Review 6B: Investing

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

What does it mean when someone says “Good investing is boring”?

• There should be little to no change in how your portfolio performs

• You should avoid talking to anyone about how your investments are performing

• You’re better off making long-term investments that don’t require day-to-day management

• You should avoid checking how your investments are doing for at least 10 years

All of the following are recommended strategies for beginner investors EXCEPT…

• Try to pick winning stocks and beat the market

• Recognize cognitive biases that may be influencing your decisions

• Minimize expense ratios to cut back on costs

• Choose your investments based on your risk tolerance

Which of the following is a characteristic of a brokerage account?

• Typically no capital gains tax

• Limits on how much you can invest

• No penalties for withdrawing your money

• Require a large amount of money to open an account

In retirement, it’s common to rely on income from all of the following sources EXCEPT...

• Social Security

• Pension Income

• Government loan

• Investment Income

Which of the following statements is TRUE about the state of retirement in the U.S.?  

• Most Americans are able to retire at their full retirement age

• Many retirees are able to support themselves on Social Security payments alone

• The majority of employers offer pension plans for workers

• Many people may need to invest to build wealth and to support themselves in retirement

Eli is planning ahead for retirement. They should consider all of the following factors when determining how much they’ll need in retirement EXCEPT…

• What age they plan to retire

• The current balance in their checking account

• The lifestyle they want to lead in retirement

• How much money they expect to receive through Social Security

401(k)s and IRAs are both…

• Types of investments that you can choose to have in an investment account

• Investment accounts that are commonly offered by employers

• A type of savings account that generally offers around a 1% rate of return

• Investment accounts that you can open to help you invest for retirement