Investment Basics Flashcard

Front

Why do companies sell shares of stock?

Back

To raise money for expansion

Front

Is a stock considered a safe or risky investment?

Back

Risky

Front

What does diversification mean in investing?

Back

Investing in multiple companies to reduce risk

Front

Which is more risky: investing a lot in one company, or a little in a lot of companies?

Back

Investing a lot in one company

Front

What is a mutual fund?

Back

A professionally managed collection of investments

Front

What does an index fund do?

Back

Copies a specific index for low cost and steady returns

Front

What is the difference between a stock, a bond, and a mutual fund?

Back

Stocks are ownership in a company, bonds are loans, mutual funds are collections of investments.

Front

Why is diversification important in investing?

Back

It reduces risk by spreading investments.

Front

What is a common feature of index funds?

Back

They copy a specific index