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Investing Review
Investing Review
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1
Commonly recognized truth in investing is that:
past performance does not guarantee future returns
past performance is what it is
past performance has no value in choosing investments
past performance guarantees future returns
2
Which of the following is NOT a benefit of mutual fund investing?
Professional management - what & when to buy/sell
Share price determined once a day
Affordability - own many stocks for less$
Diversification - multiple stocks and sectors
3
Which mutual fund investing style is depicted in the Morningstar style box?
Large companies mix of stocks and bonds
Large companies with stocks for growth potential and reduced share price
Large companies with stocks at reduced share price
Large companies with low expense ratios
4
A small-cap ________________ mutual fund includes young companies with increased sales and revenue.
blend
value
index
growth
5
Time Value of Money says money today is worth more than tomorrow. Why?
opportunity to invest and exponential gains
inflation makes money more valuable in the future
inflation risk is higher today
risk reduces over time in the market
6
A bear market occurs when stock prices are falling.
True
False
7
Which strategy for minimizing risk adjusts the % of investments in each investment type closer to goals?
Dollar Cost Averaging
Diversification
Timing the Market
Asset Allocation
8
Why it is SO important to start investing early! Huge.
Gain experience and confidence in the market
Exponential growth potential that can't be matched later
Have time to build a diversified stock portfolio
The best deals in the market are now!
9
Which of the following would cause a stock price to fall?
Company earnings fell short of projected expectations
News of an innovative product released
Company earnings exceeded projected expectations
New CEO is announced with successful track record
10
Which investment type has historically returned 10% and is your best bet to accumulate wealth?
Mutual Funds
CDs
Stocks
Bonds
11
Advantages of tax-deferred investing include which of the following? Two answers.
Greater returns as more money invested over time
Reduces taxable income so pay less income tax now
investments are taxed at lower rates
Never pay taxes on earnings
12
A stockbroker is someone who:
Can buy and sell shares of stock
Oversees stock transactions to ensure ethical trades
Manages a stock mutual fund
Works for a company to sell you shares of its stock
13
The index of large companies & good measure of the stock market & many mutual funds compare to this index.
Russell 2000
Dow Jones Industrial Average
S&P500 Index
Nasdaq Composite
14
Which of the following is NOT a benefit of mutual funds?
Immediate diversification - # of stocks & sectors
Affordability - own many stocks for less $
Professional management - choosing what & when to buy/sell
Fees involved in managing stocks
15
Which financial goal below is a good example of when to SAVE rather than INVEST your money?
Buying a new car in 7 years
Money contributed to an IRA for retirement
A down payment on a house 10 years from now
Money for a winter ski trip in 10 months
16
Which investment is best for growth investing & capital appreciation?
U.S. Savings Bond
Stocks
Bond mutual fund
Real estate
17
Tax-advantaged retirement fund allows you to invest money from paycheck before taxes & get employer matching?
401k
Roth IRA
IRA
403b
18
Ultimate advantage of investing in real estate.
Real estate involves less risk since appreciation is given
More liquidity in that you have equity in the home
High price allows money to grow more
Leverage, 20% down pmt + return on full price
19
Which investment type is a loan to a company or government, like an IOU, and offers a fixed return?
Mutual Funds
CDs
Bonds
Stocks
20
What % of your pre-retirement income do you need in retirement?
70-80%
40-50%
60-80%
50-60%
21
A 10-year bond, coupon of 8% and principal of $5,000 would yield how much in simple interest?
$400,000
$400
$4000
$9000
22
Which strategy for minimizing risk involves investing a set amount each month to lower cost?
Diversification
Asset Allocation
Dollar Cost Averaging
Timing the Market
23
It's not timing in the market, it's ________ in the market.
Diversification
Time
Money
Stocks
24
Not only should you invest early, what else should you do to increase your returns?
regulary add to your investment
invest in an individual stock
invest in large companies
take highest risk for bigger return
25
The biggest advantages for younger investors in mutual funds is:
opportunity to hit a home run after stock splits
affordable access to investing in the stock market
ability to choose your own stocks
very low fees
26
A share of profits paid to stockholders are called:
simple interest
bonuses
dividends
capital gain
27
The higher the risk, the higher the _____________ return.
average
potential
guaranteed
overall
28
When an investor sells shares of stock for a profit what does he or she call the return?
income investing
capital appreciation
capital gain
capital preservation
29
What retirement fund allows you to put money away and never pay taxes on earnings?
IRA
403b
401k
Roth IRA
30
Which investment type should you hold the LEAST in your portfolio closer to retirement for good asset allocation?
Bonds
Mutual Funds
Stocks
CDs
31
Which risk strategy involves investing in multiple investments to reduce exposure; gains > losses
Diversification
Asset Allocation
Timing the Market
Dollar Cost Averaging
32
Which investment is best for income investing & capital preservation?
Individual stock
Small-cap growth mutual fund
Real estate
Bond mutual fund
33
A big advantage of most retirement accounts is that investment dollars are __________, reducing taxable income.
tax-deferred
taxed lower
tax free
taxed higher
34
A 2:1 stock split would result in:
stock price reduced by half
twice as many stocks at full price
twice as many stocks at 1/2 price
twice as many stocks same price
35
Return on investment if you sold stock shares for a capital gain of $500 on $1800 investment is ______ (round up)
20%
28%
22%
33%
36
2 Ways Investing is Different Than Saving
Higher risk, higher potential returns
safe, low risk
Consistent returns
Long term goals
37
What is the report called that is prepared to share with potential investors for mutual funds?
portfolio report
annual report
prospectus
fund report
38
Identify the mutual fund investing style for large companies whose share price is down currently.
large growth
large value
large risk
large blend
