PF: Everfi Investing Review

Diversification is important in investing because…

• It helps you to balance your risk across different types of investments.
• It increases your overall risk, which guarantees that you will make more money.
• It ensures that you only make low-risk investments.
• It helps you gain the highest rate of return despite any risks.

How can investors receive compounding returns?

• By selecting a savings account that has a higher interest rate
• By investing their earnings back into their original investment
• By transferring their earnings into a high-risk investment
• By diversifying their investment portfolio

If an investment is considered “volatile”, it means...

• the investment will experience rapid growth over time.
• the value of the investment may be hard to predict.
• the investment is high-risk, and its price will increase quickly.
• the investment is undervalued and may increase over time.

Investors nearing retirement will typically shift their investment portfolios to include ________ risk investments.

• lower
• moderate
• higher
• None of the above – when nearing retirement, investors typically move all their investments into savings accounts

What is a possible reason a company would sell stock?

• A. To hire more people
• B. To expand its business
• C. To develop new technology
• All of the Above

What is the primary reason to issue stock?

• To help investors earn a higher rate of return
• To raise money to grow the company
• To distribute the risk of bankruptcy across more investors
• To increase investor awareness of the company

When it comes to investing, what is the typical relationship between risk and return?

• The greater the potential risk, the smaller the potential return.
• The greater the potential risk, the greater the potential return.
• There is no relationship between risk and return.
• It depends on the investment mix in your portfolio.

When you buy a ____ , you are loaning money to an organization.

• Stock
• Bond
• Mutual fund
• Index fund

Which best describes the difference between stocks and bonds?

• Stocks allow investors to share in profits; bonds make investors responsible for company debts.
• Stocks allow investors to own a portion of the company; bonds are loans to the company.
• Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year.
• Stocks are a more reliable investment; bonds tend to be more volatile.

Which of the following correctly orders the investments from LOWER risk to HIGHER risk?

• Treasury bond − Stock − Diversified mutual fund
• Stock − Treasury bond − Diversified mutual fund
• Treasury bond − Diversified mutual fund – Stock
• Diversified mutual fund − Treasury bond − Stock