Article: Brokers make their money charging you for each time you buy or sell a stock. You need to know this fee going in, but you also need to make it clear to your broker your acceptable level of trading. Some brokers will try to sucker in novice investors with high-commission stocks and multiple trades to make more money. If you have a large account and plan on frequent or aggressive trades, you might look for a commission-based account, where the broker gets a percentage of your portfolio instead of a fee per trade. If your broker is making frequent changes and trades, known as "churning," they may be trying to raise their commission. Any trading that eats into your principal should be red-flagged. Your risk tolerance determines how bold of an investment the broker will take. Stocks are, in some way, gambling, and there are both safe bets and long-shots. Your broker will want guidance on where to steer the portfolio, based on your financial needs: Younger investors should aim for high-risk investments. Stocks are a long game, and any busts now will more than likely be rectified with later booms. You have the time to afford the risk. Middle-aged investors should strike a balance between safe and risky stocks. Low-risk accounts will make safe bets with lower profits. These are great for older investments who could not deal with a sudden loss of money near retirement, or those who only want slow, reliable growth. There are two basic investment account options -- cash and cash/margin accounts. Cash accounts must have a deposit available to make a trade-- the money must be on hand. Margin accounts allow you to borrow money from the brokerage firm to purchase stocks. This loan is based on the expected profit from the stock. Cash accounts are safer, but yield far less profit. You know exactly where all your money is, and whose money it is. Margin accounts technically put you into debt, though interest rates are far lower than that at a bank. Because they make more money available to you, you stand to earn more money. Some higher-risk trades are only available on margin accounts. Are you in the stock game to make a profit right now, or for retirement? Depending on how you classify your portfolio, your broker can get you potentially lower tax rates. Standard brokerage accounts can be swapped, taken out, and edited on the fly. They can be short or long-term investments or a bit of both. They are fully taxed. Retirement accounts, like IRAs, pay much lower taxes. However, you can only take the money out of them at a certain age, or risk losing much of your profit. A professional trader would usually have both types of accounts, though this requires a lot of upfront cash. Most brokers will give you up to two weeks to give them money. You can cut a check, which will take about a week to get cleared. If you're in a hurry, expect to get a routing number and instructions to wire transfer your money over. Professional investors always set aside specific accounts for investments. They don't link their investment money to a savings or checking account. The stock market is not what it used to be. Professionals now have mines of data, and computer programs to sift through them, making split-second trading decisions for your investment that you could rarely make alone. This is why, if you have the money, full-scale brokers often turn the highest profits. That said, the financial crash of 2007 was partially due a broken algorithm that investors used but didn't understand. While investing in the stock market may be the goal, a professional investor knows better than to put all of their money in one basket. All of these, including stocks, fall under the blanket definition of a "security." CDs, or Certificates of Deposit, are savings accounts that mature at a certain date, at which point you receive a small profit. They can range from one month to five years. Bonds are loans that your grant, usually to the government, that must be paid back with interest. They are safe, consistent investments that generally outpace inflation. Funds are created either by a brokerage firm or an outside agency. Basically, they allow multiple investors to take risks together by all paying together for a larger portfolio, and thus more profit as there is usually a manager of the funds who buys and sells stocks inside of it. While they are usually profitable, you have to be comfortable with someone else handling your money with little control on your end.
What is a summary of what this article is about?
Expect to pay a fee for every transaction you make. Expect your broker to ask your acceptable level of risk. Expect most professional investors to choose margin accounts, not cash accounts. Expect the broker to determine your tax status based on your financial needs. Expect the meeting to end with a request for your investment money. Expect a professional broker often uses algorithm-based trading. Expect a professional to invest in things other than stock. Expect a broker to invest in "funds," or pre-made collections of stocks.