Frequently Asked Questions

• How much do I need to open an investment account?
• How do I open an investment account?
• Can I access my investment accounts online?
• What are the advantages of working with a Financial Advisor?
• What is the difference between saving and investing?
• How do I understand risks, rewards and investment planning?
• What is diversification?
• How do taxes affect my rate of return?
• What is asset allocation?
• What are a bull and bear markets?

How much do I need to open an investment account?

The minimum amount you need to open an investment account varies depending on the type of account in which you're interested. Banc of America Online Investing, Powered by Merrill Lynch offers both Advisory Services accounts and Self-Directed Investing accounts.

With Advisory Services, you work directly with a Financial Advisor who identifies your investment goals and needs and develops an overall financial plan suited to your unique profile. Your Financial Advisor gives you close personal attention to help you achieve your investment goals.

Among the specific accounts available to you through Advisory Services are:

• Portfolio Selects. Focuses on helping you achieve your short- and long-term investment goals by working with a select group of investment managers. Minimum investment of $250,000.
• Fund Advisor™/Fund Manager™. Targets a diversified portfolio of mutual funds aligned specifically to help you meet your distinctive goals. Minimum investment of $50,000.
• Charitable Giving Program. Provides a flexible vehicle for maximizing your charitable giving goals and the benefits you enjoy. Minimum initial contribution of $25,000.

With Self-Directed Investing, you guide your own investment planning and manage your own portfolio, including making trades online or over the telephone. There is no minimum amount required to open a Self-Directed Investing account. However, depending on the types of securities in which you invest - stocks, bonds, mutual funds, options, etc. - there may be different minimum trading amounts. You should refer to our fees and commissions for specific information.

How do I open an investment account?

Opening an investment account with Banc of America Online Investing, Powered by Merrill Lynch is easy.

Clients who want the advantages of working with a Financial Advisor to help you develop your investment plan can:

• Call a Financial Advisor at 1.800.765.4949.
• Print and mail or fax an Advisory Services application.
• Find a Financial Advisor near you.
• Have a Financial Advisor contact you.

Clients who want to direct their own investments, including doing their own planning and research and executing their own trades, can:

• Print and mail or fax an Self-Directed Investing application.
• Request a Self-Directed Investing account application by calling 1.800.926.1111.

Can I access my investment accounts online?

Yes. You can view your balances, check your securities positions and review transactions for your investments accounts. Also, you can access account statements and order status. In addition, you can get updated market quotes, news and data, and research company profiles. Clients who open a Self-Directed Investing account are able buy and sell securities, including stocks, bonds, mutual funds and options, trade after hours and check the status of trade orders.

Learn more about the features of online access.

What are the advantages of working with a Financial Advisor?

When you work with a Financial Advisor from Banc of America Online Investing, Powered by Merrill Lynch you enjoy access to a wealth of financial resources. Serious investing takes the kind of time, experience, knowledge and expertise that many people simply don't have to do on their own Our Financial Advisors work closely with you to identify your investment needs and goals, then tailor a plan to fit your profile.

What is the difference between saving and investing?

Saving generally refers to putting money in an interest-bearing account such as a savings account, checking account, or certificate of deposit administered by a bank and insured against failure of the banking institution by the Federal Deposit Insurance Corp. (FDIC) up to the maximum allowed by law.

Investing, unlike saving, can entail significant risk, and is not insured by the FDIC. When you invest, you risk the potential loss of some or all of your money. Investors hope to generate higher returns on invested dollars than on savings account deposits because they are taking a greater risk with their investment money. This is the concept behind the tradeoff between risk and potential reward. Higher risk investments have greater potential to pay higher returns, but they are also more likely to result in losses.

How do I understand risks, rewards and investment planning?

Investing is about taking calculated risks in return for potential financial rewards, such as being able to afford a secure retirement or sending your children to college.

On average, investments such as stocks, bonds, and mutual funds have historically (past performance is no guarantee of future results) delivered higher returns over time than interest paid on regular savings accounts. But the risks of investing compared to a savings account are greater: there is no guarantee of higher returns, and it's possible to lose your principal (for example, the amount you originally invested). Yet even in a savings account, money is vulnerable to the risk of inflation. As a result, investment professionals generally suggest that diversifying your investments based on your goals and needs should be considered. But investment planning is a lot more than just dividing your money across different types of investments.

The key aspects of most investment plans, whether they're done on your own or with the guidance of an investment professional, include:

1. Outlining short- and long-term life goals, and translating those goals into financial objectives (for example, how much money you'll need to meet your objectives)
2. Understanding the ways you incur debt and putting a plan in place for reducing debt if necessary
3. Determining tolerance for assuming risk and establishing the time frame you have to pursue your goals
4. Designing an investment plan with a diverse mix of investments (asset allocation) that can help your plan succeed. One key to successful investment planning is developing a plan that guides your investment decisions over time and, helps keep pace with changes in your life.

What is diversification?

Diversification is the spreading of risk by putting assets in several categories of investments - stocks, bonds, money market instruments, and a mutual fund, with its broad range of stocks in one portfolio. Basically, diversification means "Don't put all your eggs in one basket." If you have a well-balanced portfolio, you should have some protection against various market swings.

How do taxes affect my rate of return?

Depending on your tax bracket, a lower-yielding tax-exempt investment at 5% may make more financial sense than a higher-yield taxable one that pays 6%. It pays to do the math. While it might seem logical that an investment that yields 6% is better than one yielding 5%, this is not always the case. Your tax bracket can affect your rate of return.

Use the chart below to make simple comparisons. For example, in a 36% tax bracket, a 6% tax-exempt bond is equal to a 9.38% taxable investment.

What is asset allocation?

Asset allocation is one way to measure and control some of the risks they are taking and is an integral part of any investment plan. Asset allocation literally means allocating or dividing your investment dollars across an array of assets (for instance, stocks, bonds, mutual funds, cash equivalent securities) in order to diversify your portfolio and attempt to lessen the overall risk of your investments. For example, placing some of your money in higher risk securities and some in lower risk securities can help lead to a more balanced risk level in the portfolio. The overall level of risk you choose is based primarily on your tolerance to assume risk in exchange for potential rewards.

What are bull and bear markets?

• Bull market. A bull market is typically defined as an increase of 40 percent in the Dow Jones Industrial Average or the S&P 500. Ups, downs and losses can still occur during a bull market.

  Bull market gains are generally tied to economic prosperity. Investors enjoy positive investment gains for an extended period of time. Although the general trend is positive, prices may fluctuate daily during a bull market.

  Factors that could lead to a bull market:

  • Low interest rates
  • Low inflation
  • Strong corporate earnings
  • Low budget deficit
  • Political stability or lack of international conflicts
  • Low unemployment
  • Moderate economic growth

• Bear market. Bear markets are based on the changes of a stock index such as the Dow Jones Industrial Average or the S&P 500 - with a decline of 15 percent of more over an extended period of time. Prices will fluctuate during a bear market, with gains realized from time to time. A bear market may last a few months of a few years.

  Factors that could lead to a bear market:

  • Rising interest rates
  • Increasing rate of inflation
  • Lower-than-expected corporate earnings
  • Political instability or international conflict
  • High unemployment
  • A major unexpected event, such as war or earthquake

  Some causes of past bear markets:

  • Iraq's invasion of Kuwait in 1990 caused an escalation in oil prices. Additional fears of inflation and a rise in interest rates sent stock prices falling.
  • Economic and political uncertainty related to the Arab embargo, Watergate and the Vietnam War prompted the stock market's decline in 1973-74.