Investing Test Review

Front

How is a bond different from a stock?

Back

A bond is a loan you give to an organization while a stock is partial ownership in a company.

Front

Why is it important for you to understand your risk tolerance before you start investing?

Back

You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with

Front

Over time, the stock market has…

Back

Experienced highs and lows but increased in overall value

Front

How does investing in the stock market differ from putting money in a savings account at a bank?

Back

Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies.

Front

What kinds of behaviors can PREVENT people from making smart investing decisions? Options: Buying stocks when prices are low and selling them when they’re high, Staying calm when the market is experiencing a downturn, Exiting the market because that’s what everyone else is doing, Investing in a diversified portfolio instead of trying to beat the market

Back

Exiting the market because that’s what everyone else is doing

Front

Why is this likely a bad investment strategy to invest all your money in individual stocks?

Back

Purchasing individual stocks has a high amount of risk and little diversification.

Front

What type of market is described by a receding economy and a decline in the stock market?

Back

Bear Market

Front

New investors should do all of the following things EXCEPT...
Options:
Estimate how much you will need for retirement to determine how much you need to invest each month
Invest in a diversified portfolio
Invest in a low cost index fund
Pick individual stocks to see if she you beat the market

Back

Pick individual stocks to see if she you beat the market

Front

During a BULL market…

Back

More investors are buying stocks, which causes stock values to increase

Front

What are the advantages of investing in a mutual fund, rather than an individual stock?

Back

A mutual fund is diversified, so your investment is lower risk.