Personal finance true false

Convertible bonds are so named because they can be exchanged for a set number of shares of common stock.

Fact: Convertible bonds carry the provision that they may, within a stipulated time period, be converted into a certain number of shares of the issuing company's common stock

Homeowner's insurance provides protection not only on the home itself but also most of its contents.

Fact: Homeowner's insurance covers the home itself and most of the contents in it, including furniture stereos and TVs, computers, and clothing. On the other hand, cars, motorcycles, golf carts, high value jewelry, and the like usually are not covered under a homeowner's policy.

Putting your money into stocks that offer dividend reinvestment plans is a great way of building up your investment capital.

Fact: In a dividend reinvestment plan, you receive additional shares of stock, rather than cash every time the company pays a dividend. It's a great way to reap the benefits of compounding and watch your money grow over time.

The first step in retirement planning is to set your retirement goals.

Fact: In order to provide direction to your retirement plans, you should begin by defining your goals. These include what you want to do in retirement, the standard of living you want to maintain, and the implied level of income you would like.

Income stocks have relatively high dividend yields and, as such, appeal to individuals who seek a high level of current income.

Fact: Income shares are have a long and sustained record of regularly paying a much higher than average level of dividends. Because of this, they are highly sought after by investors seeking a safe and steady source of current income.

In many types of real estate investments, appreciation in the value of the property affects return more than annual rental income.

Fact: Like most forms of investing, the biggest bang for your buck usually comes from capital gains. You'll find that's the way the really big money is made, and real estate is certainly no exception to that rule.

Online and phone switching are services that enable you to move money from one fund to another, so long as you stay within the same family of funds.

Fact: Online and phone switching are conversion (or exchange) privileges that allow you to sell one fund and buy another, with the only condition being that you confine your switches to the same family of funds.

Coming up with a sound asset allocation plan will likely have more of an impact on long-term investment returns than the specific securities you hold in your portfolio.

Fact: Research shows that, over the long- run, the total return on a portfolio is influenced more by its asset allocation plan-its mix of assets- than by specific security selections.

An aggressive investor would short sell a stock if he or she expects its price to go down.

Fact: Short sales are made in anticipation of a drop in the price of a security; an investor makes money on a short sale when prices decline. However, selling short is quite risky and should only be done by risk-hardy , well- informed investors.

Uninsured motorists coverage is available as part of most automobile insurance policies.

Fact: Such insurance is available under stand ard auto insurance policies and offers protection against uninsured, underinsured, or hit-and-run accidents

You must generally obtain an umbrella personal liability policy if you want liability coverage of $1 million or more.

Fact: Such policies provide added liability protection for both homeowners and automobile insurance (simultaneously). They are intended primarily for upper-income and/or higher net worth families, who are often viewed as targets for large liability claims.

Health care insurance coverage should be viewed as an essential component of your personal financial plans

Fact: health care insurance not only helps you meet the costs of illness or injury but also protects your existing assets and financial plans

Social security survivor's benefits should be factored into your life insurance plans if you have a dependent spouse and/or minor children

Fact; social security survivors benefits are paid to the dependents of eligible deceased workers and can be a big factor in helping your family meet their annual income needs

Term insurance provides nothing more than a stipulated amount of death benefits and, as a result is considered the purest form of life insurance

Fact; term insurance provides a given amount of life insurance(death benefits) for a stipulated period of time and nothing more- no investment feature or cash value

Because most life insurance policies are largely the same, you need not concern yourself with differences in specific contract provisions

False; all insurance policies are not the same. Thus it is important to familiarize yourself with the provisions of the contract, including the beneficiary clauses and settlement options

Selecting an insurance company is the first thing you should do when buying life insurance

False; the first thing you should do is determine the amount of life insurance you need and then select the type of policy that is best for you. Only after you have taken these steps should you address where you will buy the insurance

The best way to figure out how much life insurance you need is to use a multiple of your earnings

False; while the multiple earnings approach is probably the simplest procedure, it suffers from a number of serious shortcomings, a better choice is the needs approach

A real estate investment trust (REIT) is a popular form of limited partnership that enables individuals to invest directly in income-producing property.

Fantasy: A REIT is a type of closed-end investment company (like a mutual fund) that issues stocks and invests the proceeds in various kinds of real estate properties, including mortgages.

A good investment is one that offers a positive expected rate of return.

Fantasy: A good investment is one that offers an expected return that equals or exceeds the investor's required rate of return, which is defined relative to the risk of the investment. Thus, what might be a good return in one case may be totally inadequate in another.

capital you're a you're coupon When interest rates go down, bond prices also go down because such securities become less valuable.

