San is explaining what Social Security/SS is to her younger brother. Which of the following descriptions should she use?

SS is a gov prog that pools contributions from current workers to fund ret

Why is diversification a recommended investment strategy?

Diversifying your portfolio helps reduce risk

Which of the statements below BEST describes the relationship between risk and return when considering an investment?

expect to earn a higher return when they invest in a high risk asset

A disadvantage of using a robo-adviser might be that…

You may not be able to get advice from a human when you want it

Why are Index Funds such a popular investing option?

Provide a low-cost, diversified investment that matches the overall return

20: makes 7% with a 1% fee and 500: makes 6.5% with a .1% fee - which investment has better return (net of fees)?

500: It had an overall return of 6.4% while 20 had an overall return of 6.

An actively managed mutual fund…

Is managed by a fund manager who charges a fee

How can someone make money from investing in a stock?

dividends or they sell the stock at a higher price than what they bought it

What is a brokerage account used for?

It’s a type of account used to buy and sell stocks, bonds, and funds

What kinds of behaviors can PREVENT people from making smart investing decisions?

Exiting the market because that’s what everyone else is doing

As a shareholder in a public company, what are the benefits available to you?

May get dividends from the Co. if the Co. pays them, and you have ownership

Daniel has saved $2,000 in savings that earns 0.5% interest annually. What will most happen to the purchasing power

will DECREASE because the interest rate is lower than the historical ra

Sam is 22, and is selecting his investments through his company's 401(k) plan. Why might a target date fund be good?

A TDF will automatically adjust asset allocation based on retirement year

Which of the following accurately describes a difference between an individual bond compared to a bond fund?

is considered to be a less diversified investment than a bond fund

What question an investor should ask when deciding whether or not they would like to open a Roth IRA or Traditional IRA?

Do I want to pay taxes now or later?

Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...

Pick individual stocks to see if she can beat the market

How is a bond different from a stock?

bond-loan you give to an org while a stock is partial ownership in a co

Why is it important for you to understand your risk tolerance before you start investing?

tailor your portfolio to assume an amount of risk you are comfortable with

Which of the following statements is TRUE about compound interest?

allows you to earn interest not only on the amount you have saved, but als

How does investing in the stock market differ from putting money in a savings account at a bank?

you to accumulate wealth for retirement while saving is best for short-term

You buy a bond with a fixed coupon rate of 5%. Later, bonds that are issued have a coupon rate of 3%. Which is true?

The price of your bond will increase

Which of the following is a characteristic of dollar-cost averaging?

Dollar-cost averaging is a way to decrease your risk

Work will match 3% of your $65,000 per year salary, but you only have $150 to put in your 401(k) what should you do

Contribute $150/mo to the 401(k) because her company will match

Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?

