SAVINGS/INVESTING

A key difference between saving and investing is

• Saving is for everyone, investing is for the wealthy

• Your money is insured when investing, it is not in savings

• Investing has a guaranteed return, savings does not

• Saving is for emergencies & goals, investing is for long-term wealth

Why is compound interest more beneficial than simple interest? (hint: choose 2 correct answers)

• Your money grows faster when it is compounded

• You earn interest on your interest

• Fees for compound interest are greater than simple interest

• Compound interest is hard to calculate, so fewer use it

Which would be considered the highest risk investment type?

• Stock

• Mutual Fund

• Bond

• Money Market Account

The relationship between risk and return can be stated as

• Higher risk indicates higher return

• Higher risk indicates lower return

• Lower risk indicates higher return

• No relationship exists between risk and return

How can you make money on stocks? (hint: choose 2 correct answers)

• A capital gain

• Interest

• Dividends

• Holding the stock at least 3 years

A diversified portfolio is desirable because

• It limits investment choice

• It's a good predictor on rate of return

• It increases risk and return

• It decreases risk

Which of the following accurately describes asset allocation? (hint: choose 2 correct answers)

• Well-balanced portfolio of different stock classifications

• Dividing among different asset categories based on risk

• Dividing among different asset categories based on time

• Chance your investment won't be worth as much in the future

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

• Roth IRA

• Traditional IRA

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

• You take less risk when you are young, so money will be safe

• You have more time for your money to compound

• Investing is an easy way to make quick money

• Fees on investments are cheaper when you are younger

Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which of the following statements would be the best one for him to include to show that he understands compounding interest?

• Interest earned on the principal investment
• Any form of interest earned from saving or investing
• Earning interest on interest