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How to choose a brokerage firm - Test
Contributed by: Roe
  • 1. What is the primary purpose of a brokerage firm?
A) To manage personal bank accounts.
B) To provide financial advice only.
C) To guarantee investment returns.
D) To facilitate the buying and selling of securities.
  • 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) The brand of coffee they serve.
D) Fees and commissions.
  • 3. What is a commission fee?
A) A fee for financial advice.
B) A fee charged per trade.
C) A yearly membership fee.
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) Stocks.
D) A car.
  • 5. What does SIPC insurance protect?
A) Against market losses.
B) Your investment gains.
C) Cash and securities in your brokerage account.
D) Your home and car.
  • 6. What type of research tools should a good brokerage offer?
A) Coffee brewing tutorials.
B) Fortune telling and astrology charts.
C) Reality television show reviews.
D) Market analysis and stock screeners.
  • 7. What is a robo-advisor?
A) A financial newspaper.
B) A human financial advisor.
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 length of their terms and conditions.
D) The aesthetic appeal of the website.
  • 9. Which account type is typically tax-advantaged?
A) Debit card.
B) Savings account.
C) Retirement account (e.g., IRA).
D) Checking account.
  • 10. What is the significance of customer support?
A) To provide dating advice.
B) Assistance with account issues and trading questions.
C) To offer free haircuts.
D) To sell you unrelated products.
  • 11. What does 'due diligence' mean when choosing a brokerage?
A) Only considering the cheapest option.
B) Blindly trusting recommendations.
C) Thoroughly researching and comparing options.
D) Ignoring fees and regulations.
  • 12. Which of the following is NOT a typical brokerage service?
A) Grocery delivery.
B) Stock trading.
C) Options trading.
D) Mutual fund investing.
  • 13. What is a margin account?
A) An account that allows borrowing money to invest.
B) An account where your money is guaranteed to grow.
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 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) Birthday card.
B) Airline ticket.
C) Grocery list.
D) Market order.
  • 16. What is day trading?
A) Trading only during your birthday.
B) Trading only on weekends.
C) Trading only once per year.
D) Buying and selling securities within the same day.
  • 17. What is diversification?
A) Never investing at all.
B) Spreading investments across different asset classes.
C) Investing all your money in one stock.
D) Keeping all your money in cash.
  • 18. What is a prospectus?
A) A financial newspaper.
B) A document detailing investment risks and objectives.
C) A recipe book.
D) A user manual for a car.
  • 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) Full-service brokers only trade in penny stocks.
B) Discount brokers guarantee profits.
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 Reinvestment Plan.
B) Debt Reduction Incentive Package.
C) Daily Rest Investment Program.
D) Dividend Revenue Investment Project.
  • 22. What is the best way to compare brokerage firms?
A) Pick the brokerage firm with the catchiest jingle.
B) Select the one that sends the most junk mail.
C) Review their fee structures, services and research tools.
D) Choose the firm your neighbor uses.
  • 23. Which of the following should influence your brokerage choice?
A) The opinions of random people online.
B) What your favorite celebrity uses.
C) Your investment goals and experience level.
D) The advice of someone with no investing experience.
  • 24. What is the advantage of a no-commission brokerage?
A) Guaranteed profits.
B) No risk of loss.
C) Lower trading costs.
D) Free money for signing up.
  • 25. What is an ETF?
A) Equity Transfer Form.
B) Easy Trading Format.
C) Exchange Traded Fund.
D) Electronic Transfer Fund.
  • 26. Why is it important to read customer reviews before choosing a brokerage?
A) Because reviews guarantee future performance.
B) To find the brokerage with the most negative reviews.
C) To get insights into the user experience.
D) Because all reviews are always accurate.
  • 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) Blind trust.
B) Skepticism and research.
C) Greed.
D) Ignoring warning signs.
  • 29. When should you re-evaluate your choice of brokerage firm?
A) When the stock market crashes.
B) When your investment needs change.
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) Taxable accounts are only for the wealthy.
C) There is no difference.
D) Retirement accounts offer tax advantages.
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