How to choose a brokerage firm

1. What is the primary purpose of a brokerage firm?

A) To guarantee investment returns.
B) To provide financial advice only.
C) To manage personal bank accounts.
D) To facilitate the buying and selling of securities.

2. Which of these is a key factor to consider when selecting a brokerage?

A) Fees and commissions.
B) The proximity to your home.
C) The color of their logo.
D) The brand of coffee they serve.

3. What is a commission fee?

A) A fee for opening an account.
B) A fee for financial advice.
C) A yearly membership fee.
D) A fee charged per trade.

4. What is an example of a security you can buy through a brokerage?

A) Stocks.
B) Groceries.
C) A car.
D) A house.

5. What does SIPC insurance protect?

A) Your home and car.
B) Cash and securities in your brokerage account.
C) Against market losses.
D) Your investment gains.

6. What type of research tools should a good brokerage offer?

A) Coffee brewing tutorials.
B) Reality television show reviews.
C) Fortune telling and astrology charts.
D) Market analysis and stock screeners.

7. What is a robo-advisor?

A) A robot that trades stocks directly.
B) A financial newspaper.
C) An automated investment platform.
D) A human financial advisor.

8. What is the importance of understanding the brokerage's platform?

A) The complexity to impress others.
B) The length of their terms and conditions.
C) The aesthetic appeal of the website.
D) Ease of use for trading and account management.

9. Which account type is typically tax-advantaged?

A) Debit card.
B) Savings account.
C) Checking account.
D) Retirement account (e.g., IRA).

10. What is the significance of customer support?

A) To offer free haircuts.
B) Assistance with account issues and trading questions.
C) To sell you unrelated products.
D) To provide dating advice.

11. What does 'due diligence' mean when choosing a brokerage?

A) Only considering the cheapest option.
B) Ignoring fees and regulations.
C) Thoroughly researching and comparing options.
D) Blindly trusting recommendations.

12. Which of the following is NOT a typical brokerage service?

A) Mutual fund investing.
B) Options trading.
C) Grocery delivery.
D) Stock trading.

13. What is a margin account?

A) An account where your money is guaranteed to grow.
B) An account that allows borrowing money to invest.
C) An account with no fees ever.
D) A free checking account.

14. Why is it important to understand the risks involved in trading?

A) To guarantee quick profits.
B) Because it is fun to gamble.
C) To impress your friends with your trading knowledge.
D) To avoid losing more money than you can afford.

15. Which of these is a type of order used to buy or sell securities?

A) Grocery list.
B) Airline ticket.
C) Birthday card.
D) Market order.

16. What is day trading?

A) Trading only during your birthday.
B) Trading only once per year.
C) Buying and selling securities within the same day.
D) Trading only on weekends.

17. What is diversification?

A) Keeping all your money in cash.
B) Never investing at all.
C) Investing all your money in one stock.
D) Spreading investments across different asset classes.

18. What is a prospectus?

A) A user manual for a car.
B) A recipe book.
C) A financial newspaper.
D) A document detailing investment risks and objectives.

19. What does 'FINRA' stand for?

A) Financial Investment Network Revenue Agency.
B) Federal Investigation of National Resources Administration.
C) Financial Industry Regulatory Authority.
D) Federal Insurance National Retirement Association.

20. What is the difference between a full-service broker and a discount broker?

A) Discount brokers guarantee profits.
B) Full-service brokers only trade in penny stocks.
C) Full-service brokers are cheaper, discount brokers are expensive.
D) Full-service brokers offer advice, discount brokers do not.

21. What is a DRIP?

A) Dividend Revenue Investment Project.
B) Dividend Reinvestment Plan.
C) Daily Rest Investment Program.
D) Debt Reduction Incentive Package.

22. What is the best way to compare brokerage firms?

A) Pick the brokerage firm with the catchiest jingle.
B) Choose the firm your neighbor uses.
C) Review their fee structures, services and research tools.
D) Select the one that sends the most junk mail.

23. Which of the following should influence your brokerage choice?

A) The opinions of random people online.
B) The advice of someone with no investing experience.
C) Your investment goals and experience level.
D) What your favorite celebrity uses.

24. What is the advantage of a no-commission brokerage?

A) Free money for signing up.
B) Guaranteed profits.
C) Lower trading costs.
D) No risk of loss.

25. What is an ETF?

A) Exchange Traded Fund.
B) Electronic Transfer Fund.
C) Easy Trading Format.
D) Equity Transfer Form.

26. Why is it important to read customer reviews before choosing a brokerage?

A) To get insights into the user experience.
B) Because all reviews are always accurate.
C) To find the brokerage with the most negative reviews.
D) Because reviews guarantee future performance.

27. What type of account is typically used for retirement savings?

A) Savings account.
B) 401(k) or IRA.
C) Checking account.
D) Money market account (for short term savings).

28. What is the best defense against investment fraud?

A) Greed.
B) Ignoring warning signs.
C) Blind trust.
D) Skepticism and research.

29. When should you re-evaluate your choice of brokerage firm?

A) When the stock market crashes.
B) When your investment needs change.
C) Every day.
D) Never, once you pick one you're stuck.

30. What is the difference between a taxable brokerage account and a retirement account?

A) Retirement accounts have no investment options.
B) Taxable accounts are only for the wealthy.
C) There is no difference.
D) Retirement accounts offer tax advantages.

Created with That Quiz — the site for test creation and grading in math and other subjects.