Basics Beginner: Investments

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1.
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.
2.
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.
3.
Investment diversification can be accomplished by owning _______.
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Small, mid-sized, and large company stocks. Owning many different-sized companies provides diversification because they have different characteristics and generally perform differently based on the economic and market conditions.
4.
As a rule, the longer your time horizon is for investing, the more aggressive you can be with your investments.
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True. This is due to the fact that you will have more time to recoup losses.
5.
As a general rule, which type of investment earns the highest rates?
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Stocks. As a rule, stocks earn the highest rates because their returns are not fixed. Of course, they also have the highest risks.
6.
Social Security is meant to cover _______ of your retirement income needs.
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Some. While it can be an important piece of your income during retirement, most of your income should come from your retirement investments. Social Security was never intended to provide the majority of someone's retirement income.