Investing Basics
What do you call it when you buy something, like a stock, that you hope will grow in value or pay you income in the future?
Investing
What is the term for spreading your money across many different types of investments so you aren't relying on just one?
Diversification
When you buy a share of stock, you become a part owner of what?
A company
A bond is basically a loan. Who are the two main types of borrowers that issue bonds?
Governments and companies
What do the letters ETF stand for, a type of fund that trades on a stock exchange just like a single stock?
Exchange-Traded Fund
Every investment involves a tradeoff between potential gains and the chance of losing money. What two words describe this tradeoff?
Risk and reward
Finish this saying about diversifying: "Don't put all your eggs in one ___."
Basket
What do we call stocks of big, well-established companies that are generally less risky than stocks of smaller companies?
Large-cap stocks
When you loan money by buying a bond, what does the borrower pay you for the use of your money?
Interest
Mutual funds and ETFs are popular because one purchase gives you a small piece of many what?
Companies (investments)
What do you call it when you earn interest not just on your original money, but also on the interest you've already earned?
Compound interest
What word describes how much and how quickly the price of an investment goes up and down?
Volatility
The "cap" in large-cap and small-cap is short for what word, which measures a company's total value?
Capitalization (market capitalization)
Do bonds typically offer higher or lower returns than stocks?
Lower
Mutual funds usually cost more than ETFs. Why?
They are actively managed
Two people invest the same amount every year, but one starts 10 years earlier. The early starter ends up with much more money. What is the key ingredient that gave them the advantage?
Time
What word describes cash, or anything that can be turned into cash quickly and easily?
Liquid
Over the long term, stocks have historically earned higher returns than savings accounts or bonds. What is the downside of investing in stocks?
They are riskier (more volatile)
What type of savings account pays much more interest than a traditional savings account, with very little risk to your money?
A high-yield savings account (HYSA)
Some ETFs simply copy an index like the S&P 500 instead of having someone pick the stocks. What do we call this hands-off style of management?
Passive management
What is the general word for anything of value that you own, such as a house, a stock, or a bond?
An asset
As people get closer to retirement, they usually move more of their money into safer, steadier investments. Which investment type is known for being safer than stocks and paying a set amount of interest?
Bonds
The Dow Jones Industrial Average is an index that tracks the stock prices of about how many large U.S. companies?
30
When comparing savings accounts, you should look for a high APY. What do those three letters stand for?
Annual Percentage Yield
Many actively managed funds fail to do this over time, which is why low-cost index funds are so popular. Do what?
Beat the market