How can someone make money from investing in a stock?

They get dividends from the company and sell the stock at a higher price.

Compound interest is more advantageous than simple interest because

Compound interest allows you to earn interest on interest.

A brokerage account is used for or as..

an account to buy and sell stocks, bonds or mutual funds.

To open a brokerage account, you....

must be able to transfer money from a checking or savings account.

An actively managed mutual fund

is managed by a fund manager who charges a fee.

A disadvantage of using a robo-advisor might be that....

you may not be able to get advice from a human financial advisor if wanted.

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

ETF prices can change throughout the day

Diversification is a recommended strategy because.....

It is the best way to help reduce risk.

What kinds of cognitive biases and behaviors can prevent people from making smart investing decisions?

Exiting the market because that's what everyone else is doing.

If your company offers a 401K with a match up to 5% of your salary, but you only have $125 to put in

Contribute the full $125/mo to the 401K as her company will also put in $$$

Target Date Funds are becoming an increasingly popular option to invest in because

TDF's automatically adjust the allocation between stocks &bonds as you age.

Which statement BEST describes the relationship between risk and return when considering an investment?

Investors expect a higher return when they invest in a high risk asset.

Investing in the stock market differs from putting money in a savings account at a bank because (S=Short, L=Long T=term)

Investing is best for LT accumulation, and savings for ST or emergency.

What is a vesting period?

Time it takes for an employer retirement plan to be owned fully by employee

Hannah is a beginner level investor 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.

Understanding your risk tolerance before you start investing is important because

you should tailor your investments so that you are comfortable withthe risk

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

You may recieve dividends, if pd out, and you are a partial owner of the co

When investing in individual stocks, you should expect that....(IF=Index Fund)

unforeseen company events can have a dramatic impact on the stock price.

A bond is different than a stock in that....

a bond is a loan you give to an organization; a stock is partial ownership.

What is one questions an investor should ask before investing in a Roth IRA or a Traditional IRA?

Do I want to pay taxes now (Roth IRA) or later (Traditional IRA)?

Liz has been saving and has $3,000 to invest. What do you think is a good LT investment strategy for retirement?

Invest 80% in a stock indx fund and 20% in a bond index fund.

Index funds are a popular investing option because

they are low-cost, diversified options that closely match returns of S&P.

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INVESTING MODULE REVIEW NGPF FY

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THis is for the investing module for a full year.

