Whether you’re a Fortune 500 executive or a gig worker, your financial future may be enhanced with a brokerage account.

But there are some specific aspects of a brokerage account that make them different from other accounts you might have, such as a bank account or a retirement account. Here is what you need to know about brokerage accounts.

What is a brokerage account?

A brokerage account allows you to buy and sell investments in different asset classes, such as stocks, mutual funds, bonds and exchange-traded funds, known as ETFs. The account is associated with a licensed brokerage firm, which acts as an intermediary between you and the company from which you are buying the investment. In other words, if you wanted to buy stock in Company X, the brokerage firm will make the purchase on your behalf, rather than you contacting the company directly.

Once you open an account with an initial deposit, you can use that money to specify the investment purchases you would like to make. You can add money and buy and sell your investments whenever you wish, or you can stay with your initial deposit and investment. There is no expectation of specific amounts of activity within your brokerage account.

You also can choose to have multiple accounts with different providers. For example, an investor could have a full-service brokerage account as well as participate in a discount online platform.

Where can I open a brokerage account?

The types of financial institutions that offer brokerage accounts have proliferated—from traditional brick-and-mortar companies that you associate with Wall Street, to the increasingly popular online firms. The wide range of options means there’s something to suit every investor’s need.

With Acorns, for example, you can set up a brokerage account and link it with a funding source (like a checking account) and the debit or credit cards you often use for everyday purchases. Then, through the Acorns round-up feature, every time you use a linked card, the charge gets rounded up to the next dollar amount and pulled from your funding source. Typically, once your change adds up to at least $5, the money gets invested into your custom portfolio, a mix of funds with allocations designed to match your goals and risk tolerance. Acorns Spend card users, though, can get the round-ups from their linked purchases invested in real time. (You can sign up for Acorns here.)

Here is a more detailed look at the two main types of brokerage firms:

Full-service brokerage account

These traditional accounts are handled through firms where you will have an advisor, who is paid to help you develop your investment plan and then make recommendations and execute them for you. Sometimes you will approve every trade before they make it; or you may choose to provide the authority for them to make financial decisions on your behalf, based on the information and goals you provide. Since markets move fast, sometimes that can ensure they make the buy they want while the price is right, without waiting for your approval.

There are different fee models available to access a full-service brokerage: Some firms will charge a commission, or fee, on every trade (buying and selling), while others will charge a flat fee, typically ranging from 0.5 percent to 1.5 percent, of your entire account. The theory is that when your investments grow, they are compensated via that larger annual fee, which is a percentage of your larger account. Some firms will offer a choice, while others operate exclusively on one model or the other.

Make sure to get complete information on all the fees you’ll be charged and check to see if there is a minimum balance.

A full-service brokerage could be a smart choice for an investor who wants hands-on guidance, though it is also the most expensive option.

“Discount” brokerage account

Don’t be dissuaded by the term: a “discount” brokerage account isn’t run by brokerage firms of inferior quality. Rather, these are online-only firms that require you to do most of the work yourself, in exchange for fewer or lower fees. (Note that they may have fewer asset classes available, as well). This can be an ideal setup for investors who want to make their own decisions and just need someone who can execute the trades on their behalf.

As these discount and online brokerages have grown, the competition has helped a wide range of investors because it’s led to lower trading prices and account minimums in order to attract customers.

There are even commission-free accounts that earn their money from interest on the uninvested cash that customers have in their accounts, as well as fees for subscription accounts for “margin trading.” (This is a riskier strategy than maintaining a cash account, because it means that the investor can borrow money from the brokerage firm to make the buy, with your account as the collateral and the broker as the lender. That means you’ll also be incurring interest charges.)

A discount brokerage account can be good for someone who feels confident in managing their investment portfolio themselves. 

There are also discount accounts that provide limited guidance or pre-selected portfolios to match your goals and risk tolerance so you don’t have to be actively involved, like Acorns, which offers five different portfolios from conservative to aggressive and automatically rebalances customers’ portfolios. Learn more.

How does a brokerage account differ from a retirement account?

While you might be tempted to use these two terms interchangeably, they have a key difference: Brokerage accounts are subject to tax, as opposed to retirement accounts, which offer tax advantages. Some types of retirement accounts, such as 401(k)s and traditional IRAs, are tax-deferred, which means you can deduct the amount of your contributions now, but you’ll pay taxes when you withdraw the money. Other vehicles, like the Roth IRA and Roth 401(k) are tax-exempt, which means that you will pay taxes now, rather than later, and the account can grow tax-free.

These tax advantages explain why most people first choose to open a retirement account, whether through their employer or on their own. However, the tax advantages of those accounts also come with restrictions, including when you can take the money out and even how much you can put in each year. That’s why a brokerage account can be a good supplement to a traditional retirement account. 

On the flip side, don’t forget that with a brokerage account you will need to claim the investment income on your tax return, such as any taxable income you derive from gains when you sell stocks or other assets at a profit, as well as the capital gains incurred.

Most experts recommend that you consider fully funding tax-advantaged accounts before you open a brokerage account. At the least, it’s a good idea to consider socking away enough money in your company’s retirement account to capture any match that’s offered.

So, how do I open a brokerage account?

The process for opening a brokerage account is simple: In most cases you can open your account in minutes online (in most states you’ll need to be at least 18 years old), typically free of charge. Then you can transfer money from your checking or savings account, or from another brokerage firm if you decide to switch firms or consolidate accounts. The funds will usually be available for your use within a few days to a week. If you are meeting with a financial professional face-to-face, you may choose to bring in a check for your initial deposit.

Then once the brokerage account is open, you can start making purchases. An important point: Make sure to thoroughly research the options among asset classes to choose those that align with your savings goals.

Finally, remember that the best investment strategy is one that’s consistent. You might consider setting up an automated transfer to your brokerage account to make sure that you continue to fund it regularly. However, you should also have a robust emergency savings fund in place, as a brokerage account is not a substitute for savings.

Once you open a brokerage account, it can be exciting to watch your money grow. Just remember that while the stock market has been robust recently, the market can go down as well. However, despite market ups and downs, historically the stock market has always recovered and grown significantly. Choosing wise investments based on your time horizon and risk tolerance can help put you on the path to a more comfortable retirement and help you reach the goals you have in the years before.

Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.