Basics Beginner: Investments

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Professional management is a benefit of investing in an index mutual fund.
Choose wisely. There is only one correct answer.
False. Index funds are passively managed mutual funds, meaning the portfolios simply mirror an index like the SP 500. Actively managed funds have continuous monitoring and management from investment professionals.
2.
As a general rule, which type of investment earns the highest rates?
Choose wisely. There is only one correct answer.
Stocks. As a rule, stocks earn the highest rates because their returns are not fixed. Of course, they also have the highest risks.
3.
Asset allocation is associated with determining how many stocks you will hold in your stock portfolio.
Choose wisely. There is only one correct answer.
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.
4.
During your retirement years, what do you need your investments to do the most of for you?
Choose wisely. There is only one correct answer.
Provide income. During your later years, you will need money to live on, and that will ideally come from your investments. Although growth is good, it also comes with risk, which you don't want during your retirement.
5.
One of the risks of investing in bonds is interest rate risk. This means that if interest rates rise, your bond will be earning less than new bonds.
Choose wisely. There is only one correct answer.
True. This is one risk of investing in bonds.
6.
The interest you earn on a savings account or similar cash investment is not taxed as ordinary income by the federal government.
Choose wisely. There is only one correct answer.
False. Interest is taxed as ordinary income at both the state (if you are required to pay state taxes) and federal levels.