Basics Beginner: Investments

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1.
The interest you earn on a savings account is taxed differently from the money you earn at your job.
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False. It is taxed the same way, that is, as ordinary income.
2.
Asset allocation is associated with determining how many stocks you will hold in your stock portfolio.
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False. Asset allocation is associated with determining how much you will allocate to an asset class like stocks, bonds, and cash. The number and types of stocks you have in your portfolio has to do with diversification.
3.
When a bond matures, what happens to it?
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The money gets paid back to you. When a bond matures (that is, when its term ends), the money in it gets paid back to you, along with any interest that is yet due.
4.
Compound interest is interest that is calculated only on the principal you invest.
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False. Compound interest is interest that is calculated on the principal you invest plus any interest you earn.
5.
In mutual funds, a sales charge is used to compensate the mutual fund manager.
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False. It is to compensate the financial advisor for providing advice. The expense ratio is what compensates the mutual fund manager.
6.
When you buy shares of stock in a company, you _______.
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All of the above. Owning stock comes with all these benefits, though it should be noted that dividends are not always guaranteed to be paid.