Investments

Question 1

What is the soft market?

Answer 1

A place where people can buy and sell shares of companies everyday

Question 2

What are the different stock exchanges in the United States?

Answer 2

NYSE, NASDAQ, Chicago Board of Exchange

Question 3

What is the NYSE for?

Answer 3

Very large companies

Question 4

What is the NASDAQ for?

Answer 4

Tech companies and smaller companies

Question 5

What is the Chicago Board of Exchange for?

Answer 5

Mostly commodities

Question 6

What should a young adult invest in first?

Answer 6

A bachelors degree, then a Roth IRA with growth stock mutual finds if baby steps have been completed

Question 7

What is diversification?

Answer 7

To spread around; don’t put your money on one thing

Question 8

What happens when you diversify?

Answer 8

You lower risk

Question 9

What are penny stocks?

Answer 9

Stocks that are worth a couple cents. It’s not smart to buy penny stocks because their low price indicates that the company isn’t worth very much.

Question 10

For long term investments, what is the minimum rate of return to make something?

Answer 10

6%

Question 11

What does liquidity mean?

Answer 11

How available something is; higher risk investments tend to have little liquidity

Question 12

What is a CD?

Answer 12

Certificate of Deposit; a certificate that shows that you have a deposit

Question 13

What is a Money Market Mutual Fund?

Answer 13

A fund with check writing privileges; low risk

Question 14

How much of your nest egg should be single stocks?

Answer 14

Dave Ramsey does not own any single stocks. He believes they are too risky, but if you choose to own them, no more than 10%.

Question 15

What percentage of single stock owners lose money in a year?

Answer 15

78%

Question 16

What are dividends?

Answer 16

A portion of the profits made by a company that is issued to a shareholder

Question 17

What is considered a bear market?

Answer 17

Market has lost at least 20% of value

Question 18

What is considered a bull market?

Answer 18

Market has gained at least 20% of value

Question 19

True or False: 97% of the 5 year periods have made money

Answer 19

True

Question 20

True or False: 100% of 10 year periods have made money

Answer 20

True

Question 21

How should you spread your investing in mutual funds?

Answer 21

1/4 - Growth midcap or equity fund
1/4 - Growth and income; large cap fund
1/4 - aggressive growth/emerging markets/small cap fund
1/4 - overseas or foreign fund

Question 22

What is the Rule of 72?

Answer 22

The way to approximate how long it will take to double your money.
72 divided by interest rate

Question 23

How much do millionaires invest of their own income?

Answer 23

20%

Question 24

What is an annuity?

Answer 24

A savings account with the insurance company; fixed or variable

Question 25

What is a variable annuity?

Answer 25

An annuity with a mutual fund; tax favored

Question 26

Should you buy a variable annuity inside something that is already tax protected?

Answer 26

No because you will pay unnecessary fees

Question 27

What is average return on bonds?

Answer 27

8%

Question 28

How are bond prices and interest rates related?

Answer 28

Interest rate and price are inversely related; lower price = higher interest rate

Question 29

What is a mutual fund?

Answer 29

Multiple investors put money into a fund, a manager manages the fund, and you earn money as value increases

Question 30

What are some advantages to mutual funds?

Answer 30

Creates diversification

Question 31

What are growth stocks?

Answer 31

Stocks from growing companies

Question 32

How much money do you need to start a mutual fund?

Answer 32

$250 or $500, or $25-50/month if you deposit every month

Question 33

How long should I keep a mutual fund?

Answer 33

20+ years