When a broker-dealer sells you securities out of its inventory, the broker-dealer acts as a principal in the transaction (that is, selling to you directly the securities it holds). When acting in a principal capacity the broker-dealer generally will be compensated by selling the security to you at a price that is higher than the market price (the difference is called a markup), or by buying the security from you at a price that is lower than the market price (the difference is called a markdown).
What Are Bonds?
A bond is a debt security, like an IOU. Learn about the benefits and risks of investing in bonds or bond funds.
New Resources for Older Investors
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How to Open a Brokerage Account
Read our Investor Bulletin to learn what to expect when opening a brokerage account.