Investing Test Flashcards
A type if growth investment
Stocks
A type of income investment
Savings account
A system where the public can buy it sell stock
Stock exchange
Something of value that can be changed into cash
Asset
Earning interest on previously earned interest plus the principal amount
Compound interest
Spreading your money among different savings and investments
Diversification
Historical long term annual average rate of inflation
3%
The basic rule of risk to return relationship
The higher the risk the higher the rate of return
The lowest investment risk while still growing in value
Savings account
True/false- mutual funds are convenient and professionally managed
FALSE
True/False- Mutual funds offer guaranteed returns
FALSE
True/False- buying a car to get to work is an investment
FALSE
If you buy stock in a company can you expect to have control in what is produced at that company
NO
What are the 3 steps to building wealth
- Have enough income to invest
- Make a plan
- Put money to work by investing
When is the best time to start investing
Sooner rather than later
How have most people gained their fortunes
Planning. Investing. Inculminating Assets of value
What is the difference between saving and investing
Saving-Setting aside money to use later
Investing- using money to buy something to make money
Why should one diversify their investments
Minimize your risk of loosing money. Money is invested in different types of investments
Why should one save their money in bank rather than under their mattress
- Insured 2. Safety 3. Invest earned 4. Less temped to spend if it’s in bank
Other than diversifying investments, what are other recommended practices
Develop investment strategies, start now or early, invest for the long term, invest regularly, do your hw before investing, determine what your investing
What strategies should a new investor avoid
Flipping stock, blind trust in resources of information, getting emotional, relying on only past performances, don’t borrow money to invest, holding 1 type of investment
What is the dollar cost averaging investment strategy
Invest a set amount of money at regular intervals, invest consistently
How can a minor buy stocks and bonds
Custodian account set up by your parents/ guardians
Explain the time value concept
The value of money decreasing due to inflation
Put these in highest to lowest Balanced mutual fund Certificate of deposit Money market deposit account Start up stock Us savings bond
Start up stock Balanced mutual fund Us savings bond Certificate of deposit Money market deposit account
Rank highest to lowest Mutual fund Collectible Stock (in 1 company) Savings account Corporate bond
Collectible Stock (in 1 company) Mutual fund Corporate bond Savings account
