PF - Unit 6 Review

The individual assets contained in an actively managed mutual fund are selected by…

• An automated computer program

• A professional fund manager

• The investor who owns the most shares of the fund

• The pool of investors

Which is the best description of an index fund?

• A safe investment product that guarantees a high rate of return

• A retirement fund for employees over age 50

• An index made up exclusively of government bonds

• A mutual fund that tracks the performance of a specific market benchmark

One downside of active investing is that…

• You cannot diversify your portfolio using this strategy

• You must have a license, certification, or college degree to make these types of investments

• You are paying a fund manager who charges fees that will eat into your potential returns

• You must buy and sell each day in order for it to work correctly

All of the following are true about target date funds (TDFs), EXCEPT…

• TDFs track the performance of a particular market index

• TDFs are a good investment option for hands-off investors

• TDFs automatically reallocate your investments over time

• TDFs are invested in primarily in stocks when the target date is far in the future

How is an exchange traded fund (ETF) different from a mutual fund?

• An ETF is a pooled investment that uses funds from many different investors

• An ETF is usually actively traded and has higher expense ratios

• An ETF can only be bought at the end of the day from the fund provider

• An ETF can be traded throughout the day and bought from other investors, like a stock

What is a robo-advisor?

• An investment management service that uses a computer program to manage assets

• A security algorithm used by some fund managers to protect your investments

• A financial manager who provides specialized advice about technology funds

• A popular type of exchange traded fund (ETF) with a low minimum investment

The S&P 500 is…

• An index of the 500 largest publicly-traded companies in the US

• A diverse collection of stocks and bonds

• An actively managed mutual fund

• An index of the 500 largest publicly-traded US and Foreign companies

Alberto has decided to invest his retirement money into a mutual fund filled with mid-sized US companies. The fund manager is…

• The budgeting software Alberto uses to make sure he has enough saved every month

• The person who selects which stocks to include in the fund

• The website where Alberto logs in to check his fund’s value

• A CEO at one of those midsize companies

Alma recently started investing in a target-date fund with a planned retirement date that is 38 years in the future. How is the portfolio in her TDF most likely allocated?

• Her TDF allocation will depend on the specific securities she selects

• Half stocks and half bonds

• Majority stocks and a small percentage of bonds

• Majority bonds and a small percentage of stocks

Which statement about the investment fees associated with mutual funds is true?

• You’ll pay a one-time fee when you start your investment portfolio with a mutual fund

• Fees, compounded over the life of your investment, can substantially decrease your returns

• Fees are typically set at 10 to 15%, annually, of the amount you have invested

• You’ll only pay fees to your fund manager if your portfolio has a return over 5%