Front

Imagine you are explaining to a friend the key difference between saving and investing. Which of the following statements best captures that difference? Saving is primarily for emergencies and short-term goals, while investing is focused on long-term growth and retirement.

Back

Saving is primarily for emergencies and short-term goals, while investing is focused on long-term growth and retirement.

Answer explanation

The correct choice highlights that saving is intended for emergencies and short-term needs, while investing aims for long-term growth and retirement, emphasizing their distinct purposes.

Front

Which is NOT a stock market index? Options: Dow Jones Industrial Average, S&P 500, Nasdaq

Back

New York Stock Exchange

Answer explanation

The New York Stock Exchange (NYSE) is a stock exchange, not an index. The Dow Jones Industrial Average, S&P 500, and Nasdaq are all stock market indices that track the performance of specific groups of stocks.

Front

Brokers who suggest specific investments, create an investment plan, & make adjustments are

Back

Full-Service Brokers

Answer explanation

Full-Service Brokers provide personalized investment advice, create tailored investment plans, and make adjustments as needed, unlike discount brokers who offer limited services.

Front

A diversified portfolio is desirable because

Back

It decreases risk

Answer explanation

A diversified portfolio decreases risk by spreading investments across various assets, reducing the impact of any single asset's poor performance on the overall portfolio.

Front

Which is a NOT a good reason to buy a stock fund like the S&P 500?
Options:
Have a diversified portfolio,
Have an investment with low fees,
Don't have to monitor as closely as an actively managed account,
You want to "beat the market" with your ROI

Back

You want to "beat the market" with your ROI

Answer explanation

Wanting to 'beat the market' is not a good reason to buy an S&P 500 fund, as it is designed to match market performance, not outperform it. The other options focus on benefits like diversification and lower monitoring needs.

Front

Your money remains tax-deferred in this account until you withdraw (taxed as income)

Back

Traditional IRA

Answer explanation

In a Traditional IRA, your money grows tax-deferred until withdrawal, at which point it is taxed as income. In contrast, a Roth IRA allows for tax-free withdrawals, but contributions are made with after-tax dollars.

Front

Why is it important to start investing as soon as possible?

Back

You have more time for your money to compound

Answer explanation

Starting to invest early allows your money to compound over time, maximizing growth. The longer your investments have to grow, the more wealth you can accumulate, making this the most important reason to start investing as soon as possible.

Front

True or False: Investing in a diversified portfolio of stocks guarantees you will not lose money.

Back

False

Answer explanation

False. While a diversified portfolio can reduce risk, it does not guarantee against losses. Market fluctuations can still lead to declines in stock values.

Front

Andy earned $300 on a $1000 investment. What is his current ROI (return on investment)?

Back

30%

Answer explanation

ROI is calculated as (Profit ÷ Initial Investment) × 100. Since Andy earned $300 on a $1,000 investment, his ROI is (300 ÷ 1000) × 100 = 30

Front

What is a good strategy to help you save?

Back

Pay yourself first - set aside money for savings each month

Answer explanation

The best strategy is to 'pay yourself first' by setting aside savings each month. This ensures you prioritize saving before spending, leading to better financial stability.