etc.), since these often come with additional fees to trade.
For example, many brokers charge a commission in the range of $0.50 to $0.75 per options contract. Even if your broker doesn't charge a base commission, options trading could cost you.
Mutual funds are another area with big fees. Most brokers offer some mutual funds on a no-transaction-fee basis, but commissions can range as high as $74.95 if your desired fund isn't on the list. A few brokers have recently dropped their mutual fund commissions altogether, and trading with these rare few can help you keep mutual funds fees to a minimum.
Many brokers offer bonuses in order to attract business, and you don't need to be a millionaire to take advantage of them. The bonus shouldn't make or break your decision all by itself, but it's a piece of the puzzle worth considering.