What's the point?
The purpose of retirement accounts is __________, while the purpose of saving accounts is __________.
building wealth for retirement, short term goals or emergencies
True or False. Bonds are individual loans to corporations, while stocks are partial ownership.
True
Your company matches 4% of your salary for 401K contributions. You can only afford to invest 2%. What do you do?
Invest all of the the 2% to take advantage of as much of the company match as you can and double your contribution.
Betsy hates losing so much that she decides to stop taking any risks so she won't lose. What bias does she have?
Loss-Aversion
True or False. When investing in a high risk stock or other asset, you would expect a lower return.
False. "No risk it, no biscuit"
Give a difference between bonds and bond funds.
Bond funds are more diversified than bonds. Bond funds can pay you dividends.
You like the idea of receiving dividends from a company. You also feel like you'd enjoy part ownership in a company. What should you do?
Buy stock in a company that pays dividends.
Seth sees all of his buying stock in a new trendy company. Since they are he decides to buy some too, even though it's too risky for him. What bias does he have?
Bandwagon
What is the point of diversification?
Lowering your risk
This term can be the difference between investments you are comfortable with, and investments you are not comfortable with.
Risk Tolerance.
You want an account that gives you the widest amount of investment options. Which kind of account should you open?
IRAs
Cale has his ideas on how a company will perform. In debates with people he only looks up information that he knows proves his viewpoint. What bias does he have?
The point of investing is to build wealth and make money. What are the two ways you do this?
Receive dividends. Sell stocks for more than what you bought them for.
The main difference between Target Date Funds and other accounts is that Target Date Funds will do this automatically.
Adjust asset allocation as you get nearer to retirement
You hold bonds that were issued at 5% interest. The interest rate of bonds drops to 2%. You don't know whether to sell or hold. What do you do?
Sell. According to the bond see-saw as rates go down, prices go up. If rates go up, prices go down.
Joe can't decide what to do about his investment portfolio. He talks to many people, but tends to be swayed by the last pieces of information he hears. What bias does he have?
Recency
The point of this account is to buy stocks.
Brokerage
What is the main difference between a Traditional and a Roth IRA?
When you pay taxes
DAILY DOUBLE
You have a test in Financial Literacy tomorrow. You think you know it pretty well, but want to get a good grade. What should you do?
STUDY
Callie is stubborn. She develops her viewpoints early on, and no matter what information she hears after that, she will not budge. What bias does she have?
Anchoring