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Published byMolly Stokes Modified over 9 years ago
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What is the difference in Traditional IRA & Roth IRA? How it is taxed. Roth IRAs grow tax free
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What is an advantage of investing with help of a full service brokerage company? Can help with complex issues when investing, such as tax situation, etc. They also have analysts working behind the scenes reviewing the data.
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Define stock: Share of ownership in a company
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What is compound interest? When your previous earned interest can earn interest
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Why does the average investor invest in mutual funds? Diversification is built into this type of investment
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What is the general relationship between risk & reward? The higher the risk, the greater the reward
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Define Capital gains: Gain made from investments. Taxed as unearned income
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What does rollover mean in the investment world? The average American changes employment 7 times in their lifetime – a rollover allows them to move investments by following the outlined rules and avoid tax consequences
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What are market indicators? Dow, S&P 500 and Nasdaq
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What are round & odd stock purchases? The number of stocks purchased. A round lot means in lots of 100 (i.e. 200, 300, etc.) Odd lots are 102, 104, 201, etc.
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What are the three most important criteria to consider when investing? Risk, Rate of Return and Liquidity
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What is the risk pyramid? Shares information regarding the measure of risk for an investment
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How are the prices for stocks & bonds determined? Supply and demand
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Liquidity is most difficult in which type of investment? Real Estate
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What is an IPO and who can purchase it? Initial public offering – Investment Bankers
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Why should you start to invest when you are young? To benefit from compounding. You can never get back time!
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What is a nominal rate of return? A nominal rate of return does not take all cost into consideration. A real rate of return gives a more accurate reflection.
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Explain the purpose of 529, 401(k) and 403(b) 529 - Saving for higher education 401(k) – offered by private companies as a way to save for retirement (typically has a match) 403(b) – way for individuals working for non-profits to save for retirement (typically does not have a match)
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Explain bear market: Does not have consumers’ confidence and investors tend to not invest
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What is the difference in corporate and government/municipal bonds? The tax situation
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What are blue chip stocks? Stocks in large, nationally known companies, that have been around for a long time. i.e. McDonalds, Coke, etc.
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What is the relationship between risk & diversification? Diversification lowers risk. One of the main reasons most Americans invest in mutual funds is because diversification is built into them
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What is inflation risk? What is market risk? Inflation risk - The risk that an investment will not keep up with inflation. Market risk – a guarantee that you will make money
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Explain bull market: Has consumers’ confidence and consumers tend to invest in this type of market
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What is principal? Original amount of money invested
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