Finance Chapter 10 - Investments
T/F: Commodities and futures are extremely speculative and carry a high risk.
TRUE
T/F: Diversification lowers your risk with investing.
TRUE
Never invest purely for ____ __________.
Tax savings
With virtually all investments, ad the risk goes _____, so does the potential return.
Up
Your return in a single stock comes as the company increases in ______ or pays you, its owner, some of the profits (dividends).
Value
_________ annuities are mutual funds sheltered by the annuity covering, thereby allowing the mutual fund to grow tax-deferred.
Variable
What are the types of annuities?
Variable & fixed
What are some investments that don't give you a high rate of return?
- Gold - C.D. - Bonds
List 4 types of investments that you should always avoid.
- Gold - Commodities - Day Trading - Viaticals
What are the examples of horrible investments?
- Gold - Commodities & Future - Day trading - Viaticals
____% of any 15-year period in the stock marked has made money.
100
Always check the ___-___-_____ _______ ________ when investing
5-10-year Track Record
Which is NOT true about investments? A. Always invest only for tax saving purposes B. Never invest using borrowed money C. Avoid complicated investments that are difficult to understand. D. All of the above are true
A. Always invest only for tax savings purposes
________ is a savings account within an insurance company
Annuity
A short-term investment is an investment that is used for savings for how many years or less? A. 1 B. 5 C. 10 D. 12
B. 5
What is the KISS rule of investing? A. Keep it Simple Stocks B. Keep it Simple, Stupid C. Keep it Solo Situated D. Keep it Somewhere Safe
B. Keep it Simple, Stupid
What's the best option if you begin losing money in mutual fund? A. Take the money out of the mutual fund B. Leave it alone and continue to invest money in the fund. C. Panic D. None of the above
B. Leave it alone and continue to invest money in the fund
Which one is not a type of annuity? A. Variable B. Stable C. Fixed D. None of the above
B. Stable
Never invest using _____________ money.
Borrowed
A savings account with a certificate is a: A. Bond B. Annuity C. C.D. D. Viatical
C. C.D.
Which statement is true about liquidity? A. The less liquid the investment, the less return. B. The more liquid an investment, the more return C. The more liquid an investment, the less return D. Both A and B
C. The more liquid an investment, the less return
You should have lots of _____ before using real estate as an investment.
Cash
A C.D. is a _______________ ___ _______, typically at a bank.
Certificate of deposit
__________ is food, metal or fixed physical substance that investors buy or sell, usually via future contracts
Commodity
Which is true about investments? A. Never invest using borrowed money B. Never invest only for tax saving purposes C. Diversification will help lower the risk D. All of the above
D. All of the above
Which of the following is NOT a good investment? A. Gold B. Viaticals C. Futures D. All of the above
D. All of the above
Which of the following is a risk to consider when investing? A. You could lose all your money B. Inflation C. Your money is not liquid D. All of the above
D. All of the above
Long-term investments properly diversified include the following mutual funds: A. Growth, growth and income, bond, aggressive growth B. Growth, balanced, international, bond C. International, bond, aggressive growth, growth D. Growth, growth and income, international, aggressive growth
D. Growth, growth and income, international, aggressive growth
A bond is a _____ instrument by which the company owes you money.
Debt
__________ is spreading around the risk
Diversification
______________ means to spread around one's investment dollars among several different classes of financial assets and among the securities of many issuers; results in lowered risk
Diversification
________________ means to spread around.
Diversification
Mutual funds that are properly ___________ will have investment dollars spread equally amount 4 different classes of financial assets.
Diversified
Money market mutual funds are great for ___________ _____.
Emergency fund
T/F: If your company offers a 403B investment plan then it makes sense to consider investing in annuities instead of mutual funds.
FALSE
T/F: "Liquidity" means to spread around and lower risk.
FALSE "Diversification"
T/F: A certificate of deposit is the best place to keep an emergency fund.
FALSE A money market mutual fund is the best place to keep an emergency fund
T/F: A single stock is the best place to keep your emergency fund.
FALSE Single stocks carry very high risk.
_______ annuities are at a low interest rate of around 5%, aren't really fixed, and are a bad investment.
Fixed
_________ is a term to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange
Futures
Daniel just graduated from college and wants to invest 15% of his income into mutual funds. He earns an annual salary of $32,000 but is $21,000 in debt with his car and student loan. He has $500 in savings. What steps does Daniel need to take?
He needs to pay off debt and then bump his emergency fund up before he begins investing
Single stock investing carries an extremely ______ degree of risk.
High
Your return in a bond is the fluctuation in price and the ________ rate paid.
Interest
____________ account or arrangement in which one would put their money for long-term growth; should not be withdrawn for a suggested minimum of five years
Investments
Why do you look at long-term track rector with a mutual fund?
It gives a much better picture of what you can expect from the fund over the long haul. Looking at short-term track record does not take into account the fluctuations in the market or significant events that cause the market to rise or fall sharply and would not be reliable indicators of a fund's performance.
What is the KISS rule of investing?
Keep it Simple, Stupid!
_______-____ is growth and income stock mutual funds.
Large-cap
As there is more liquidity, there is typically ______ return.
Less
Real estate is the least ______ consumer investment.
Liquid
When discussing investments, __________ is availability.
Liquidity
__________ is the quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money; when there's more liquidity, there is less return
Liquidity
Mutual funds are good _____-_____ investments.
Long-term
How do you go about finding the right person to help you invest?
Look for someone who has the heart of a teacher and explains things in a way you understand
Money market mutual funds are ____ risk money market accounts with check-writing privileges.
Low
Diversification ________ risk.
Lowers
In mutual funds, investors pool their _______ to invest.
Money
___________ ________ is a collection of money from different investors, which is used to purchase stocks, bonds, or other investments and is managed by a fund manager.
Mutual funds
How are single stocks different from mutual funds and which is the better investment?
Mutual funds are made up of 90 - 200 individual companies. Single stocks represent one company. Mutual funds are a better investment because they offer more diversification.
When you buy stock, you are buying a small piece of __________ in the company.
Ownership
In mutual funds, _________ managers manage the pool or fund.
Portfolio
_________ is a list of your investments
Portfolio
_______ ________ is the least liquid of all investments.
Real estate
In mutual funds, your _______ comes as the value of the fund is increased.
Return
_______ is the degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit
Risk
_______ is the degree of uncertainty of the return on an investment.
Risk
______-_____ ________: Risk goes up, return goes down
Risk-Return Ratio
_______-______ _______ is the relationship of substantial reward in comparison to the amount of risk taken
Risk-Return Ratio
______ is the government agency responsible for regulating the stock market. It was created in 1934 to increase public trust after the 1929 stock market crash and the years of the Great Depression
SEC (Securities Exchange Commission)
Annuities are ________ accounts with an insurance company
Savings
__________ _______ are accounts at financial institutions that allow regular deposits and withdrawals; the minimum required deposit, fees charged, and interest rate paid varies among providers
Savings account
_______ is a piece of ownership in a company or mutual fund
Share
________ is a piece of ownership in company stock
Share
Few individuals do well with ______ bond purchases.
Single
______-____ is aggressive growth stock mutual funds
Small-cap
____________ is purchasing risk investments that present the possibility of large profits, but also post a higher-than-average possibility of less
Speculative