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Strategy Beginner: Introduction to Investment Strategy

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1.
Investments in which earnings are allowed to build tax-free are called ______.
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Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.
2.
If you might need to borrow against your principal, you need _______.
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A collateral investment. A collateral investment can be used to secure a loan.
3.
The greater potential return that investments offer in return for accepting greater risk is called ________.
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Risk premium. This is the "reward" for taking on risk.
4.
If you might need to use your principal soon, which aspect(s) of trading would especially concern you?
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Maturity date and minimum investment. Minimum investment determines how much of your principal will be tied up, and the maturity date how long.
5.
Investors diversify to reduce the risks of different business trends.
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True. Diversifying helps them avoid any particular trend affecting their investments too much.