Investing Bell Ringer 6-7

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 seeks to match the average return of the securities it includes

• Passively managed funds are managed by a fund manager

Geraldo reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7.0% per year and an annual fee of 1%. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Geraldo (net of fees)?

• ActiveFund20: It had an overall return of 8.0% while PassiveFund500 had an overall return of 6.6%

• PassiveFund500: It had an overall return of 6.6% while ActiveFund20 had an overall return of 8%

• ActiveFund20: It had an overall return of 7.0% while PassiveFund500 had an overall return of 6.5%

• PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%

Why are Index Funds such a popular investing option?

• They are a mix of 2-3 individual stocks that can help you diversify your portfolio

• They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500

• They are actively managed by a fund manager

• They are managed by robo-advisors that guarantee higher returns than the overall stock market

Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?

• ETFs are traded once a day after the market closes

• An ETF is a single stock that you can buy in the stock market

• Actively managed ETFs have very low fees

• ETF prices can change throughout the day as they are exchanged on the market

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 much 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

I am passively managed and usually come with lower fees. Which investment am I?

• Mutual Fund

• Index Fund

• ETF

• TDF

I can be bought and sold throughout the day. Which investment am I?

• Mutual Fund

• Index Fund

• ETF

• TDF