Stock Market Vocabulary Review

Paul decides to divide his investments (usually by percentage) into specific asset classes with the hope of adding variety to his portfolio. What investment strategy best describes Paul's approach?

• Asset Allocation

• Averaging Down

• Diversification

• Dollar Cost Averaging

John is an investor. He is considering a technique where he borrows stocks, sells them, and then hopes to rebuy them when the price falls. What is this technique called?

• Put Option

• Short Selling

• Limit Order

• Call Option

True or False: A bull market is a market where share prices are decreasing steadily.

• True

• False

Which of the following bonds has a lower risk: a corporate bond or a treasury bond?

• Corporate Bond

• Treasury Bond

Which stock market index allows investors to buy and sell stocks through an automated network of computers?

• Dow Jones Industrial Average

• Nasdaq

• S & P 500

Imagine you have some money that you want to invest. You decide to put a certain amount into your investment every month, no matter what the price of the asset is. What is this investment strategy called?

• Asset Allocation

• Averaging Down

• Diversification

• Dollar Cost Averaging

Larry has invested in a certain asset. The price of the asset has fallen recently. John decides to buy more shares of this asset, resulting in a lower average purchase price. What is this investment strategy called?

• Asset Allocation

• Averaging Down

• Diversification

• Dollar Cost Averaging

Manny has recently inherited a large sum of money. He wants to invest this money but also wants to minimize his overall risk. Which investment strategy should he use that divides investment funds across a variety of assets?

• Asset Allocation

• Averaging Down

• Diversification

• Dollar Cost Averaging

Which of the following is a collection of stocks or bonds combined in a single fund that can be purchased and traded on major stock exchanges? (Hint: They are usually passively managed and typically feature less fees (expense ratios) than other fund types.)

• Mutual Funds

• ETFs

• Index Funds

• Bond Funds

Which stock market index consists of the 30 most-traded blue-chip stocks on the New York Stock Exchange?

• Dow Jones Industrial Average

• Nasdaq

• S & P 500