Strategy Beginner: Introduction to Investment Strategy

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1.
It is never smart to invest through a full-service broker.
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False. Investors who do not want to put in the time or effort to research and manage their investments may find a full-service broker essential.
2.
Investments in which earnings are allowed to build tax-free are called ______.
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Tax-deferred. Tax-deferred investments are those in which earnings are allowed to build tax-free until you receive them as income.
3.
Investors diversify to reduce the risks of different business trends.
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True. Diversifying helps them avoid any particular trend affecting their investments too much.
4.
If you might need to borrow against your principal, you need _______.
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A collateral investment. A collateral investment can be used to secure a loan.
5.
The greater potential return that investments offer in return for accepting greater risk is called ________.
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Risk premium. This is the "reward" for taking on risk.