Risky Business
What is the definition of risk in investing?
Exposure to the chance of injury or loss.
Why is diversification important in investing?
It helps reduce risk by spreading investments across different types.
Investing in fixed-income stocks falls under what type of risk?
Conservative
Jamie wants safe, steady returns. Where should she invest?
Savings account or fixed-income stocks.
What is a portfolio?
A collection of financial investments like stocks, bonds, and mutual funds.
Low risk typically results in high returns.
False
Name one diversification rule mentioned in the slideshow.
Select investments from at least three industries.
Buying growth stocks with better returns but moderate risk is called what?
Moderate risk.
Jamie’s brother advises buying a lottery ticket. What is the risk level?
Speculative.
What are dividends?
Payments made by a company to its shareholders, often from profits.
What is the relationship between high risk and returns?
High risk can lead to high returns, low returns, or losses.
What happens to your portfolio if one investment fails, but you’re diversified?
The value of the entire portfolio should not be wiped out.
Investing in a new company with an untested drug for smarter children is what type of risk?
Speculative
Jamie’s best friend suggests investing in Chevron. What is the potential risk level?
Moderate
Define “mutual fund.”
An investment vehicle that pools money from many investors to buy a diversified portfolio.
Give an example of a low-risk investment.
Fixed-income stocks.
Give an example of diversifying within the entertainment industry.
Invest in Disney (high cap) and a startup animation company (low cap).
What type of risk includes high dividends but slow value changes?
Conservative risk.
Why is putting money under a mattress not a good idea for investing?
It doesn’t earn returns and loses value to inflation
What does “high cap” mean in stock investments?
A company with a large market capitalization
Name a factor that determines a person’s risk tolerance.
Age, salary, financial obligations, or family situation.
What is a mutual fund, and how does it help with diversification?
A mutual fund pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.
Which risk type has unpredictable outcomes but potential for high profits?
Speculative risk.
What’s one thing Jamie should learn before investing?
How risk and return are connected
What does it mean to invest in “low cap” stocks?
Investing in companies with small market capitalizations, often startups.