ETF prices can change throughout the day as they are exchanged

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NGPF - Unit 3 - Investing

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NGPF Investing unit 3

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Questions 25

Answers

1
San is explaining what Social Security/SS is to her younger brother. Which of the following descriptions should she use?
SS is a type of retirement savings plan offered by some employers
SS is a gov mandate that requires employers to offer employees a 401(k)
SS is a type of ret savings plan that you can open through a brokerage firm
SS is a gov prog that pools contributions from current workers to fund ret
2
Why is diversification a recommended investment strategy?
diversify your portfolio, you will definitely earn a high return
tell your fund manager to use diversification, they’ll charge you lower fee
Diversifying your portfolio helps reduce risk
Investing in a diversified portfolio guarantees that you won’t lose money
3
Which of the statements below BEST describes the relationship between risk and return when considering an investment?
expect to earn a higher return when they invest in a low risk asset
expect to earn zero return when investing in a low risk asset
expect to earn a lower return when they invest in a high risk asset
expect to earn a higher return when they invest in a high risk asset
4
A disadvantage of using a robo-adviser might be that…
You’ll might be waitlisted since there are only a handful of robo-dvisers
You are charged higher fees than if a human adjusted your portfolio
You don’t have any input as to how your portfolio is invested
You may not be able to get advice from a human when you want it
5
Why are Index Funds such a popular investing option?
They are actively managed by a fund manager
A mix of 2-3 individual stocks that can help you diversify your portfolio
Managed by robo-advisors that guarantee higher returns overall stock market
Provide a low-cost, diversified investment that matches the overall return
6
20: makes 7% with a 1% fee and 500: makes 6.5% with a .1% fee - which investment has better return (net of fees)?
20: It had an overall return of 8.0% while 500 had an overall return of 6.
20: It had an return of 8.0% while 500 had an overall return of 6.
500: It had an overall return of 6.4% while 20 had an overall return of 6.
20: It had an overall return of 8.0% while 500 had an overall return of 6.
7
An actively managed mutual fund…
mix of 2 types of stocks & bonds to diversify your portfolio
Always performs better than an index fund
Generally has lower fees than a passively managed index fund
Is managed by a fund manager who charges a fee
8
You bought 10 shares of stock in StreamingVideoCo for $450 ($45 per share) you sold them for $80 each - profit/loss
Loss of $450
Profit of $350
Profit of $800
Loss of $800
9
How can someone make money from investing in a stock?
They sell the stock for the same price they bought it for
They sell the stock for a lower price than what they bought it for
dividends or they sell the stock at a higher price than what they bought it
The stock loses value but the overall market experiences a positive return
10
What is a brokerage account used for?
It’s a type of account used to buy and sell stocks, bonds, and funds
the account you use to pay taxes owed on money earned on your investments
It’s a special type of 401(k) plan that only some employers offer
an online portal that allows you to set up appointments with a fund manager
11
What kinds of behaviors can PREVENT people from making smart investing decisions?
Buying stocks when prices are low and selling them when they’re high
Staying calm when the market is experiencing a downturn
Investing in a diversified port instead of trying to beat the market
Exiting the market because that’s what everyone else is doing
12
As a shareholder in a public company, what are the benefits available to you?
You have ownership of a portion of the Co. and receive coupon payments
You can select members of the manag team [e.g., the Chief Executive Officer
Must receive dividends from the Co. (all companies must pay them)
May get dividends from the Co. if the Co. pays them, and you have ownership
13
Daniel has saved $2,000 in savings that earns 0.5% interest annually. What will most happen to the purchasing power
will INCREASE because the interest rate is higher than the historical r
will DECREASE because the interest rate is lower than the historical ra
will INCREASE because the interest will compound faster than the histor
will remain the SAME because the interest rate is the same as the histo
14
Sam is 22, and is selecting his investments through his company's 401(k) plan. Why might a target date fund be good?
A TDF will automatically adjust asset allocation based on retirement year
A TDF is insured by the federal government
A TDF buys a single stock/bond -beginner investors can practice day trading
A TDF is actively managed by a fund manager but comes with low fees
15
Which of the following accurately describes a difference between an individual bond compared to a bond fund?
is issued by a company while bond funds only invest in government bonds
guarantees you a higher rate of return than a bond fund
is considered to be a less diversified investment than a bond fund
pays you dividends while a bond fund pays you regular interest
16
What question an investor should ask when deciding whether or not they would like to open a Roth IRA or Traditional IRA?
Do I want to pay taxes now or later?
Do I want to take advantage of my employer’s matching contribution?
Do I want to make a guaranteed return of 6% or 8%?
Do I want to take on more or less risk?
17
Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...
Invest in a low cost index fund
Invest in a diversified portfolio
Estimate what she will need for retirement/determine what to invest
Pick individual stocks to see if she can beat the market
18
How is a bond different from a stock?
Bonds-issued by smaller startup co while stocks are by well established org
Bonds are riskier than stocks but have the potential to earn higher returns
bond-loan you give to an org while a stock is partial ownership in a co
Bonds-earning high returns/stocks-providing a table source of income
19
Why is it important for you to understand your risk tolerance before you start investing?
tailor your portfolio to assume an amount of risk you are comfortable with
recommended that people with a low risk tolerance shouldn’t invest at all
If you have a high risk tolerance, you may be eligible for lower fees
help you decide if you want to participate in your employer’s match program
20
Which of the following statements is TRUE about compound interest?
allows you to earn interest not only on the amount you have saved, but als
difficult to calculate, so those who use it earn higher profits for the
directly impacts how much you will be charged in fees
means you have a fund manager who is compounding your returns without char
21
How does investing in the stock market differ from putting money in a savings account at a bank?
typically earns between 1-2% while saving generally earns between 5-7%
Investing is always a less risky option than saving
is best for short-term situations; saving is best for the long term
you to accumulate wealth for retirement while saving is best for short-term
22
You buy a bond with a fixed coupon rate of 5%. Later, bonds that are issued have a coupon rate of 3%. Which is true?
The interest rate for your bond will fall to 3%
The price of your bond will stay the same
The price of your bond will increase
The demand for your bond will decrease
23
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 offered exclusively through robo-advisors
Dollar-cost averaging is advantageous because earnings are untaxed
Dollar-cost averaging is a strategy that only expert investors use
24
Work will match 3% of your $65,000 per year salary, but you only have $150 to put in your 401(k) what should you do
Opt out of the 401(k) plan since she doesn’t have much to contribute
Save the $150 until she has enough to max out her 401(k) then invest
PUt $75/mo in here 401 and same in her IRA so she is diversified
Contribute $150/mo to the 401(k) because her company will match
25
Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?
ETFs are traded once a day after the market closes
ETF prices can change throughout the day as they are exchanged
Actively managed ETFs have very low fees
An ETF is a single stock that you can buy in the stock market

NGPF - Unit 3 - Investing Flashcards | StudBud