Investing and Retirement

Saving and investing have nothing to do with the amount of money you have.

True

Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money is

liquidity

A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement.

annuity

a___ is a piece of ownership in a company, mutual fund or other investment

share

Long-term investments, properly diversified, include the following mutual funds

Growth, growth and income, international, aggressive growth

In some cases, employers will match the employee contribution, but you should find your plan whether your company matches or not. This statement refers to:

401(k)

What is the key to a good investment portfolio?

The key to investing is diversification, since having different types of investments and not keeping all your eggs in one basket lowers risk.

What was the name of the book the billionaire advised Mr. Ramsey to read? Why was it recommended?

He recommended the Tortoise and the Hare. The book represents the importance of not rushing investment, since slow and steady wins the race.

The benefit of diversification in your investments is:

Reduced risk

If you get into financial trouble, borrowing against your retirement plan is a good opinion.

False (You should never borrow from your retirement plan)

Employee benefits packages:

Are non-wage compensations provided to employees in addition to their normal wages or salaries

To ensure that some of your retirement savings will not be subject to income tax upon withdrawal, you would contribute to:

A Roth IRA

Using the Rule of 72:

What interest rate would you need for your money to double in 6 years.

72/x=6

x=12%

You can start investing with a small amount of money.

True

A young investor willing to take moderate risk for above-average growth would be most invested in:

Mutual funds

What is the Rule of 72? How is it calculated?

The Rule of 72 is a formula used to calculate the amount of years it takes to double money.

\
formula 72/interest rate = years

You should start investing as soon as you have your college education funded.

True

If you leave a job and have money saved in your employer’s retirement plan, always roll that money into an IRA using a direct rollover, which allows you to avoid taxes and penalties.

True

Good investment portfolios are extremely complex

False (Investment portfolios do not have to be complicated)

Buying the beneficiary position of someones life insurance policy below face value

Viaticales

Explain what commodities are? Explain why they are so risky.

Different raw materials that are usually traded, like gold. They are extremely risky because they are unstable. Many factors can affect the value, such as weather and inflation.

Money markets are great for your emergency fund due to their liquidity and stability.

True

___ is a list of your investments.

portfolio

Name and explain two types of Mutual Funds you were taught to invest in.

Small-cap: maximum long term growth from smaller companies

Large-cap: mutual fund made up of large companies

Single stocks and mutual funds carry the same amount of risk.

False (Single stocks carry more risk than mutual funds)

Describe the Bull and Bear markets. Why are they named this?

Bull and bear markets are named after how the animals attack they attack their prey. When bulls attack they use their horns and that describes how during bull markets, markets are rising. Bears hit down their prey, so bear markets are falling.

Distribution of a portion of a companies earnings to companies share holders is ____.

dividend

A retirement plan found in nonprofit organizations such as churches, hospitals, and schools.

403(b)

What are the three “Basic Rules of Investing“

* Kiss Principle- Keep it Simple Stupid
* Never invest on borrowed money
* Never invest purely for tax savings

Which statement is true about liquidity?

The more liquid and investment, the less return

Relationship of substantial reward compared to the amount of risk taken is __

risk-return ratio

What is the difference between tax deferred and tax free investments?

tax deferred - pre-tax contributions taken from gross income

\
tax free- are after-tax contributions taken from net income

Savings accounts and money-market accounts are most appropriate for:

Emergency funds and short-term goals

Using the Rule of 72:

\
You have an investment rate of return at 7%, how many years would it take to double your money?

72/7=x

\
x= About 10 years

Mutual funds are good___ term investments

Long

Why do single stocks carry a high degree of risk? Why do mutual funds carry less risk?

Single stocks are not diversified at all and it is impossible to predict what factors will influence the company/value of the stocks.

\
Mutual funds are more diversified and professionally managed, so they carry less risk.

Which of the following is a good investment option?

Mutual funds

A reason that people need to save and invest is to:

Enable their money to make money