Ch 2 Risk, Return & Insurance

Which is not true about inflation

• it is a general increase in the prices of goods and services

• individual purchasing power decrease

• hyperinflation is rare

• stocks will always outpace inflation

Which is not one of the 3 things the author says you should do to minimize risk when markets fluctuate?

• sell when stocks start to drop

• diversify for a smoother ride

• consider your time horizon

• pair down holdings in a bloated market

Why is it important to create a vision board of your financial goals?

• To ensure financial goals can be met with your investment plan

• to decrease self awareness

• To focus only on immediate returns

• To ignore long-term planning

Which of the following statements is true about risk?

• Risk is always controllable.

• Risk levels can be predicted by examining an investments past experience.

• Risk is not impacted by by an investment's past experience

• Risk is always significant.

An advantage of holding real estate as an investment is that it can be a lucrative as investing in stocks.

• true

• false

What is a stop loss order?

• A type of investment strategy

• An order to buy a stock at a lower price

• An order to sell a stock when it reaches a certain price

• A method to calculate risk

Capital gains and other tax implications are an example of a dis-advantage of holding real-estate for an investment

• true

• false

What is the relationship between uncertainty and risk in investing?

• Uncertainty decreases risk

• Uncertainty has no impact on risk

• Uncertainty increases risk

• Uncertainty guarantees higher returns

historically which investment typically has the highest rate of return over time?

• Mutual funds

• Bonds

• CD's

• Stocks

What does considering your time horizon in investments involve?

• Investing all money immediately

• Ignoring retirement plans

• Understanding the amount of time until retirement

• Selling all stocks quickly