WorksheetsInvesting 101
Total questions: 25
Worksheet time: 15mins
A key difference between saving and investing is
Saving is for everyone, investing is for the wealthy
Your money is insured when investing, it is not in savings
Investing has a guaranteed return, savings does not
Saving is for emergencies & goals, investing is for long-term wealth
Why is compound interest more beneficial than simple interest? (hint: choose 2 correct answers)
Your money grows faster when it is compounded
You earn interest on your interest
Fees for compound interest are greater than simple interest
Compound interest is hard to calculate, so fewer use it
Which would be considered the highest risk investment type?
Stock
Mutual Fund
Bond
Money Market Account
The relationship between risk and return can be stated as
Higher risk indicates higher return
Higher risk indicates lower return
Lower risk indicates higher return
No relationship exists between risk and return
How can you make money on stocks? (hint: choose 2 correct answers)
sell higher than the purchase price
Interest
Dividends
Holding the stock at least 3 years
Which is true about Initial Public Offerings (IPOs)? (hint: choose 2 correct answers)
IPOs occur when a private company becomes publicly traded
All companies file an IPO
IPO's are always done in a company's first year
When an IPO occurs, a company raises money to grow the business
A diversified portfolio is desirable because
It limits investment choice
It's a good predictor on rate of return
It increases risk and return
It decreases risk
Why is it important to start investing as soon as possible?
You take less risk when you are young, so money will be safe
You have more time for your money to compound
Investing is an easy way to make quick money
Fees on investments are cheaper when you are younger
True or False: Investing in a diversified portfolio of stocks guarantees you will not lose money.
True
False
People typically respond to bull markets by...
Buying stocks
Selling stocks
Not acting
People typically respond to bear markets by...
Buying stocks
Selling stocks
Not acting
When you buy ownership in a company, you are buying...
Shares
bonds
coupons
IPO's
When you buy stock, you are actually buying a piece of the company and becoming part owner
True
False
Federal Government Bonds are essentially considered very low risk.
True
False
When it comes to buying stocks, the goal is to...
Be patient! Wait for a stock price to double before you invest
Diversify! Buy a lot of high risk stocks
Do your research! Follow all of the advice of the professionals
Buy low! Hold the stock for a time, then sell it for more than you paid
No matter what anyone tells you… there is no way of knowing with absolute certainty whether buying stock in a company will result in a positive return or a negative return
True
False
What is a stock?
a piece of a company
a collection of stocks and bonds
a loan with an insurance company
Gold, Silver, or Bronze
Bonds pay interest at a specified rate. These rates are called...
Shareholders
Coupon Rates
Interest Rates
Initial Public Offerings
Not sure how many Stocks or Bonds to invest in? Use the following rules to help.
60% Stocks and 40% Bonds
Rule of 75
50/30/20 Rule
120-age=Stock %
If you diversify your investments...
you lower your risks.
you have a variety of stocks, bonds, and other assets.
you have all your investments in one stock.
you can completely eliminate loss.
An index fund is...
the rate of return from a bond investment.
a group or bundle of stocks or bonds.
ownership of a single share of stock.
usually a poor investment.
What is a bond?
A bet on the future of crop prices
a certificate of deposit
a loan with a business or the government
a retirement arrangement
Jim is 49 years old. He recently inherited some money and wants to invest it. He plans on retiring in the next ten years or so. If he follows the rule(s) for investing, how much should he in vest in Stocks and how much in Bonds?
90% on Bonds and 10% in Stocks
60% in Stocks and 40% in Bonds
100% in Stocks and 0% in Bonds
71% in Stocks and 29% in Bonds
This is the place where stocks can be bought and sold.
Open Market
Share Market
Stock Market
Value Market
