Investment Review: Unit 5

How can compounding increase your investment’s growth?

• By reducing the risk of investing

• By reinvesting your earnings to gain additional returns

• By increasing the impact of inflation over time

• By investing in different assets to diversify your portfolio

What statement accurately describes the historical trends of the stock market since its inception?

• The value has increased constantly and slowly since the stock market opened

• The value has gone up and down a lot, but overall has increased over time

• The value increased a lot in its early days, but has since stayed relatively constant

• The value has gone up and down a lot, but overall has decreased over time

If you want to maximize your investment returns, which of these suggestions would be examples of good advice?

• Make frequent trades and withdraw your short-term earnings

• Start to invest early for the long-term

• Reinvest earnings 

• Use diversification and allocation to minimize risk

How does a bond differ from a stock in your investment portfolio?

• Bonds typically have higher returns and lower risk than stocks

• Bonds typically have higher returns and higher risk than stocks

• Bonds typically have lower returns and higher risk than stocks

• Bonds typically have lower returns and lower risk than stocks

In 2018, Agatha set up a spreadsheet with a list of 10 stocks and 4 bond funds she’d just purchased for her investment portfolio. She recorded her purchase price per share and the number of shares she’d bought of each asset. She hasn’t bought or sold any shares since that day. She’s interested to know how much money she’d gain or lose if she sold all the shares today. What new data would she need in order to determine the return on investment for her entire portfolio? 

• The price per share for each of her investments today

• The total returns of the US stock market over that same time frame

• The number of shares other investors have purchased over that same time frame

• The federal interest rate, minus inflation since the day she purchased the shares

What does it mean to have an investing portfolio that is diversified?

• Using a variety of sources to do research on what stocks to buy

• Making sure that your investments are different from those of  your friends and family

• Investing in different assets to spread out the risk to different markets

• Never buying the same stock more than once

What is a dividend?

• A dividend is a payment a company makes periodically to owners of its stock

• A dividend is the difference between the purchase price and selling price of a stock

• A dividend is the tax you pay in order to buy and sell stocks

• A dividend is a payment you make to keep a stock on loan from a company

Which of the following is TRUE about investing?

• It is meant for short-term needs like your emergency fund, not saving for retirement

• It guarantees a high rate of return over a short period of time

• It can help you grow your money through the power of compounding

• It involves little risk because your returns are insured up to $250,000

Which of the following is TRUE about savings?

• It is meant for short-term needs like your emergency fund, not saving for retirement

• It guarantees a high rate of return over a short period of time

• It can help you grow your money through the power of compounding

• It involves little risk because your returns are insured up to $250,000

Which of these terms regarding bonds is NOT correct?

• Face Value: the value of the bond that will be paid out at the end of the bond’s life

• Coupon Rate: the annual interest rate paid to the holder of the bond

• Maturity: The recommended age a buyer should be when they purchase a given bond

• Price: the cost of the bond if you were to purchase it in the market at that moment