Basics Beginner: Investments

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1.
What is time horizon?
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The length of time over which you will be investing your money. Your time horizon will be a factor when choosing investments.
2.
What ultimately causes stock prices to rise?
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Companies increase their profits in the future. Ultimately, a rise in profits causes stocks to grow in value, which leads to rising stock prices.
3.
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.
4.
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.
5.
Which bonds are subject to credit risk?
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Both municipal and corporate. Corporate and municipal bonds are subject to credit risk, and the value of their bonds can be impacted if the financial strength of the company or municipality declines.
6.
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.