Investing #5

Why might a young person just starting a new career choose a TDF for their 401K investment?

• A TDF is actively managed by a fund manager but comes with low fees

• A TDF buys a single stock and bond so that beginner investors can practice day trading

• A TDF will automatically adjust his asset allocation based on the retirement year he has chosen

• A TDF is insured by the federal government, so your money is protected even if the fund performs poorly

What is one question an investor should ask when deciding whether or not they would like to open a Roth IRA or a Traditional IRA?

• Do I want to pay taxes now or later?

• Do I want to make a guaranteed return of 6% or 8%?

• Do I want to take advantage of my employer’s matching contribution?

• Do I want to take on more or less risk?

If you are new to investing and eager to get started, what should you NOT do?

• Invest in low cost funds

• Invest in a diversified portfolio

• Estimate how much you will need for retirement

• Pick individual stocks and see if you can beat the market.

What is Social Security?

• Social Security is a type of retirement savings plan offered by some employers

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

• Social security is a government mandate that requires employers to offer their employees a 401(k) or pension plan

• Social Security is a type of retirement savings plan that you can open through a brokerage firm

Why are Index Funds such a popular investing option?

• They are a mix of 2-3 individual stocks that can help you diversify your portfolio

• They are actively managed by a fund manager trying to beat the market

• They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500

• They are managed by robo-advisors that guarantee higher returns than the overall stock market

An actively managed mutual fund…

• Generally has lower fees than a passively managed index fund

• Always performs better than an index fund

• Is a mix of two types of stocks and two types of bonds to diversify your portfolio

• Is managed by a fund manager who charges a fee