Basics Beginner: Investments

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1.
Professional management is a benefit of investing in an index mutual fund.
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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.
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.
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True. This is one risk of investing in bonds.
3.
When a company shares some of its profits with its stockholders, what are those profits called?
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Dividends. Dividends are a cut of a company's profits that are shared with stockholders.
4.
What is asset allocation?
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Determining how much money to spend on different types of assets. Asset allocation is a big term, but it refers to how we distribute our money among investments.
5.
Which of the following is not a characteristic of a cash investment?
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Moderate return. Cash investments have historically provided low returns because they are safe and liquid.
6.
During your retirement years, what do you need your investments to do the most of for you?
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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.