How to Open a New Account
In general, clients are required to create a new account and sign an agreement prior to investing. If you want to open your own account, make sure to review all the information contained in the agreement carefully as it may have a bearing on your legal rights as regards your investment account.
Majestic State Holdings Ltd. advisors will ask for personal information such as your financial condition, which includes your net worth, investment history, and income, as well as your investment goals. Thus, it is crucial for you to provide all the required information that will be used by our financial advisors in coming up with the appropriate investment recommendations that will help address your particular needs.
Who Makes the Important Decisions Concerning Your Account?
The answer is YOU, the investor. After all, it is your own account. It is, however, within your discretion to delegate the authority to your Majestic State Holdings Ltd. advisor, who will then be tasked with making investing decisions on your behalf. The advisor will then decide based on what he believes is the best option at the time.
The investment decision may be done without prior consultation with you about the type of security, price, amount, or when to sell or buy. Thus, you must carefully weigh your options before making a decision on whether or not to give the discretionary authority for your account to anyone. Determine which arrangement will be more appropriate and beneficial for you.
Where Will the Funding for Your Investment Come from?
For most investors, maintaining a cash account is preferable. This will require full payment each time you buy security.
A margin account is a viable alternative to the cash account. This means you can loan money from the brokerage company to fund your security purchase. By having this type of an account, you will be charged with interest at the agreed rate. You must sign the margin agreement that provides for the required interest and other terms of the loan.
If you opt to purchase securities on margin, and a shortfall results from a drop in the value of the securities in your account, the brokerage firm has the right to sell any of the securities in your portfolio immediately. In case the total value of your account is not sufficient to cover for the balance of the loan, even if the drop was caused by a drop in the market for only one day, you will immediately be made liable to pay the balance. Bear in mind that the balance may be a considerable sum of money, even after deducting the proceeds from the sale of your securities.
In general, the margin account agreement contains provisions to the effect that securities kept in your margin account can be lent out by the broker anytime, even without compensation or notice.
How Much Risk Is Tolerable and How Much Risk Should You Assume?
It is important that you clearly indicate your complete investment objectives that include the level of risk you can tolerate. Make sure to have a good understanding of the terms, and ensure that whatever risk level you go for would reflect your investment targets accurately.
No One Would Invest with the Intention to Lose Money.
This is obviously true. However, any type of investment comes with risk, although at varying degrees.
Here are some things to consider:
- The higher gains expected, the bigger the risk. This depends on market conditions, and you may lose a part of or your entire initial investment.
- There are investments that cannot be converted to cash or sold easily. Determine beforehand if there is a fee or penalty in case you need to quickly sell an investment prior to its maturity date.
- No investment comes with a guarantee of how it will perform in the future. Even past successes are not a guarantee of a particular investment’s future performance.
- The securities in your account may be subject to reorganizations, mergers, tender offers, or actions from third parties that may have a bearing on the value of your account. Be attentive to public announcements, as well as any information sent to you regarding these transactions. For one, these may require complex investing decisions. Thus, make sure that you have a full understanding of the terms that come with any offer to sell or exchange your shares before making any move.
- Investments in securities such as mutual funds aren’t covered by federal insurance against a decline in market value.
- While capital markets are under careful regulation, the market reacts to news and events, and these are parts of a trading day’s normal course. You must therefore be familiar with whatever may happen during volatile periods in the markets.