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WorksheetsInvesting NGPF
Total questions: 20
Worksheet time: 15mins
What is a common strategy to minimize investment risk?
Focusing solely on short-term gains
Diversifying across different asset classes
Ignoring market trends
Investing all money in a single stock
Which of the following is a characteristic of dollar-cost averaging?
Dollar-cost averaging is a way to decrease your risk
Dollar-cost averaging is a strategy that only expert investors use
Dollar-cost averaging is advantageous because earnings are untaxed
Dollar-cost averaging is offered exclusively through robo-advisors
If interest rates rise, what will typically happen to bond prices?
Rise
Fall
Stay the same
What is a key advantage of investing in mutual funds?
They are risk-free
They have no fees
They offer guaranteed returns
They are managed by professionals
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
Which is NOT a stock market index?
Russell 2000
Amazon
S&P 500
Nasdaq
Which of the following is a benefit of starting to invest early?
Guaranteed profits
Lower investment fees
More time for compound growth
Higher short-term gains
Which of the following is a characteristic of a mutual fund?
It is managed by a professional
It is a type of bond
It guarantees a fixed return
It requires no fees
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
Which of the following is a characteristic of a bond?
High volatility
Ownership in a company
Unlimited growth potential
Fixed interest payments
Which of the following is a benefit of compound interest?
It increases the interest rate over time
It reduces the initial investment amount
It guarantees a fixed return
It allows earnings to generate additional earnings
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
Your money grows tax-deferred in this retirement account but when you withdraw it is taxed as income.
Roth IRA
Traditional IRA
What is the primary difference between a passively managed fund like index funds and
actively managed funds like mutual funds?
Mutual Funds typically carry lower costs than Index Funds
The goal of an Index Fund is to earn a higher return than the market
Mutual Funds try to outperform the market
Index Funds have a higher cost than Mutual Funds
Which would be considered the highest risk investment type?
Stock
Mutual Fund
Bond
Money Market Account
Compound Interest works best when....
You have a long time horizon - 10 years or more
You take all of your money out of your account after 6 months
You have a high interest rate on debt
It does not work best. Compound interest is hard to calculate, so fewer use it
Which of the following is a characteristic of a high-risk investment?
Insured by the government
Potential for high returns
Low volatility
Guaranteed returns
How can you make money on stocks?
Buy low and sell high
Interest
Buy high and sell low
Holding the stock for 1 month
Putting regular amounts of money into an investment account at specific time intervals is
Compound interest
Diversification
Dollar cost averaging
Inflation
What is the primary benefit of dollar-cost averaging?
It eliminates all investment risks
It reduces the impact of market volatility
It increases the rate of return
It guarantees a profit
