Personal Finance Investing Unit Review Part 2

Is managed by a fund manager who charges a fee

An actively managed mutual fund...

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

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?

It's a type of account used to buy and sell stocks, bonds, and funds

What is a brokerage account used for?

Do I want to pay taxes now or later?

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?

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

Why are Index Funds such a popular investing option?

You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with

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

You may receive dividends from the company, if the company pays them, and you have ownership of a portion of the company

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

PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%

Geraldo reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7.0% per year and an annual fee of 1%. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Geraldo (net of fees)?

Contribute the full $150/mo to the 401(k) because her company will match that full amount, "doubling" her investment every month

Katrina works for Penny's Pickles, which offers a 401(k) match for up to 3% of her salary, which is $65,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do?

Pick individual stocks to see if she can beat the market

Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...

Social Security is a government program that pools contributions from current workers to fund retirement support benefits to those who are eligible

Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?