Unit 5

Question 1

Time - investing vs Saving

Answer 1

Investing: Typically requires a longer time horizon, often years or even decades, to see significant growth in wealth.

Saving: Can be for short-term needs or emergencies, and the growth is usually slower compared to investing.

Question 2

Risk/Reward - Investing vs Saving

Answer 2

Investing: Involves taking on some level of risk with the potential for higher returns. The risk could result in losses if investments don’t perform well.

Saving: Generally considered safer since it involves placing money in low-risk accounts like savings accounts or certificates of deposit (CDs), but the returns are typically lower than those from investments.

Question 3

using money to make money stocks vs bonds

Answer 3

Investing: Involves using your money to buy assets like stocks, bonds, or real estate with the expectation that they will increase in value over time, thereby making you more money.

Saving: Usually involves putting money into accounts where it earns interest over time, but the growth is limited compared to investing.

Question 4

ROI / ROR

Answer 4

This tells you how much money you’ve made or lost on your investment compared to how much you initially put in. It’s like calculating your score in a game to see if you won or lost.

Question 5

Portfolio

Answer 5

collection of different investments, similar to having a variety of items in a treasure chest. It helps spread out risk and maximize potential gains.

Diversification:
Investing: Diversification means not putting all your eggs in one basket. It’s like having different types of plants in a garden to protect against a single pest wiping out everything.