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Financial Planning Courses: 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.
Investors with a long-term goal like retirement in 20 or more years who are willing to live with significant declines in the short run often choose to allocate a higher percentage of their investment dollars to ________.
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Stocks. Stocks have historically returned much higher returns than bonds and cash for long-term investors; however, the investor must be willing to live with significant declines in stock values over the short term and the potential of losing money.
3.
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.
4.
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.
5.
In mutual funds, a sales charge is used to compensate the mutual fund manager.
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False. It is to compensate the financial advisor for providing advice. The expense ratio is what compensates the mutual fund manager.
6.
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.