Investing

Question 1

If the rate of inflation is higher than the rate of return on your investments, then you are ____ _____.

Answer 1

Losing money

Question 2

What is a fund?

Answer 2

A bundle of investments

Question 3

3 main asset classes (types)

Answer 3

Bonds, stocks, cash

Question 4

What is a bond?

Answer 4

A contract w/a company or the government where we loan them our money. They pay us interest for the loan.

Question 5

What is another way to refer to bonds? (Hint: “investing in___” or “owning ___” and “____ income”)

Answer 5

investing in debt; owning debt; fixed income

Question 6

What is a stock?

Answer 6

a share of company ownership

Question 7

What is “price appreciation” for a stock

Answer 7

as the company grows over time, so does our tiny piece of the pie

Question 8

What are dividends?

Answer 8

cash payments made by the company to shareholders

Question 9

___ _______ + ______ = a stock’s total return

Answer 9

price appreciation + dividends

Question 10

3 components of diversification

Answer 10

1. Investing in more than 1 asset class (aka having both stocks and bonds)
2. Investing in more than one country and sector (industry)
3. Investing in more than 1 company
   ^funds take care of #2 and #3

Question 11

For short-term money goals, you should keep your money in ______

Answer 11

cash

Question 12

As you get older, you shift your asset allocation from ____ to _____

Answer 12

Stocks to bonds
(so you’re invested in more stocks when you’re younger)

Question 13

What are bull and bear markets?

Answer 13

Bull market = a positive market that’s expanding, has an upward trajectory

Bear market = a negative market that’s losing value, contracting (more than 20% of value for a prolonged period)

Question 14

True or False: The market is more often up than it is down.

Answer 14

True. It’s up about 70% of the time and down 30% of the time. Bull markets last between 5-10 years. Bear markets last between 1-3 years

Question 15

A contraction in the economy 2 quarters in a row is called a ______

Answer 15

Recession

Question 16

Buying –> stocks go ____
Selling –> stocks go ____

Answer 16

up
down
Demand determines value

Question 17

Events don’t directly cause the stock market to go up/down. _______’s ________ do.

Answer 17

Consumer’s reactions

Question 18

The stock market is like a giant mood ring because ____

Answer 18

It’s reflective of our outlook

Question 19

Why is the stock market also called an “anticipation market”?

Answer 19

B/c the stock market moves first, then the economy follows

Question 20

What are the 3 keys to stock investing success?

Answer 20

1. Do NOT sell when your stocks are down
2. Keep adding money in regularly over time (without looking at the market)
3. Wait a really, really long time (10-50 years)

Question 21

Active management is…

Answer 21

A managed portfolio where you pick out the best stocks or hire someone to do so. You try to beat the market

Question 22

Passive management is

Answer 22

An unmanaged portfolio. Aka Index Investing. Riding the market waves by buying into your small piece of the market and letting it go

Question 23

What is an “index”?

Answer 23

a measure of stock market performance on average (it’s not an investment)

Question 24

Dow Jones measures the top ___ companies

Answer 24

30

Question 25

When you buy or sell individual stocks, there is often a _____ fee added on.

Answer 25

Transaction fee (like $10 for Apple stock)

Question 26

True or False: ETFs and Mutual funds can be index or actively managed

Answer 26

True

Question 27

Index funds outperform actively managed funds __% of the time.

Answer 27

99%

Question 28

1 fund made up of other funds (the crockpot, the whole diversified portfolio) as part of your 401k or 403b is called a ____ _____-_____ fund.

Answer 28

Retirement Target-Date Fund (or Lifecycle Fund)

Question 29

Some Retirement Target-Date Funds are indexed some are managed. This is why you need to _________

Answer 29

Check the funds it’s investing in before signing on

Question 30

Major con of robo-advisors

Answer 30

Their fee

Question 31

Mutual fund tickers end in what letter?

Answer 31

X (like VFIAX)

Question 32

ETF funds are “tax-____” and therefore better for _____ accounts

Answer 32

tax-efficient
brokerage