7.2 - Stocks, Bonds, & Mutual Funds

Which of the following is TRUE about owning a share of stock?

• The value of a share is based on the number of investors in a company.

• Companies lose significant amounts of money every time someone buys a share.

• Owning a share means you own a percentage of the company.

• You have to return the share of the company you own typically after 5 years, otherwise, you pay a penalty fee each year.

How do stocks and bonds differ?

• Stocks may help you protect your money from inflation while bonds may be more susceptible to losing their value over time due to inflation.

• Stocks are low risk while bonds are high risk.

• Stocks are loans you give out to corporations and get paid back with interest; bonds are shares of a company that you own.

• Stocks are good for income while bonds are good for long-term growth.

What does it mean to “diversify” your portfolio?

• Investing all of your money into 1-2 funds so that you can focus on making money through compound interest.

• Pooling your money into one fund so that you can more easily manage your investments.

• Putting your money in funds that come with high fees since they are guaranteed to perform better.

• Spreading risk by investing your money in a variety of funds and investment options.

How can someone make money from investing in a stock?

• They sell the stock for a lower price than what they bought it for

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

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

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

How do investors make $ with bonds?

• From the interest payments

• Sell bonds more than what they paid for it

• Rising interest rates

• Getting back your initial investment

What is NOT a benefit of Mutual funds?

• It's a diversified investment

• Managed by finacial professional

• Allows participation in a variety of investments

• Fees and Sales Loads

Diversification is....

• Reducing Risk by investing in different investments

• Using various forms of payments

• Investing in stocks under different portfolios

• Only investing in one type of stock or bond