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

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

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

3. What is a commission fee?

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

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

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

5. What does SIPC insurance protect?

A) Your investment gains.
B) Your home and car.
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) Reality television show reviews.
C) Market analysis and stock screeners.
D) Fortune telling and astrology charts.

7. What is a robo-advisor?

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

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

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

9. Which account type is typically tax-advantaged?

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

10. What is the significance of customer support?

A) To sell you unrelated products.
B) To offer free haircuts.
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) Stock trading.
B) Grocery delivery.
C) Mutual fund investing.
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 impress your friends with your trading knowledge.
B) To guarantee quick profits.
C) To avoid losing more money than you can afford.
D) Because it is fun to gamble.

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

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

16. What is day trading?

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

17. What is diversification?

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

18. What is a prospectus?

A) A document detailing investment risks and objectives.
B) A user manual for a car.
C) A financial newspaper.
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 only trade in penny stocks.
B) Full-service brokers are cheaper, discount brokers are expensive.
C) Full-service brokers offer advice, discount brokers do not.
D) Discount brokers guarantee profits.

21. What is a DRIP?

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

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

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

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

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

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

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

25. What is an ETF?

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

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) Money market account (for short term savings).
C) Checking account.
D) Savings account.

28. What is the best defense against investment fraud?

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

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

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