Phase 4 Student Competition Quiz

1. How does 'Inflation' impact your long-term savings and investments?

• It reduces the cost of goods and risk

• It increases the value of savings

• It decreases the purchasing power of your money over time

• It has no impact

What is the impact of 'Compound Interest' on long-term investments?

• It decreases the value of your investments

• It accelerates the growth of investments over time by earning interest on interest

• It guarantees you get rich quick and reduced risk on your investments

• The investment won't ever decrease in value

1. Why is it important to 'Diversify' your investments?

• To concentrate risk in one area

•  To spread risk and reduce the impact of any single investment loss 

• To ignore market fluctuations

•  To maximise returns on one investment

Which is an example of 'Dollar-Cost-Averaging' your investment?

• Investing $1000 every month, regardless of how the market is performing

• Investing $1000 each time the investment decreases in value, to lower your investment average

Which investment will generate a greater return based on your understanding of 'The Power of Compounding Interest'?

• Scenario A:

  Investing $200 a month from age 19 to 29 ($24,000 invested in total) and withdrawing the investment at age 60

• Scenario B

  Investing $200 a month from age 29 to 59 ($72,000 invested in total) and withdrawing the investment at age 60

Scenario Question (Double Points!)

Emma won $10,000 and wants to invest the money but does not know how.

What would be her most sensible investment strategy?

• Invest $5,000 a month into a diversified managed fund and invest $5,000 per month split between her favourite individual stocks.

• Invest the $10,000 into a diversified managed fund or index fund

• Invest in the best performing company in Australia over the past 12 months

• Engage in speculative investments to chase high and fast returns

Scenario Question (Double Points!)

Lisa receives a bonus of $2,000. She has no emergency fund and wants to invest in the stock market.

What should she do first?

• Start building an emergency fund and repay any debts

• Invest the entire amount in stocks

• Allocate the money to her 'Wants' bucket

• Allocate the money to her 'Needs' bucket

Scenario Question (Double Points!)

You’re nearing retirement and have a significant portion of your savings in stocks.

If your priority is preserving your wealth, what should you do?

• Keep all savings in stock investment funds

• Diversify your retirement funds into more defensive assets to reduce risk

• Withdraw all the money from your investments

• Ignore market conditions