Investing Fundamentals

What is a stock?

• An investment that signifies ownership in a corporation.

• A loan given to a company or government by an investor.

• A collection of various investments held by an institution or individual.

• A strategy to reduce financial risk.

What is the main difference between stocks and bonds?

• Stocks give you ownership in a company, while bonds are loans you give to a company or government.

• Stocks are less risky than bonds.

• Bonds can be traded on the stock market, but stocks cannot.

• Stocks pay interest, while bonds give you voting rights in a company.

What is a mutual fund?

• A private investment vehicle that only allows a limited number of investors.

• An investment strategy that involves buying a single stock.

• Mutual funds are investment strategies that pool your money with other investors to purchase a collection of stocks, bonds, or other securities.

• A government-issued certificate of debt.

Why is diversification important in investing?

• It guarantees a fixed return on investment.

• It allows investors to vote on corporate decisions.

• It helps to spread risk among a variety of investments to reduce the impact of any one investment's poor performance.

• It focuses all investment on one sector to maximize returns.

What is the primary goal of risk management in investing?

• To eliminate all risk.

• To maximize returns at any risk level.

• Monitoring and dealing with the financial risks associated with investing.

• To invest solely in government bonds.

What does asset allocation refer to?

• The process of dividing investments among different kinds of assets, such as stocks, bonds, and cash, to optimize risk and return.

• Allocating all your assets into a single stock.

• The allocation of assets to pay off liabilities.

• The process of buying assets at their lowest price and selling them at their highest.

Which type of bond is considered the safest?

• Corporate bonds

• Municipal bonds

• Junk bonds

• Government bonds

What is the term for the profit you make from selling a stock at a higher price than you paid for it?

• Dividend

• Interest

• Capital gain

• Return on investment (ROI)

Which of the following is NOT a common way to manage risk in investing?

• Diversifying your investment portfolio

• Investing all your money in a single stock

• Using stop-loss orders

• Buying insurance products

What is the advantage of investing in a mutual fund/ETF rather than buying individual stocks and bonds?

• Mutual funds offer guaranteed returns.

• Mutual funds allow individual investors to achieve greater diversification.

• Mutual funds only invest in government securities.

• Mutual funds do not charge any fees.