Investing Fundamentals

Question 1

Before starting an investment fund, what should you do?

Answer 1

Have a solid emergency fund that would cover 3-6 months living expenses if something were to happen

Question 2

How many credit cards does the normal individual need?

Answer 2

No more than 2. Preferably just 1.

Question 3

Economics

Answer 3

Study of how wealth is created and distributed

Question 4

Fiscal policy

Answer 4

Used to alter the tax structure and levels of government spending

These actions are designed to influence the amount that citizens/businesses save, invest, and spend

Used to offset the effects of a recession

Question 5

Monetary policy

Answer 5

Used to determine the size of the supply of money in the nation and level of interest rates that both consumers and businesses pay to borrow money

Question 6

Business cycle

Answer 6

The increase and decrease in a nation’s economic activity

Question 7

What are six steps you can take if expecting the economy to head for a downturn?

Answer 7

1. Establish a larger emergency fund
2. Know what you owe, including monthly payments like car, mortgage, etc
3. Reduce spending
4. Notify credit card companies and lenders if can’t make payments
5. Track investments so you know what to sell if needed
6. Sell a few stocks before the downturn to keep in savings, then buy again shortly before the economy comes back up again

Question 8

Speculative investment

Answer 8

A high risk investment made in the hope of earning a relatively large profit in a short time

Question 9

Rate of return

Answer 9

Total income received from an investment over a specific period of time divided by the original amount invested

Question 10

What is the face value of a bond?

Answer 10

The dollar amount that will be paid to the bondholders at maturity.