What does diversification involve?

Spreading investments across different asset types

What is dollar cost averaging?

Investing a fixed dollar amount at regular intervals

What are exchange traded funds (ETFs)?

A pooled investment fund traded on exchanges.

What is an index fund?

A type of mutual fund investment consisting of stocks and bonds designed to mimic the composition and performance of a financial market index.

What is the primary goal of investing?

To generate income, profit, or other positive financial return in the future.

What does liquidity refer to in financial terms?

The efficiency with which an investment or asset can be converted to cash without penalties or a significant reduction in value.

What is the stock market?

An exchange or marketplace where shares of publicly held companies can be traded.

What is a mutual fund?

A type of investment where money from many investors is pooled together to establish a diversified portfolio of many different types of securities.

What does the rate of return indicate?

The profitability of an investment by comparing the gains or losses generated over a specified time period relative to the initial amount invested.

What is a Traditional IRA?

A type of investment that allows individuals to direct pre-tax income to a retirement account that can grow tax-deferred until withdrawal during retirement.

What does risk tolerance measure?

The degree of loss an investor is willing to endure within their investment portfolio.

A type of investment that allows individuals to direct income after taxes are paid to a retirement account, growing tax-free and withdrawn tax-free during retirement.

What is the role of the Securities and Exchange Commission (SEC)?

To regulate and oversee the securities industry in the United States, ensuring fair practices and investor protection.

What does volatility refer to in the context of stocks?

Quick and unexpected changes in the value or price of a stock.

Investment Knowledge Check Flashcards

Student preview

22 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is a 401(k) plan?

Back

An employer-sponsored retirement plan

2.

FLASHCARD QUESTION

Front

Which retirement plan is offered by public schools and other nonprofit organizations?

Back

403(b) plan

3.

FLASHCARD QUESTION

Front

What does a bond represent?

Back

A loan made by an investor to a borrower

4.

FLASHCARD QUESTION

Front

What is a bear market?

Back

A prolonged drop in investment prices.

5.

FLASHCARD QUESTION

Front

_________________ acts as a go-between for investments and securities exchange.

Back

Broker

6.

FLASHCARD QUESTION

Front

What characterizes a bull market?

Back

Rising asset prices and consumer confidence

7.

FLASHCARD QUESTION

Front

What is a commodity?

Back

A basic good used in commerce

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