Managing Risk & Types of Funds

All of the following are strategies to reduce risk EXCEPT…

• 1. Holding your investments for at least five years

• 1. Making sure your investments are diversified

• 1. Hiring an investment manager who you think can beat the market

• 1. 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…

• 1. It allows your investments to earn more interest

• 1. It keeps you from reacting to dips in the market and selling at too low of a price

• 1. Fees are waived for investments held for over five years

• 1. You get a bonus from the company if you invest for five years

Which of the following is an example of diversification?

• 1. Putting the majority of your money into a savings account and investing the rest

• 1. Investing different amounts of money every month

• 1. Purchasing shares of stock in a variety of companies and industries

• 1. Using multiple investment managers to get different opinions

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

1. 
   

• 1. A type of savings account that you can use for emergency expenses

  
  

• 1. A pool of money from shareholders that is used to invest in a collection of assets like stocks and bonds

  
  

• 1. A way to crowdsource money from people online to help pay for an expense

  
  

• 1. An amount someone has in their checking account

  
  

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

1. 
   

• 1. The fund is guaranteed to provide a rate of return that is lower than the overall market

  
  

• 1. The fund will match the overall return of the market

  
  

• 1. The fund is managed by a fund manager, who tries to beat the overall market’s rate of return

  
  

• 1. If the actively managed fund does not beat the market, the fund manager will pay you the difference

  
  

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

1. 
   

• 1. Fees for a passively managed fund are typically lower than those for an actively managed fund

  
  

• 1. Passively managed funds are generally seen as low risk investments

  
  

• 1. A passively managed fund seeks to match the average return of the securities it includes

  
  

• 1. Passively managed funds are managed by a fund manager