Risk_Funds_Retirement Note/Questions

What is the primary benefit of diversification? a) Guaranteed high returns b) Elimination of all risk c) Spreading risk across different investments d) Avoiding taxes on investments

Dollar cost averaging involves: a) Investing all your money at once b) Investing a fixed amount regularly c) Only investing when the market is low d) Borrowing money to invest

All of the following are strategies to reduce risk EXCEPT…

• Holding your investments for at least five years
• Making sure your investments are diversified
• Hiring an investment manager who you think can beat the market
• Investing small amounts of money over longer periods of time

Leaving your investments in the stock market alone for at least five years is a good way to reduce risk because…

• It allows your investments to earn more interest
• It keeps you from reacting to dips in the market and selling at too low of a price
• Fees are waived for investments held for over five years
• You get a bonus from the company if you invest for five years

Which of the following is an example of diversification?

• Putting the majority of your money into a savings account and investing the rest
• Investing different amounts of money every month
• Purchasing shares of stock in a variety of companies and industries
• Using multiple investment managers to get different opinions

When talking about investing, what does it mean when someone refers to a fund?

• A type of savings account that you can use for emergency expenses
• A pool of money from shareholders that is used to invest in a collection of assets like stocks and bonds
• A way to crowdsource money from people online to help pay for an expense
• An amount someone has in their checking account

The goal of an actively managed fund is to outperform the market. What does this mean?

• The fund is guaranteed to provide a rate of return that is lower than the overall market
• The fund will match the overall return of the market
• The fund is managed by a fund manager, who tries to beat the overall market’s rate of return
• If the actively managed fund does not beat the market, the fund manager will pay you the difference

All of the following are true about a passively managed fund EXCEPT…

• Fees for a passively managed fund are typically lower than those for an actively managed fund
• Passively managed funds are generally seen as low risk investments
• A passively managed fund guarantees the average return of the securities it includes
• Passively managed funds are managed by a fund manager

I am actively managed and usually come with higher fees. Which investment am I?

• Mutual Fund
• Index Fund
• ETF
• TDF

I am best for beginner investors who want to build their retirement fund. I don't require a lot of work as an investor and am often referred to as a set-it-and-forget-it fund. Which investment am I?

• Mutual Fund
• Index Fund
• ETF
• TDF