Test your knowledge

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What activity forms the base of the investment pyramid?

Choose wisely. There is only one correct answer.

Selecting investments

Setting goals

Asset allocation

Setting goals. The other activities will be greatly influenced by your goal setting.

Once you're retired, you won't need to adjust your spending rate.

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True

False

False. Market downturns and unexpected expenses can necessitate adjusting your spending rate.

Why is setting your saving and spending rate more important in the investing pyramid than investment selection?

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It helps you cope in the event of a shortfall in your investments.

You need to save more so than you need to invest.

Saving yields more earnings than investing.

It isn't, actually.

It helps you cope in the event of a shortfall in your investments.

Why does budgeting still matter after you have stopped saving for retirement?

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You may need to adjust your spending rate at times during retirement.

You need to continue saving money for retirement even when you're retired.

You should pinch pennies during retirement.

It doesn't matter, actually.

You may need to adjust your spending rate at times during retirement. Especially during market downturns.

For saving for your long-term goals, advisors usually recommend starting out with stocks and holding them over the long term rather than switching eventually to safer investments.

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True

False

False. Advisors usually recommend shifting to safer investments over time in order to protect the wealth you have built up.

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