How many times have you glanced at the legal ramblings on an application, only to sign on the dotted like when opening up a new account with your broker? If there is a problem in the future, those are the rules your broker will use to justify their actions. Still glad you glanced at it?
Depending on what services your broker is providing, there will be several forms to fill out. Read them all out. Make sure that what you and your broker agreed to is written out. Are your investment objectives listed in the agreement? Net worth listed also? Have you been completely honest in filling out the agreement? Your stock broker will tailor your investment plan around those numbers. Will you be trading with a discount broker online? Read over the agreement carefully and you will learn exactly what your online broker like eToro will do in the case of a margin call.
Who controls your account? Who can make inquiries? Who has the authority to enact on your behalf? Are you letting your broker take advantage of an investment opportunity without consulting you? Do you want your broker to call you before executing a trade, risking the chance of missing a great entry point? How are you paying for the advice and service your stock broker provides? What service fees are you paying? Are they being paid out of your investment account or your bank account?
Are you buying on margin? What happens in the case of a margin call? What interest rate is your broker charging you? How much notice do they provide in the case of a margin call before selling your securities? How much risk are you prepared to take when trading? How much risk are you willing to let your broker take on your behalf? Have you requested your investments only be “income” oriented, and find yourself with “high growth” stocks?
Beware when opening a new account. Your brokerage firm may ask you to sign an agreement to arbitrate any dispute between you and the firm. You do not have to sign this, as it means you give up the right to sue the stock broker and the brokerage firm. Before you sign, make sure you read and understand your rights. Its your money! Make sure your broker only gets what they are entitled to!
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