Final answer:
Comparing brokerage firms involves looking at their services and costs; full-service brokers offer more personalized services at higher fees, discount brokers have lower costs but fewer services, and online brokers are suited for self-directed investors. Mutual funds can offer a professionally managed, diversified portfolio at relatively lower costs. Diligent monitoring of investments can lead to potential better performance than random selection without active management.
Step-by-step explanation:
Comparing full-service, discount, and online brokerage firms involves examining differences in service and cost. Full-service brokerage firms offer personalized investment advice, retirement planning, tax tips, and regular portfolio updates, but they come with higher fees. Discount brokerage firms offer lower costs but provide fewer services, suitable for investors who prefer a more hands-on approach to their portfolios. Online brokerage firms, similar to discount brokers, offer low fees and are convenient for self-directed investors comfortable with making their own investment choices without any personalized advice.
Mutual funds are an alternative option where investments are diversified across stocks and bonds, managed by professional brokers, thus providing a balance of professional management with potentially lower costs than full-service brokers.
When investing, it is crucial to assess risk and monitor investments carefully. An investor who diligently tracks prices, current events, and actions the company has taken may have a better-performing portfolio compared to an investor who selects companies randomly and pays no attention to financial news. However, it's important to note that all investments carry risk and past performance does not guarantee future results.