Personal Finance
Who should invest in a Roth retirement account?
A roth would be the best one for you if you think you are going to be getting more money the older you get
What is one example of a "brokerage" service?
Allowing customers to buy/sell stocks
What are the risk for active investing?
High
Generally, the longer the term of the bond, the?
Higher the chance the bond price may change due to changes in yield.
How is investing in a fund more diversified approach than Investing in a single stock or bond.
Investing in a fund is more diverse because you already have stocks and bonds in the mutual fund
It harnesses compound interest and higher average returns to grow your wealth faster.
Investment
It involves assets like stocks and bonds
Investment
Your account balance will be impacted by the market
Investment
What does it mean to diversify across investments?
It means to diverse into the different investments so you can lessen the risks
Do investors hold on to money for a long time or a amount of short time?
Long time
What are the risk for passive investing?
Low
A riskier bond usually comes from a corporation that has a?
Low credit rating.
Do investors have high risk or low risk?
Low risk
What is the goal when it comes to passive investing?
Match the return of the market
Does diversification mean that if one investment goes down, another will go up to make up for it?
No
What is the goal when it comes to active investing?
Outperform the market
What is the face value of a bond?
Par value
What solutions are presented to fix the Social Security shortfall?
Reduce benefits to match income from payroll taxes
It involves very little risk.
Saving
It is meant for short term goals
Saving
Why is investing a more powerful tool to build long-term wealth than saving?
Saving allows you to have no risk of losing anything but you gain little while investing allows you to gain a high amount of money but you have to worry about losing
Is saving long term or short term?
Short term
Do traders hold on to money for a long time or a short amount of time?
Short time
Which statement best describes what Social Security is and how it works?
Social Security is a government program that pools contributions from current workers to then provide retirement support benefits to those who are eligible.
What does it means to diversify by asset class?
Spread out your investment with those three categories which are stock, bond, and cash
What are the risk as an investor when it comes to buying a stock from a company?
That company can fall out and not do well which means that investor loses money off of that company
What are two disadvantages of putting your money into savings accounts, compared to investing?
The interest rate is much lower in a savings account and the second disadvantage is that your money won't grow with that low interest that you have
What are the tax advantages of investing in a 401(k) or IRA?
The money you contribute is tax deductible
What are the fees for passive investing?
They are low
Do traders buy and sell stocks alot or do they hold onto them?
They do it alot
Why is it still a good idea to diversify your investments?
To minimize risk because you are diversifying into three different asset classes. So if one goes down then maybe one will go up
Amita wants to invest in a fund and choose a few individual stocks and bonds to invest in. Is she allowed to do this? Or, does she have to choose one or the other?
Yes she can do this because it's her own money.Who manages the fund?
Even though risk seems like a bad thing, why is that not always the case with investing?
You can be able to get a reward when it comes to that risk. The higher the risk the better the reward but it matters what you are okay with
Who manages the fund when it comes to passive investing?
You manage it
What will happen if you sell your bond before its maturity date?
You won't get the full amount from the bond and you won't receive the interest payments.
What are two significant advantages of a 401(k) over an IRA?
Your employer will contribute money towards it and they set it up for you
How much of your income do experts recommend investing in a 401(k) account?
10%
About how much more does money grow when it's invested rather than deposited in a traditional savings account?
100 times more
Who manages the fund when it comes to active investing?
A paid finacle professional that you pay to handles your money
Why is it important to invest for retirement?
Because the money is not enough for you to live off of and it might not even be there for you
A 401(k) plan is what?
Benefit that helps workers invest for retirement
Explain the role compound interest played in making this possible.
Compound interest is when your earning your interest on interest so you can have more money
Which tends to be a riskier investment - corporate bonds or government bonds? Why?
Corporate bonds are more riskier because some companies aren't as stable as a government bond when it comes to your money and you getting your money.
Do traders have high risk or low risk?
High risk
Interest rates for riskier bonds tend to be?
Higher so that investors are more willing to take on that risk.
When a company lists its stock on an exchange how will that help them?
It allows investors to buy the stocks from the company and they can spread it to the public and this can cause the company to have more buyers
What is a dividend?
Its money that the company can give back to their investors and they don't have to do this
When overall interest rates rise (to 10%), the bond you already own (with 5% coupon rate) becomes?
Less valuable to potential buyers, so its price will fall.
The higher the risk associated with the bond, the?
More likely a corporation might default on paying the investor.
When overall interest rates fall (to 2%), the bond you already own (with 5% coupon rate) becomes?
More valuable to potential buyers, so its price will rise.?
How can you invest for retirement if your employer does not offer a 401(k) plan?
Open an Individual Retirement Account
What are the fees for active investing?
They are high
Do investors buy and sell stocks alot or do they hold onto them?
They buy and hold on to the stocks for the long run
What are the two ways that investors can make money from stocks?
They can either trade the stocks in the stock market or earn money from the company by dividends
While Social Security benefits millions of Americans, the system is not perfect. In what ways is inequality built into the Social Security system?
They can still get the benefits without having to pay a lot of money then someone else and not having to work a lot throughout their lives
What are the tree ways you can manage risk?
Time (The longer you are investing the more likely you will make money), Diversification (Investing in multiple investments instead of investing into one), Invest over time (Spreading your invest a little bit over time).
The stock market fluctuates in the short-term but tends to increase in the long term, with an average projected growth of approximately 6% per year. Based on what you know about trading and investing, which approach is higher risk? Why?
Trading because it's very fast to get money but you can lose money very fast as well
What recommendations would you give someone who wants to take advantage of compound interest but is not able to put away large sums of money on a regular basis?
Use small amounts because it will still build wealth through a long period of time
What types of income can you use in retirement to support yourself?
You can pay with a pension, social security, and employment
Opening an employer-provided 401(k) or an IRA is just the first step towards investing for retirement. What other action do you need to take? Why?
You have to decide how much money you want to put in there and you have to estimate when you will be able to retire
What is the advantage of starting to invest at a young age?
Your money will have more time to grow for when you retire