Basics Beginner: Investments

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1.
During your working years, what do you need your investments to do the most of for you?
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Grow. If you are like most people, you will need your investments to grow so that when you are older, you can withdraw sufficient money from them to live on.
2.
It is possible to buy shares of a mutual fund directly from the fund instead of through a broker.
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True. Although you can buy shares through a broker, most funds also let you buy shares directly from the funds themselves.
3.
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.
4.
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.
5.
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.
6.
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.