7.1 Why Should I Invest?

Which is NOT a difference between saving and investing?

• Saving is short term, investing is long term

• Saving is low-risk, investing is high-risk

• Saving does not pay interest, investing does pay interest

• Saving does not beat inflation over the long run, investing usually does

Which is NOT an example of investing?

• Cash

• Stocks

• Bonds

• Mutual Funds

• Property

What would be a typical average annual return for a savings account?

• 10%

• 0.05%

• 1.5%

• 2%

What would be a typical average annual return for an investing account?

• 10%

• 0.05%

• 1.5%

• 2%

Which of the following assets have the lowest risk?

• Cash

• Bonds

• U.S. Stocks

• U.S. Micro Cap Stocks

Which of the following assets have the highest risk?

• Cash

• Bonds

• U.S. Stocks

• U.S. Micro Cap Stocks

What does it mean to have a balanced portfolio?

• Includes stocks from companies from many different sectors, such as, energy, materials, industries, healthcare, etc.

• Includes assets from different classes, such as, stocks, bonds, mutual funds, cash, hard assets, index funds

• Includes balancing your financial goals and your personal goals to make sure they align.

How is compound interest different than simple interest?

• It is simple interest - interest earned on that interest
• It is double the simple interest earned on an investment
• It is simple interest + interest earned on that interest
• It's not different; they are one and the same

How does inflation impact the money in your savings account?

• Inflation decreases only the $ you earn in interest
• Inflation increases the value of the money in your account
• Inflation has no impact on $ in your savings account.
• The purchasing power of your money decreases over time

All of the following are reasons that it is important to start saving or investing early. Which is the least important?

• Money accrues more interest if saved or invested earlier (longer time for compounding interest).

• You never know when an emergency will occur, and you may need your savings when it does.

• You need to make sure you can buy all the cool stuff that you see your neighbors, friends, or family buying so you can look cool too.

• You will have to invest more money if you start later in order to achieve the same retirement goal. As you age, the “catch up” savings for retirement will be huge to compensate for not saving when you were younger

• Most millennials have saved little to nothing for retirement. Fight the peer pressure and save early and often!