Investing Mid Unit Review (AF) 3.8-3.10

What does it mean when someone says “Good investing is boring”?

• There should be little to no change in how your portfolio performs

• You should avoid talking to anyone about how your investments are performing

• You’re better off making long-term investments that don’t require day-to-day management

• You should avoid checking how your investments are doing for at least 10 years

All of the following are recommended strategies for beginner investors EXCEPT…

• Try to pick winning stocks and beat the market

• Recognize cognitive biases that may be influencing your decisions

• Minimize expense ratios to cut back on costs

• Choose your investments based on your risk tolerance

Which of the following is a characteristic of a brokerage account?

• Typically no capital gains tax

• Limits on how much you can invest

• No penalties for withdrawing your money

• Require a large amount of money to open an account

What is the difference in how a brokerage account functions compared to a normal bank account?

• You cannot store money in a brokerage account but you can in a bank account

• a brokerage account gives you access to invest in things like stocks, bonds, and mutual funds

• a bank account gives you access to invest in things like stocks, bonds, and mutual funds

• You can transfer money in and out of a bank account but not a brokerage account

Which account would be best used for the situation?

Ava is a recent college graduate. She realized she has some extra money in her budget and would like a way to invest it while also having access to it should she need cash.

• Brokerage Account

• Retirement Account

Which account would be best used for the situation?

Naomi would like to invest for retirement but doesn’t want to worry about paying taxes every year.

• Brokerage Account

• Retirement Account

Which statement best describes what Social Security is and how it works?

• Social Security is a mandatory payroll deduction for current workers who then receive the retirement benefit on an annual basis.

• Social Security is an optional program to allow retirees to continue contributing to their individual retirement accounts.

• Social Security is a government program that pools contributions from current workers to then provide retirement support benefits to those who are eligible.

• Social Security is a federal health insurance program for retired workers.

What solutions are presented to fix the Social Security shortfall? (hint: choose three correct answers)

• Stop distributing benefits to workers who do not pay into the system

• Reduce benefits to match income from payroll taxes

• Increase the Social Security tax rate

• Raise the age of retirement for younger workers

While Social Security benefits millions of Americans, the system is not perfect. In what ways is inequality built into the Social Security system? (choose 3)

• Benefit levels are dependent on your salary

• To be eligible for benefits, you must earn a minimum amount for at least 10 years

• Social Security taxes are not charged on income above a certain amount

• Only those will internet access can apply

Why will you need slightly more income in each year of your retirement?

• Your expenses increase the longer you are in retirement.

• Your rate of return on investments is guaranteed to increase in retirement, so you can spend more each year.

• You are required to withdraw more money each year from your retirement account

• You should take the increasing price of goods and services over time into account.