Wealth Managment

True or False: Vesting periods can be used as a way to retain employees for a longer period of time

True

What is one main difference between a 401(k) and a Roth IRA?

401(k) you contribute pre-tax money while you pay taxes now for a Roth IRA

Your returns (or interest rate) are 8% a year. How long before your investment doubles?

9 years

Sam is 22, just started his first full-time job, and is selecting his investments through his company's 401(k) plan. Why might a target date fund (TDF) be a good option for Sam?

A TDF will automatically adjust his asset allocation based on the retirement year he chose

How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in a company

What is a bond?

A loan from you to a company or the government

As you get older, a Target Date Fund will adjust by...

Decreasing in stocks and increasing your bonds

What should people do to minimize risk in the stock market?

Diversify their investments

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

Do I want to pay taxes now or later

True or False: A savings account is useful for putting aside money for retirement

False

True or False: Mutual funds guarantee a higher rate of return

False

True or False: Nancy is new to investing and is eager to get started. She should pick individual stocks to see if she can beat the market

False

How does a mutual fund differ from an index fund?

Index funds invest in a specific list of securities while mutual funds securities change

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

Investing if for retirement while savings is for short term purchases or emergencies

John has saved $3,000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

It will decrease

WHat is the best advice to give an investor when the market is volatile?

Make sure investors are diversified

Is a bond or mutual fund more diversified?

Mutual fund

How do stocks and bonds differ

Owning a share means you own a percentage of the company< risky bonds are more stable and less risky.

What does it mean to "diversify" your portfolio?

Spreading your investments both among and within different asset classes.

How do stocks and bonds differ?

Stocks may help you protect your money from inflation while bonds may be more susceptible to losing their value over time due to inflation

Why are Index Funds such a popular investing option?

They provide a low cost, diversified investment option that closely matches the overall return of a given index such as S&P 500

How can someone make money from investing in a stock?

They receive dividends or they sell the stock higher price than what they bought for (capital gain)

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

To assume the amount of risk you are comfortable with

Why is diversification a recommended investment strategy?

To help reduce risk

What is a brokerage account used for?

To purchase different accounts

True or False: An actively managed mutual fund is managed by a fun manager who charges a fee (expense ratio)

True

True or False: Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

True

True or False: Dollar-cost averaging is a way to decrease your risk when investing because you invest small amounts at regular intervals. The total price paid is less affected by market timing

True

True or False: Exiting the market because that's what everyone else is doing is a behavior that can PREVENT people from making smart investing decisions

True

True or False: Having a financial planner manager will charge fees that will decrease the profits you gain

True

True or False: Investors expect to earn a higher return when they invest in a high risk asset

True

True or False: Mutual funds offer investors the advantage of securities diversification

True

What is one advantage of starting to invest as early as possible?

You can get more money

How do you know if you are eligible to open and make contributions to a Roth IRA?

You have to earn below a certain amount to make contributions

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

You may receive dividends from the company

Certificates of deposit and municipal bonds are types of

lending investments