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Investment Basics Flashcards

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1
Q

What is the definition of an investment?

A

An investment is the allocation of resources, usually money, in order to generate income or profit.

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2
Q

True or False: All investments guarantee a return.

A

False

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3
Q

Fill in the blank: The primary goal of investing is to __________ wealth over time.

A

grow

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4
Q

What is a stock?

A

A stock is a share in the ownership of a company.

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5
Q

What are bonds?

A

Bonds are fixed income instruments that represent a loan made by an investor to a borrower.

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6
Q

Multiple Choice: Which of the following is considered a low-risk investment? A) Stocks B) Bonds C) Real Estate D) Cryptocurrency

A

B) Bonds

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7
Q

What is diversification in investing?

A

Diversification is the practice of spreading investments across various financial instruments to reduce risk.

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8
Q

True or False: Real estate is a liquid investment.

A

False

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9
Q

What is the difference between a mutual fund and an exchange-traded fund (ETF)?

A

A mutual fund is actively managed and priced at the end of the trading day, while an ETF is traded on an exchange like a stock and priced throughout the day.

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10
Q

Fill in the blank: __________ risk is the risk of losing some or all of an investment due to market fluctuations.

A

Market

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11
Q

What does ROI stand for?

A

ROI stands for Return on Investment.

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12
Q

Multiple Choice: Which investment is generally considered the most volatile? A) Bonds B) Stocks C) Savings Accounts D) Certificates of Deposit

A

B) Stocks

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13
Q

What is an index fund?

A

An index fund is a type of mutual fund or ETF that aims to replicate the performance of a specific index.

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14
Q

True or False: Dollar-cost averaging is an investment strategy that involves investing a fixed amount of money at regular intervals.

A

True

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15
Q

What is the purpose of a prospectus?

A

A prospectus is a legal document that provides details about an investment offering to the public.

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16
Q

Fill in the blank: __________ investing involves selecting stocks based on their fundamental value and potential for growth.

A

Value

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17
Q

What is the capital gains tax?

A

The capital gains tax is a tax on the profit made from selling an asset that has increased in value.

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18
Q

Multiple Choice: What type of investment is typically considered safest? A) Stocks B) Bonds C) Real Estate D) Commodities

A

B) Bonds

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19
Q

What is the significance of the S&P 500?

A

The S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

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20
Q

True or False: A bear market is characterized by rising stock prices.

A

False

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21
Q

What is asset allocation?

A

Asset allocation is the process of dividing investments among different categories, such as stocks, bonds, and cash.

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22
Q

Fill in the blank: __________ is the potential for loss in an investment.

A

Risk

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23
Q

What does it mean to liquidate an asset?

A

To liquidate an asset means to convert it into cash by selling it.

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24
Q

Multiple Choice: Which of the following is NOT a type of investment? A) Stocks B) Bonds C) Savings Accounts D) All are types

Study These Flashcards
A

D) All are types

25
What is a dividend?
A dividend is a portion of a company's earnings distributed to shareholders.
26
True or False: Investing in foreign markets can increase diversification.
True
27
What is a financial advisor?
A financial advisor is a professional who provides financial services and advice to clients.
28
Fill in the blank: __________ investments are those made with the expectation of generating income or appreciation.
Capital
29
What is the primary risk associated with investing in stocks?
Market risk, which involves the potential for loss due to market fluctuations.
30
Multiple Choice: What is the main purpose of bonds? A) Generate income B) Increase volatility C) Decrease risk D) All of the above
A) Generate income
31
What does the term 'bull market' refer to?
A bull market refers to a period of rising stock prices.
32
True or False: Real estate investment trusts (REITs) are companies that own or finance income-producing real estate.
True
33
What is the role of the Securities and Exchange Commission (SEC)?
The SEC is a U.S. government agency responsible for regulating the securities industry and protecting investors.
34
Fill in the blank: __________ investing focuses on short-term price movements and trends.
Technical
35
What is a hedge fund?
A hedge fund is an investment fund that employs various strategies to earn active returns for its investors.
36
Multiple Choice: Which investment typically has the highest potential return? A) Bonds B) Real Estate C) Stocks D) Savings Accounts
C) Stocks
37
What does the term 'liquidity' refer to in finance?
Liquidity refers to how quickly an asset can be converted into cash without affecting its market price.
38
True or False: A 401(k) is a type of retirement savings plan offered by employers.
True
39
What is a yield?
Yield is the income return on an investment, typically expressed as a percentage.
40
Fill in the blank: __________ analysis involves evaluating a company's financial data to determine its value.
Fundamental
41
What is the difference between active and passive investing?
Active investing involves ongoing buying and selling, while passive investing involves a buy-and-hold strategy.
42
Multiple Choice: Which of the following is a characteristic of a growth stock? A) High dividends B) Low risk C) High potential for capital appreciation D) Stable earnings
C) High potential for capital appreciation
43
What is a stock market crash?
A stock market crash is a sudden and significant decline in stock prices across a significant section of the market.
44
True or False: An IPO (Initial Public Offering) is when a company offers its shares to the public for the first time.
True
45
What does 'market capitalization' refer to?
Market capitalization refers to the total market value of a company's outstanding shares of stock.
46
Fill in the blank: __________ is the amount of profit earned on an investment relative to its cost.
Return
47
What is a financial portfolio?
A financial portfolio is a collection of financial assets like stocks, bonds, and cash.
48
Multiple Choice: Which investment is typically the most stable? A) Stocks B) Bonds C) Real Estate D) Commodities
B) Bonds
49
What is the purpose of a retirement account?
The purpose of a retirement account is to save and invest money for retirement while providing tax advantages.
50
True or False: Dollar-cost averaging can help mitigate the impact of market volatility.
True
51
What is a bear market?
A bear market is a market condition where prices are falling or are expected to fall.
52
Fill in the blank: __________ funds are designed to track the performance of a specific index.
Index
53
What is risk tolerance?
Risk tolerance is an investor's ability and willingness to endure market volatility.
54
Multiple Choice: Which of the following is a benefit of investing early? A) Compounding returns B) Lower risk C) Higher liquidity D) All of the above
A) Compounding returns
55
What is a robo-advisor?
A robo-advisor is an automated platform that provides financial planning services with little to no human intervention.
56
True or False: High-yield savings accounts are risk-free investments.
True
57
What is a margin account?
A margin account allows investors to borrow money from a broker to buy securities.
58
Fill in the blank: __________ investing involves purchasing assets at a lower price and selling them at a higher price.
Speculative
59
What is the role of a stockbroker?
A stockbroker is a professional who buys and sells stocks and other securities on behalf of clients.

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