How to choose a brokerage firm

How to choose a brokerage firm - Test

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

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

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

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

3. What is a commission fee?

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

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

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

5. What does SIPC insurance protect?

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

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

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

7. What is a robo-advisor?

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

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

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

9. Which account type is typically tax-advantaged?

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

10. What is the significance of customer support?

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

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

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

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 that allows borrowing money to invest.
D) An account where your money is guaranteed to grow.

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

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

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

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

16. What is day trading?

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

17. What is diversification?

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

18. What is a prospectus?

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

19. What does 'FINRA' stand for?

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

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) Full-service brokers only trade in penny stocks.
C) Full-service brokers are cheaper, discount brokers are expensive.
D) Discount brokers guarantee profits.

21. What is a DRIP?

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

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) Review their fee structures, services and research tools.
D) Pick the brokerage firm with the catchiest jingle.

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

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

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

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

25. What is an ETF?

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

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

A) To find the brokerage with the most negative reviews.
B) Because all reviews are always accurate.
C) To get insights into the user experience.
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) Ignoring warning signs.
B) Blind trust.
C) Greed.
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.

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