Basics of Money
What are the one of the three main functions of money
Medium of exchange, store of value, unit of account
What does it mean to “diversify” a portfolio?
Invest in a variety of assets to reduce risk.
What is a market sector?
A group of companies that operate in the same industry or business type, like tech or healthcare.
What is inflation?
The rise in prices over time, reducing purchasing power.
Who makes the big decisions in a company?
CEO & executive team/board.
What’s the difference between an asset and a liability?
Assets add value; liabilities take value away.
What is the difference between aggressive and conservative investing?
Aggressive = higher risk & potential return; Conservative = safer, slower growth.
Which sector includes companies like Google, Apple, and Microsoft?
Technology sector.
What usually happens when interest rates go up?
Borrowing decreases, investments may shift, stocks may drop.
What’s a merger vs. an acquisition?
Merger = two companies join; Acquisition = one buys another
Why is budgeting important for long-term financial health?
Helps avoid overspending, prepares for future expenses.
Name 3 asset classes someone might invest in.
Stocks, bonds, real estate, crypto, mutual funds, etc.
During a recession, which of these sectors is usually the most stable: Tech, Consumer Staples, or Real Estate?
Consumer Staples.
What’s the connection between inflation and interest rates?
Interest rates are often raised to reduce inflation
Why would a company buy back its own stock?
To reduce shares, increase value per share, or show confidence.
What happens when expenses are greater than income?
You become in debt.
If you're a long-term investor, why might you ignore short-term market dips?
Because markets typically recover over time; short-term dips are normal
Why might an investor choose to invest in multiple sectors instead of just one?
To reduce risk and take advantage of different economic cycles — diversification.
How might a pandemic affect financial markets?
Causes uncertainty, drops in production, panic selling, etc.
How do leadership decisions affect stock prices?
They can change company value and investor perception.
Explain how inflation affects your purchasing power.
Inflation decreases the value of money over time, so you can buy less with the same amount
What is a stop-loss order used for?
To automatically sell a stock to prevent further loss.
What is the difference between a bull and bear market?
A bull market is when the market has a upward trend and a bear market is when the market has a downward trend.
Name one industry that usually performs well during a recession.
Healthcare, utilities, consumer staples.
Why would a company delay launching a risky product?
To reduce risk, wait for better market timing, or gather more data.