Fantasy: Bond prices and interest rates move in the opposite direction. As a result, when interest rates go down, bond prices go up

Disability insurance is helpful only if you make a lot of money-and then only if you are out of work for a long period of time (at least six months to a year).

Fantasy: Disability income insurance replaces some or all of the weekly earnings lost in case you are physically unable to work. The coverage usually begins after a short waiting period and is just as valuable-perhaps more so-to the low-income family as it is to those with high incomes.

Filing a property or liability claim is quick and easy to do. Just call your agent, provide a few basic details, and look for your check in a few days.

Fantasy: Filing a property or liability claim is often a detailed and time-consuming process wherein you must prove your loss. The insurance company can offer you an amount less than the loss you claim or deny your claim altogether

If you rent an apartment, you needn't worry about property insurance because your furniture and other personal belongings are already covered by the landlord's insurance policy.

Fantasy: If you rent and do not have some sort of insurance coverage on your furniture and other personal property, your possessions are uninsured and could be lost! Your landlord is liable only if you can prove that your loss was due to his or her negligence

When a mutual fund is open-ended, it means there's no limit on the returns an investor can realize.

Fantasy: In an open-end mutual fund there is no limit to the number of shares the fund can issue. While the upside return on a mutual fund is limited only by the overall market and the skill of its managers, investors cannot lose more than they invested.

Hospital insurance is the most comprehensive type of medical insurance you can buy.

Fantasy: Major medical or comprehensive major medical provides the most complete coverage, whereas hospital insurance covers only the costs incurred while confined to a hospital.

If you lose a lot of money because a broker gave you a poor investment recommendation, you can recover all or most of your loss by filing a claim with the Securities Investor Protection Corporation.

Fantasy: SIPOC insurance applies only if you are dealing with a brokerage firm that goes out of business. If the brokerage firm fails, you are protected against the loss of securities or cash held by the broker. Importantly, that has nothing to do with getting bad advice from a broker; the SIPC does not cover such situations.

You would need to save $2,500 a year in order to end up with a $25,000 nest egg in ten years.

Fantasy: Simply dividing your financial target ($25,000) by the length of time you have to get there (ten years) fails to take into account the fact that your money can earn a positive rate of return over time. Indeed, the amount you'll have to save each year depends on the rate of return you can earn on your money: The more you can earn, the less you'll have to put up each year.

Stocks listed on the New York Stock Exchange are traded in the over-the-counter market.

Fantasy: Stocks not listed on organized exchanges are traded in the over-the-counter (OTC) market. Listed securities are traded on stock exchanges, which are not part of the OTC market.

The type of car you drive is a personal matter that has no bearing on how much you will have to pay for automobile insurance.

Fantasy: The type of car you drive is one of the major determinants of auto insurance premiums. You can expect to pay a lot more for insurance on a sporty model than on a more "sedate" one.

With health care insurance that covers the whole family, Children May be included up to age 26 as long as they are full-time students

Fantasy: Under the Affordable Care Act a child may be covered in a family insurance plan so long as he or she is under 26 years of age. There is not a requirement that the child be a full-time student.

While exchange-traded funds (ETFs) offer many of the benefits of mutual funds, they have tax-timing disadvantages not present with otherwise comparable mutual funds.

Fantasy: While ETs offer many of the benefits of mutual funds, they also have tax-timing advantages over mutual funds. Most mutual funds regularly distribute taxable capital gains to investors. In contrast, ETFs rarely distribute them. Thus, ETF investors defer most all capital gains taxes until they choose to take them by selling shares.

Health reimbursement accounts (HRAs) and health savings accounts (HSAs) are both funded by employers to help their employees cover health-related costs and any unused money is the employee's to keep.

Fantasy: While both accounts are consumer-directed plans, HRAs are funded solely by employers. In contrast, the money in HSAs is provided by employees, employers, or both to be spent on routine medical costs. If you change jobs, the HRA money remains with your employer. However, the money in an HSA belongs to the employee.

You should pay little attention to annual stockholders' reports because they are so biased.

Fantasy: While they do tend to accentuate the positive, annual stockholders' reports are nonetheless an excellent source of information and are widely used by informed investors to obtain financial information about specific companies.

The difference between a health maintenance organization (HMO) and a preferred provider organization (PPO) is that the HMO offers a wider range of choices of physicians, hospitals, and so forth.

One of the drawbacks of an HMO is that it is common to be treated at its central facility and by its own doctors. More options are, however, being offered. In a PPO, on the other hand, there are typically more opportunities to choose your health care providers from a network of designated physicians and hospitals.