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Questions 23

Answers

1
How can someone make money from investing in a stock?
The stock loses value but the overall market experiences a positive return.
They get dividends from the company and sell the stock at a higher price.
They sell the stock for a lower price that what they bought it for.
They sell the stock for the same price they paid for it.
2
Compound interest is more advantageous than simple interest because
Compound interest allows you to earn interest on interest.
Compound interest has lower fees than simple interest.
Compound interest means you work harder for your interest.
Compound interest means you have a fund manager, compounding your returns.
3
If you bought 10 shares of stock for $55 a share. 2 months later you sold them for $90 per share. You would have...
Loss of $450
Loss of $900
Gain of $350
Gain of $900
4
A brokerage account is used for or as..
an online account for paying taxes or money you owe on your investments.
an account to buy and sell stocks, bonds or mutual funds.
a special type of 401K plan that only some employers offer.
an online portal that allows you to set up appointments with a fund manager
5
To open a brokerage account, you....
have to set an appointment with a brokerage firm as you cannot open it.
need to be over the age of 21 or you need a parent to open it for you.
need proof that you have saved enough for an emergency fund first.
must be able to transfer money from a checking or savings account.
6
An actively managed mutual fund
is a mix of two types of stocks and bonds to diversify your portfolio.
generally has lower fees than an index fund.
always performs better than an index fund.
is managed by a fund manager who charges a fee.
7
A disadvantage of using a robo-advisor might be that....
you may be put on a waitlist to use the robo-advisor as there aren't many.
you may not be able to get advice from a human financial advisor if wanted.
you don't have any input as to how your portfolio is invested.
you are charged higher fees than if a human fund manager was used.
8
Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?
An ETF is a single stock that you can buy in the stock market.
ETF's are traded once a day after the market closes.
ETF prices can change throughout the day
Actively managed ETFs have very low fees.
9
Diversification is a recommended strategy because.....
if you diversify, you are guaranteed a higher return.
If you tell your fund manager to diversify, they'll charge lower fees.
It guarantees that you won't lose money with your investments.
It is the best way to help reduce risk.
10
What kinds of cognitive biases and behaviors can prevent people from making smart investing decisions?
Staying calm when the market is experiencing a downturn.
Investing in a diversified portfolio instead of trying to time the market.
Exiting the market because that's what everyone else is doing.
Buying stocks when prices are low and selling them when they're high.
11
If your company offers a 401K with a match up to 5% of your salary, but you only have $125 to put in
you should opt out of the plan, and use the money elsewhere in your budget.
Contribute the full $125/mo to the 401K as her company will also put in $$$
you should put 1/2 in 401K and the other 1/2 in an IRA to diversify.
12
Target Date Funds are becoming an increasingly popular option to invest in because
TDF always perform better than the overall stock market.
TDF don't require you to have a brokerage account.
TDF are tied to a social media account so you can share updates .
TDF's automatically adjust the allocation between stocks &bonds as you age.
13
Which statement BEST describes the relationship between risk and return when considering an investment?
Investors do not expect to earn a return on a high risk,(it's a write-off.)
Investors expect to earn a higher return when they invest in bonds.
Investors expect a higher return when they invest in a high risk asset.
Investors expect to earn a lower return when they invest in a risky asset.
14
Investing in the stock market differs from putting money in a savings account at a bank because (S=Short, L=Long T=term)
Investing is best for LT accumulation, and savings for ST or emergency.
investing typically earns between 1-2% while savings generally earn 5-7%.
investing is always a less risky option than saving.
investing is best for short term, savings is best for long term.
15
What is a vesting period?
Time it takes for an employer retirement plan to be owned fully by employee
The period of time it takes a broker to complete a trade.
The period of time you h old stock before selling it.
The period of time you have been investing in a plan.
16
Hannah is a beginner level investor and is eager to get started. All of the following are things she should do EXCEPT..
Invest in a diversified porfolio.
Pick individual stocks to see if she can beat the market.
Invest in a low cost index fund.
Estimate her need at retirement to determine how to invest each month.
17
Understanding your risk tolerance before you start investing is important because
people with a high risk tolerance may be eligible for lower fees.
you should tailor your investments so that you are comfortable withthe risk
people with a low risk tolerance shouldn't invest at all.
it helps you determine if you want to participate in a 401K plan.
18
As a shareholder in a public company, what are the benefits available to you?
You must receive dividends, you can select members of the mgmt team.
You may recieve dividends, if pd out, and you are a partial owner of the co
You can select members of the management team and vote for new boardmembers
You have ownership of a portion of the company and receive coupon payments.
19
When investing in individual stocks, you should expect that....(IF=Index Fund)
stock prices will be more stable in the LT than prices of a diversified IF.
stock prices for a company are relatively easy to predict.
unforeseen company events can have a dramatic impact on the stock price.
You will have an informational edge by reading an article about a company.
20
A bond is different than a stock in that....
bonds are best for having high returns, a stock is best for stable returns.
a bond is usually issued by smaller companies and stocks by larger ones.
a bond is a loan you give to an organization; a stock is partial ownership.
a bond is typically risker than stocks but have the potential to earn more.
21
What is one questions an investor should ask before investing in a Roth IRA or a Traditional IRA?
Do I want to pay taxes now (Traditional IRA) or later (Roth IRA)?
Do I want to pay taxes now (Roth IRA) or later (Traditional IRA)?
Do I want to make a guaranteed return of 6% or 8%?
What type of investments do I want to make?
22
Liz has been saving and has $3,000 to invest. What do you think is a good LT investment strategy for retirement?
Invest 100% in the stock of her favorite company.
Invest 80% in a stock indx fund and 20% in a bond index fund.
Invest 100% in a regular savings account.
Invest 100% in a bond index fund.
23
Index funds are a popular investing option because
they are managed by robo-advisors that guarantee higher returns.
they are low-cost, diversified options that closely match returns of S&P.
they are a mix of 2-3 individual stocks that can help with diversifying.
they are actively managed by a fund manager.

INVESTING MODULE REVIEW NGPF FY Flashcards | StudBud