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Practical Business Knowledge > Investment Basics > Flashcards

Investment Basics Flashcards

1
Q

What is the definition of an investment?

A

An investment is the allocation of resources, usually money, in order to generate income or profit.

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2
Q

True or False: All investments guarantee a return.

A

False

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3
Q

Fill in the blank: The primary goal of investing is to __________ wealth over time.

A

grow

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4
Q

What is a stock?

A

A stock is a share in the ownership of a company.

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5
Q

What are bonds?

A

Bonds are fixed income instruments that represent a loan made by an investor to a borrower.

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6
Q

Multiple Choice: Which of the following is considered a low-risk investment? A) Stocks B) Bonds C) Real Estate D) Cryptocurrency

A

B) Bonds

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7
Q

What is diversification in investing?

A

Diversification is the practice of spreading investments across various financial instruments to reduce risk.

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8
Q

True or False: Real estate is a liquid investment.

A

False

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9
Q

What is the difference between a mutual fund and an exchange-traded fund (ETF)?

A

A mutual fund is actively managed and priced at the end of the trading day, while an ETF is traded on an exchange like a stock and priced throughout the day.

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10
Q

Fill in the blank: __________ risk is the risk of losing some or all of an investment due to market fluctuations.

A

Market

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11
Q

What does ROI stand for?

A

ROI stands for Return on Investment.

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12
Q

Multiple Choice: Which investment is generally considered the most volatile? A) Bonds B) Stocks C) Savings Accounts D) Certificates of Deposit

A

B) Stocks

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13
Q

What is an index fund?

A

An index fund is a type of mutual fund or ETF that aims to replicate the performance of a specific index.

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14
Q

True or False: Dollar-cost averaging is an investment strategy that involves investing a fixed amount of money at regular intervals.

A

True

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15
Q

What is the purpose of a prospectus?

A

A prospectus is a legal document that provides details about an investment offering to the public.

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16
Q

Fill in the blank: __________ investing involves selecting stocks based on their fundamental value and potential for growth.

A

Value

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17
Q

What is the capital gains tax?

A

The capital gains tax is a tax on the profit made from selling an asset that has increased in value.

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18
Q

Multiple Choice: What type of investment is typically considered safest? A) Stocks B) Bonds C) Real Estate D) Commodities

A

B) Bonds

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19
Q

What is the significance of the S&P 500?

A

The S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

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20
Q

True or False: A bear market is characterized by rising stock prices.

A

False

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21
Q

What is asset allocation?

A

Asset allocation is the process of dividing investments among different categories, such as stocks, bonds, and cash.

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22
Q

Fill in the blank: __________ is the potential for loss in an investment.

A

Risk

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23
Q

What does it mean to liquidate an asset?

A

To liquidate an asset means to convert it into cash by selling it.

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24
Q

Multiple Choice: Which of the following is NOT a type of investment? A) Stocks B) Bonds C) Savings Accounts D) All are types

A

D) All are types

25
Q

What is a dividend?

A

A dividend is a portion of a company’s earnings distributed to shareholders.

26
Q

True or False: Investing in foreign markets can increase diversification.

A

True

27
Q

What is a financial advisor?

A

A financial advisor is a professional who provides financial services and advice to clients.

28
Q

Fill in the blank: __________ investments are those made with the expectation of generating income or appreciation.

A

Capital

29
Q

What is the primary risk associated with investing in stocks?

A

Market risk, which involves the potential for loss due to market fluctuations.

30
Q

Multiple Choice: What is the main purpose of bonds? A) Generate income B) Increase volatility C) Decrease risk D) All of the above

A

A) Generate income

31
Q

What does the term ‘bull market’ refer to?

A

A bull market refers to a period of rising stock prices.

32
Q

True or False: Real estate investment trusts (REITs) are companies that own or finance income-producing real estate.

A

True

33
Q

What is the role of the Securities and Exchange Commission (SEC)?

A

The SEC is a U.S. government agency responsible for regulating the securities industry and protecting investors.

34
Q

Fill in the blank: __________ investing focuses on short-term price movements and trends.

A

Technical

35
Q

What is a hedge fund?

A

A hedge fund is an investment fund that employs various strategies to earn active returns for its investors.

36
Q

Multiple Choice: Which investment typically has the highest potential return? A) Bonds B) Real Estate C) Stocks D) Savings Accounts

A

C) Stocks

37
Q

What does the term ‘liquidity’ refer to in finance?

A

Liquidity refers to how quickly an asset can be converted into cash without affecting its market price.

38
Q

True or False: A 401(k) is a type of retirement savings plan offered by employers.

A

True

39
Q

What is a yield?

A

Yield is the income return on an investment, typically expressed as a percentage.

40
Q

Fill in the blank: __________ analysis involves evaluating a company’s financial data to determine its value.

A

Fundamental

41
Q

What is the difference between active and passive investing?

A

Active investing involves ongoing buying and selling, while passive investing involves a buy-and-hold strategy.

42
Q

Multiple Choice: Which of the following is a characteristic of a growth stock? A) High dividends B) Low risk C) High potential for capital appreciation D) Stable earnings

A

C) High potential for capital appreciation

43
Q

What is a stock market crash?

A

A stock market crash is a sudden and significant decline in stock prices across a significant section of the market.

44
Q

True or False: An IPO (Initial Public Offering) is when a company offers its shares to the public for the first time.

A

True

45
Q

What does ‘market capitalization’ refer to?

A

Market capitalization refers to the total market value of a company’s outstanding shares of stock.

46
Q

Fill in the blank: __________ is the amount of profit earned on an investment relative to its cost.

A

Return

47
Q

What is a financial portfolio?

A

A financial portfolio is a collection of financial assets like stocks, bonds, and cash.

48
Q

Multiple Choice: Which investment is typically the most stable? A) Stocks B) Bonds C) Real Estate D) Commodities

A

B) Bonds

49
Q

What is the purpose of a retirement account?

A

The purpose of a retirement account is to save and invest money for retirement while providing tax advantages.

50
Q

True or False: Dollar-cost averaging can help mitigate the impact of market volatility.

A

True

51
Q

What is a bear market?

A

A bear market is a market condition where prices are falling or are expected to fall.

52
Q

Fill in the blank: __________ funds are designed to track the performance of a specific index.

A

Index

53
Q

What is risk tolerance?

A

Risk tolerance is an investor’s ability and willingness to endure market volatility.

54
Q

Multiple Choice: Which of the following is a benefit of investing early? A) Compounding returns B) Lower risk C) Higher liquidity D) All of the above

A

A) Compounding returns

55
Q

What is a robo-advisor?

A

A robo-advisor is an automated platform that provides financial planning services with little to no human intervention.

56
Q

True or False: High-yield savings accounts are risk-free investments.

A

True

57
Q

What is a margin account?

A

A margin account allows investors to borrow money from a broker to buy securities.

58
Q

Fill in the blank: __________ investing involves purchasing assets at a lower price and selling them at a higher price.

A

Speculative

59
Q

What is the role of a stockbroker?

A

A stockbroker is a professional who buys and sells stocks and other securities on behalf of clients.

Practical Business Knowledge (13 decks)

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