Everfi- Marketplaces- Keys to Investing

A ______ is a fixed income investment that represents a loan from an investor to a borrower.

Bond

A _____ is a short-term investment that is considered highly liquid.

Cash Equivalent

Which of the following statements about cash equivalents is FALSE?

Cash equivalents are considered relatively risky compared to stocks.

What is diversification?

An investment strategy that mixes a wide variety of investments from different categories within a portfolio.

You can diversify your portfolio by investing all your money in one industry.

False

Historically, long-term returns of the stock market have been negative.

False

Jason is 58 years old, has strong financial health, a short time horizon, and an average risk tolerance. Which asset allocation you recommend?

45% stocks and 55% bonds/cash equivalents.

Yena is 38 years old, has average financial health, an intermediate time horizon, and an average risk tolerance. Which asset allocation would you recommend?

65% stocks and 35% bonds/cash equivalents.

Miguel is 25 years old, has low financial health, a long time horizon and a high risk tolerance. Which asset allocation would you recommend?

85% stocks and 15% bonds/cash equivalents.

___________ is an investment strategy that mixes a wide variety of investments from different categories within a portfolio.

Diversification

How is an index fund different than an exchange-traded fund?

Exchange-traded funds trade directly on stock exchanges while index funds do not.

A well diversified portfolio needs about 3 to 5 stocks from different categories.

False

Why might an investor want to invest in the stock market?

Investing in companies through the stock market offers a chance to share in their profits.& Investing in the stock market usually offers a higher return than interest earned on a savings account.

Which of the following is NOT a reason why people invest in the stock market?

Investing is a guaranteed way to make money.

Which of the following statements about investing is FALSE?

Investing is best when you're looking to maintain the value of your money with a little bit of growth.

How is a mutual fund different than an index fund?

Mutual funds are actively managed while index funds are passively managed.

Which of the following is NOT a consideration when determining your asset allocation?

Portfolio diversification

How comfortable you feel taking the risk of losing your money refers to:

Risk tolerance

A _____ is a share of ownership in a company.

Stock

Which of the following statements about stocks is FALSE?

Stocks pay out interest annually.

People invest in the stock market because:

The time value of money states that money available now is worth more than the same amount of money later because of its potential to grow. & Investing in companies through the stock market offers a chance to share in the profits of those companies. &Investing in the stock market generally offers a higher return than interest earned on a savings account.

How long you plan to keep your investments in your portfolio refers to:

Time horizon

A well-diversified portfolio needs about 20-25 stocks from different categories.

True

In the past 90 years, the stock market has had positive returns, averaging 10% annually.

True

Which of the following statements about bonds is TRUE?

When a bond matures, you get the full amount you loaned back with interest.

When would it be a good idea to invest your money instead of putting it in a savings account?

When you won't need the money for a long time.

When would it be a good idea to put your money in a savings account instead of investing it?

When you're looking to maintain the value of your money with a little bit of growth.