When would it be a good idea to put your money in a savings account instead of investing it?
answer
When you're looking to maintain the value of your money with a little bit of growth.
question
When would it be a good idea to invest your money instead of putting it in a savings account?
answer
When you won't need the money for a long time.
question
Which of the following statements about investing is FALSE?
answer
Investing is best when you're looking to maintain the value of your money with a little bit of growth.
question
Why might an investor want to invest in the stock market?
answer
Investing in companies through the stock market offers a chance to share in their profits.& Investing in the stock market usually offers a higher return than interest earned on a savings account.
question
People invest in the stock market because:
answer
The time value of money states that money available now is worth more than the same amount of money later because of its potential to grow. & Investing in companies through the stock market offers a chance to share in the profits of those companies. &Investing in the stock market generally offers a higher return than interest earned on a savings account.
question
Which of the following is NOT a reason why people invest in the stock market?
answer
Investing is a guaranteed way to make money.
question
Historically, long-term returns of the stock market have been negative.
answer
False
question
In the past 90 years, the stock market has had positive returns, averaging 10% annually.
answer
True
question
A ______ is a fixed income investment that represents a loan from an investor to a borrower.
answer
Bond
question
A _____ is a short-term investment that is considered highly liquid.
answer
Cash Equivalent
question
A _____ is a share of ownership in a company.
answer
Stock
question
Which of the following statements about stocks is FALSE?
answer
Stocks pay out interest annually.
question
Which of the following statements about bonds is TRUE?
answer
When a bond matures, you get the full amount you loaned back with interest.
question
Which of the following statements about cash equivalents is FALSE?
answer
Cash equivalents are considered relatively risky compared to stocks.
question
Which of the following is NOT a consideration when determining your asset allocation?
answer
Portfolio diversification
question
How comfortable you feel taking the risk of losing your money refers to:
answer
Risk tolerance
question
How long you plan to keep your investments in your portfolio refers to:
answer
Time horizon
question
Miguel is 25 years old, has low financial health, a long time horizon and a high risk tolerance. Which asset allocation would you recommend?
answer
85% stocks and 15% bonds/cash equivalents.
question
Yena is 38 years old, has average financial health, an intermediate time horizon, and an average risk tolerance. Which asset allocation would you recommend?
answer
65% stocks and 35% bonds/cash equivalents.
question
Jason is 58 years old, has strong financial health, a short time horizon, and an average risk tolerance. Which asset allocation you recommend?
answer
45% stocks and 55% bonds/cash equivalents.
question
What is diversification?
answer
An investment strategy that mixes a wide variety of investments from different categories within a portfolio.
question
___________ is an investment strategy that mixes a wide variety of investments from different categories within a portfolio.
answer
Diversification
question
A well diversified portfolio needs about 3 to 5 stocks from different categories.
answer
False
question
You can diversify your portfolio by investing all your money in one industry.
answer
False
question
A well-diversified portfolio needs about 20-25 stocks from different categories.
answer
True
question
How is a mutual fund different than an index fund?
answer
Mutual funds are actively managed while index funds are passively managed.
question
How is an index fund different than an exchange-traded fund?
answer
Exchange-traded funds trade directly on stock exchanges while index funds do not.
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