Investing
Your friend Jenny wants to use a robo-advisor to manage her portfolio. What does this mean?
A computer software system is going to adjust her portfolio based on her preferences
What are the benefits of being a stock holder?
- you may get dividends - you are part owner of company
How is a bond different from a stock?
-A bond is a loan -a stock is ownership in a company
Why are Index FUNDS such a popular investing option?
-Low cost -Automatically diversified -choose from a larger index
What questions should you ask about how to get started investing?
-What are the fees? -What is the service support level? -Goals? -Risk Tolerance?
Why is it important to start saving for retirement in your twenties?
-can retire early -you get more interest on your money -don't have other expenses like mortgage and/or family support so it is easier to invest
Explain the differences between index funds and mutual funds
-index funds invest in specific securities like stocks -index fund you want to mirror the performance of the index -mutual funds invest in a changing list of securities -mutual funds is to outperform the market
Factors that can influence an individual company's stock price
-new technology -company news -competition -economy/interest rates
To open a brokerage account you...
1. fill out application 2. transfer money 3. must be 18 years old
Why is compound interest more advantageous than simple interest?
Compound interest allows you to earn interest on the interest you've already earned
Why is diversification important? Give me an example
Diversifying your portfolio helps reduce risk
How can someone make money from investing in a stock?
Dividends or sell the stock for more than purchase price
What is one question an investor should ask before investing in a Roth IRA or a Traditional IRA?
Do I want to pay taxes now or later?
What kinds of biases and behaviors can lead to bad investing decisions?
Exiting the market because that's what everyone else is doing
Describe the relationship between risk and return when considering an investment
Expect to earn a higher return when you invest in a high risk stick
How does investing in the stock market differ from putting money in a savings account at a bank?
Investing allows you to accumulate wealth for retirement
Characteristics of an actively managed mutual fund...
Is managed by a fund manager who charges who charges a fee
What is a brokerage account used for?
It's a type of account used to buy and sell stocks, bonds, and mutual funds
Nancy is a beginner level investor what things she should not do?
Pick individual stocks to see if she can beat the market
Why are Target Date Funds (TDFs) becoming an increasingly popular option to invest in?
They automatically change between stocks and bonds as you age
What is a vesting period?
Time it takes for shares in an employer retirement plan to be owned fully
True or False ETF prices can change throughout the day as they are exchanged on the market.
True
A disadvantage of using a robo-adviser might be that...
You may not be able to get advice from a financial advisor when you need it
Why is it important for you to understand YOUR risk tolerance before you start investing?
You should have clear goals and assume an amount of risk you're comfortable with
When investing in individual stocks, you should expect that...
company events can have dramatic impacts on the stock price
