PF Investing

What does diversification mean to investing?

• to spread around

• don't put all your eggs in one basket

• put your money into mutual funds that invest in several different stocks or bonds

• all are correct

What is the relationship between risk and return when investing

• as the risk goes down, the return goes up

• as the risk goes up, the return goes down

• as the risk goes up, the return goes up

• there is not relationship between risk and return when investing

For the past 10 years what percent of mutual funds have made money?

• 85%

• 90%

• 95%

• 100%

Investing is for five years or longer, saving is for fewer than five years.

• true

• false

A major difference in saving and investing is

• Saving is important, investing is optional

• Investing is important, saving is optional

• the amount of money you earn (rate of return)

A share or piece of ownership in a company is a

• bond

• mutual fund

• annuity

• stock

Susie wants to save money on her taxes. Should she invest for this reason?

• Yes. Savings on taxes is a great reason for investing.

• No. Never invest only for tax reasons.

If you invest in mutual funds you are diversifying your investments. Is this a good idea?

• Yes. Diversification helps lower risk.

• No. You should keep all your investments in one fund because investing always involves risk.

Dave wants to invest in single stocks, is this a good idea?

• No, because the risk is too high and the average person doesn't know enough about stocks to directly invest in them and it's too risky.

• No, because you cannot buy stocks without putting your money into a mutual fund.

• Yes, because stocks are a great investment.

• Yes, because stocks have an average return of 12%.

Which answer is true about investments?

• Never invest using borrowed money.

• Diversification lowers risk.

• Never invest for tax reasons only.

• All are true.