13.1 - Starting Your Investment Program
What is the accumulation of excess funds by intentionally spending less than you earn?
What is Savings
What is investment risk?
What is the possibility that the yield on an investment will deviate from its expected return
What is the possibility for an investor to experience losses due to unknown factors that affect the overall performance of financial markets?
What is Market Risk/ Systematic Risk/ Undiversifiable Risk?
What are places where stocks and bonds are traded (or in the case of electronic trading, the way in which securities are traded)?
What is securities market?
What does buy and hold mean?
What is an investment strategy that investors use to buy a wide range of stocks or mutual funds and hold onto them almost indefinitely
Explain the difference between investing vs. saving
Savings is the accumulation of excess funds by intentionally spending less than you earn. Investing is putting saved money to work so that it makes you even more money.
Why would an investment risk be beneficial for the investor?
What is high risk equals higher the potential return
What is usually the largest transaction cost in investments?
What is commissions?
What is a reverse movement of at least 10 percent in a stock, bond, commodity, or index to adjust for recent, too rapid, price rises?
What is a market correction?
Why is a portfolio diversification important?
What is it is a practice of selecting a collection of different asset classes of investments that are chosen for their potential personal return and risk return characteristics.
What is rate of return/yield?
What is the total return on an investment expressed as a percentage of its price
What type of investor chooses to strive for a very high return by accepting a high level of risks? Conservative, modern, or aggressive?
What is aggressive
What is using borrowed funds to invest with the goal of earning a rate of return in excess of the after-tax costs of borrowing?
What is leverage
Who are people who attempt to predict the short-term movements of various markets?
Who are market timers?
What are the 3 markets included in stocks or mutual fund investments?
Fluctuating market, declining market, and rising market.
What are the two parts of total return?
What is Dividends (Current income) and Capital Gains
What does risk tolerance mean to an investor?
What is to infer the risks, you have made and make changes in the value of your investment
What are three types of investment risk?
What are business failure risk, inflation risk, time horizon risk, regulatory risk, business-cycle risk, market-volatility risk, global investment risk, liquidity risk, marketability risk, reinvestment risk?
What is when emotion, not logic, rules investing decisions and investors, decide to copy the observed decisions of other investors or movements in the markets rather than follow their own beliefs and information?
What is herd behavior?
Asset allocation requires only three types of investments... what are they?
What is stocks/mutual funds, bonds, and cash
What is the definition of a bond?
What is a debt instrument issued by an organization that promises repayment at a specific time and the right to receive regular interest payments during the life of the bond
What makes up the base level of the risk pyramid?
What is SAVINGS BONDS, CERTIFICATES OF DEPOSIT, INSURED BANK ACCOUNTS, AND TREASURY SECURITIES
What are three of changes in society that can cause market risk?
What are changes in economic, social, political, or general market conditions?
What are three mistakes to avoid for long term investing?
What are being overconfident, setting unrealistic goals, trading too much, buying high and selling low, borrowing to invest to recover losses, taking on too much risk, and being loss averse?
Why is rebalancing your investment portfolio at least once a year important?
What is it is an account managing feature that keeps your 401k asset allocation in balance with your most recent asset allocation investment elections.