Investing Bell ringer 1

All of the following are reasons to invest, EXCEPT…

• To minimize the impact on inflation, which causes you to lose purchasing power

• To earn a consistent rate of return with lower risk than typical savings accounts

• To build wealth by reinvesting your returns and allowing them to compound

• To earn higher average rates of return than you would in a typical savings account

Which of the following statements BEST describes investing?

• Putting $100 per month into an FDIC-insured bank account for short-term goals

• Buying and selling stocks within the same day to take advantage of short-term price variation

• Reducing the purchasing power of your money over time

• Buying assets, like stocks, with the intention to hold them and grow your wealth over the long term

An investor can best harness the power of compounding by doing all of the following, EXCEPT…

• Making frequent trades

• Starting to invest early

• Reinvesting earnings

• Minimizing risk

How does investing in the stock market differ from putting money in a savings account at a bank?

• Investing is always a less risky option than saving

• Investing is best for short-term situations like emergency funds; saving is best for the long-term

• Investing typically earns between 1-2% while saving generally earns between 5-7%

• Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

Which of the following statements is TRUE about compound interest?

• Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts

• Compound interest means you have a fund manager who is compounding your returns without charging a fee

• Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

• Compound interest directly impacts how much you will be charged in fees

Daniel has saved $2,000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

• His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation

• His purchasing power will INCREASE because the interest rate is higher than the historical rate of inflation

• His purchasing power will INCREASE because the interest will compound faster than the historical rate of inflation

• His purchasing power will remain the SAME because the interest rate is the same as the historical rate of inflation