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