Investment Strategies Pre Test

What is the primary purpose of investing?

• Save money for short-term goals
• Preserve wealth
• Generate a return on capital
• Avoid taxes

Which of the following is generally considered a low-risk investment?

• Stocks
• Bonds
• Cryptocurrency
• Real estate

What does the term "diversification" mean in the context of investing?

• Concentrating investments in a single asset
• Spreading investments across different assets
• Investing in only one type of industry
• Timing the market to maximize returns

How does compounding contribute to investment growth?

• By reducing investment risk
• By increasing the initial investment amount
• By reinvesting earnings to generate more earnings
• By diversifying the investment portfolio

What is the purpose of a financial advisor in the context of investing?

• To guarantee high returns on investments
• To provide insurance against investment losses
• To offer guidance and advice on financial decisions
• To manage personal expenses

Which of the following is an example of a long-term investment goal?

• Buying a new car within a year
• Saving for a vacation in six months
• Funding a college education in 10 years
• Building an emergency fund for unexpected expenses

What is the role of inflation in investment planning?

• It has no impact on investment returns
• It erodes the purchasing power of money over time
• It increases the value of fixed-income investments
• It decreases the importance of diversification

In the context of investing, what does the term "liquidity" refer to?

• The ease with which an investment can be bought or sold without affecting its price
• The total return on investment
• The potential for high profits
• The maturity date of a bond

Which investment strategy involves buying a mix of different asset classes to spread risk?

• Market timing
• Dollar-cost averaging
• Diversification
• Short selling

What does the term "bull market" signify in the financial world?

• A market with declining prices
• market with rising prices and optimism
• A market with stagnant prices
• A market with no trading activity