How to choose a brokerage firm

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

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

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

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

3. What is a commission fee?

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

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

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

5. What does SIPC insurance protect?

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

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

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

7. What is a robo-advisor?

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

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

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

9. Which account type is typically tax-advantaged?

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

10. What is the significance of customer support?

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

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

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

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

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

13. What is a margin account?

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

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

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

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

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

16. What is day trading?

A) Trading only once per year.
B) Trading only during your birthday.
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) Investing all your money in one stock.
C) Spreading investments across different asset classes.
D) Never investing at all.

18. What is a prospectus?

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

19. What does 'FINRA' stand for?

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

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

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

21. What is a DRIP?

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

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

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

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

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

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

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

25. What is an ETF?

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

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

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

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

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

28. What is the best defense against investment fraud?

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

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

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

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

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

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