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Financial Planning Courses: Investments

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1.
Which bonds are subject to credit risk?
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Both municipal and corporate. Corporate and municipal bonds are subject to credit risk, and the value of their bonds can be impacted if the financial strength of the company or municipality declines.
2.
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.
3.
What results when you sell an investment for more than you paid for it?
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A capital gain. It can be thought of as a gain on the capital invested.
4.
What does diversification do for a mutual fund?
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Spread risk. By spreading risk among many different securities in a fund, you can reduce the damage that a downturn in a few of them can cause.
5.
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.
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.