Basics Beginner: Investments

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1.
What is the most commonly used type of cash investment?
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Savings account. A savings account is made up of cash you deposit, but unlike the cash in your pocket, it pays some interest to you.
2.
If you see letters such as AAA, BB, A, etc. in the financial news media and they are in reference to bonds, what are they referring to?
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Credit ratings of the companies that sell the bonds. These letters describe the credit ratings of the companies that sell the bonds. The closer they are to AAA, the better the health of the company, and therefore the less risky they will be.
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.
When you buy shares of stock in a company, you _______.
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All of the above. Owning stock comes with all these benefits, though it should be noted that dividends are not always guaranteed to be paid.
5.
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.
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.