Strategy Beginner: Introduction to Investment Strategy

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1.
If your investment strategy is risk-averse, you avoid risk whenever possible.
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False. A risk-averse strategy does not seek to avoid risk entirely, but to get the best possible return at the lowest possible risk.
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 use your principal soon, which aspect(s) of trading would especially concern you?
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Maturity date and minimum investment. Minimum investment determines how much of your principal will be tied up, and the maturity date how long.
5.
The more liquid an investment is, _______.
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The easier it is to turn into cash. Liquid investments are easy to turn into cash, either by withdrawing from them or selling them.