Self Directed Bokerage Account



Sue wanted to make the best investment possible through an employer 401K brokerage, but she didn't trust brokers who had steered her investment decisions in the wrong direction, in the past. It seemed they weren't interested in her account appreciating in value with dividends, or that she had any capital gains. They just wanted to get their share of commissions, and from there she was on her own. She decided to do a little research and open a self directed brokerage account so that she could take charge of her own future. But she had already heard stories of people who had used the self directed option when opening an account, and that some of those people had made horrible decisions on which stocks to invest. She'd even heard that some of the investment decisions on those accounts had been so greedy and so high risk that some people had lost all their money. Her employer was offering matching contributions to her 401K. This made her happy, and if she was going to be contributing to a retirement that she was going to direct herself, she didn't want the same thing that happened to those other folks to happen to her.



Sue went online and researched to learn everything she could about self directed investments. There were many questions about things such as how much she should pay in fees and what kinds of accounts there were. She knew that there were brokers that basically make the investment decisions for the account owner, and then there were self directed brokerages where the investment was entirely up to the account owner. Reading further online, she learned that some brokerages offered a variety of securities in which to invest, including bonds, stocks, and currencies.

She discovered something called stock "options." Those sounded pretty cool, and they worked like this. A person could purchase through their brokerage an option to either buy or sell x number of shares of a stock prior to a certain time in the future known as the expiration date. If the price of the stock moved in the right direction either above or below what was termed the strike price, they could exercise the option to buy or sell shares, and make a profit. But then she read that if the price hadn't moved past the strike price before the expiration date, the option would expire worthless. That seemed high risk and did not seem like a safe brokerage investment for her. She found information about buying commodities and buying on margin, but found out that the account value, even if it was not self directed, could fluctuate way up or way down with market conditions, generating another potential for losing her entire investment portfolio if there was a margin call. It didn't take long for her to decide this was not for her.