Investing 101

How does investing in the stock market differ from putting money in a savings account at a bank?

• Investing is always a less risky option than saving.

• Investing is best for short-term situations like emergency funds; saving is best for the long-term

• Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

Which of the following statements is TRUE about compound interest?

• Compound interest means you have a fund manager who is compounding your returns without charging a fee.

• Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned.

• Compound interest always impacts how much you will be charged in fees.

You have saved $500 in a savings account that pays you .5% interest per year. The rate of inflation is at 3.4%, what happens to your purchasing power over time?

• Your purchasing power will increase because your savings account is earning a higher rate of interest than inflation.

• Your purchasing power will decrease because your savings account is earning less than the rate of inflation.

• Your purchasing power will remain the same.

You purchased 10 shares of stock in Amazon for $50.00 per share. Three months later you decide to sell all 10 shares for $75 per share. What was your profit or loss on the sale?

• Loss of $250.00

• Profit of $250.00

• Profit of $750.00

• Loss of $750.00

Which of the statements below BEST describes the relationship between risk and return when considering an investment?

• Investors expect to earn a higher return when they invest in a high risk asset

• Investors expect to earn a lower return when they invest in a high risk asset

• Investors expect to earn zero return when investing in a low risk asset

Why should you diversify your investments?

• Investing in a diversified portfolio guarantees that you won’t lose money with your investments

• Diversifying your portfolio helps reduce risk

• If you diversify your portfolio, you will definitely earn a high return

How is a bond different from stock?

• A bond is a loan you give to a organization, while stock is partial ownership in a company.

• Bonds are best for earning high returns while stocks are best for providing a stable source of income

• Bonds are typically riskier than stocks.

How can someone make money from investing in a stock?

• They receive dividends or sell the stock at a higher price than what they paid for it.

• They sell the stock for the same price they bought it for.

• The stock loses value but the overall market experiences a positive return

Why would you use a brokerage account?

• To buy and sell stocks, funds, and bonds.

• For your special kind of 401K plan that no one else offers.

A disadvantage of using a Robo-adviser might be that…

• You may not be able to get advice from a human financial advisor when you want it

• You don’t have any input as to how your portfolio is invested

• You’ll be put on a waitlist to use the robo-adviser since there are only a handful of them to choose from