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4 votes
Discount brokers will:

A) Execute orders
B) Give advice
C) Watch portfolios
D) Provide finance
E) Maintain a minimum balance

1 Answer

6 votes

Final answer:

Discount brokers primarily execute orders without providing additional services like investment advice or portfolio management. A diligent approach to monitoring investments and staying informed could lead to better portfolio performance compared to making uninformed, random investment choices.

Step-by-step explanation:

Discount brokers are financial service providers that offer execution of orders for buying and selling securities at reduced commission rates. These service providers, as opposed to full-service brokers, do not typically provide investment advice, manage client portfolios, offer financing services, or require clients to maintain a minimum balance in their accounts. Their primary role is simply to execute trades on behalf of their clients.

Concerning your investments on E-Trade, your diligent approach to monitoring your portfolio, tracking prices, staying informed about current events, and analyzing company actions may lead to better-informed investment decisions and potentially a higher performance of your portfolio. Contrastingly, your friend's lackadaisical approach and random selections without monitoring or obtaining financial news could result in poor performance due to lack of strategic response to market changes.

Investments' characteristics, such as average expected return, degree of risk, and liquidity are essential factors for investors to consider. By opting for a more informed and active management style, you could achieve a higher rate of return, as you are potentially more equipped to manage risks intelligently and make decisions that could enhance liquidity if necessary. Banks, being financial intermediaries, offer different accounts with varying levels of liquidity and are covered by FDIC insurance to reduce the risk of bank failures, showcasing the trade-off between risk and return in financial decisions.

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