Investing Flashcards

Questions and Answers

How is a savings account most useful?

For depositing and withdrawing money frequently

For using money in the near future but not right away (correct)

For using money for CDs and other investments

For saving for a long time without withdrawing

In what way does a 401(k) differ from an individual retirement account (IRA)?

A 401(k) is created through an individual's employer. (correct)

A 401(k) can be created by individuals who deposit money.

A 401(k) is a good long-term investment strategy.

A 401(k) allows consumers to contribute before taxes.

According to the pie graph, among people 65 and over, investment income represents the:

Fourth largest source of income. (correct)

Largest source of income.

Second largest source of income.

Smallest source of income.

Which is an example of a high-risk investment?

Stock in a start-up company Signup and view all the answers

What does the information about Gale's investments demonstrate?

If she had purchased only the stock and had not diversified her investments, she would have lost money. Signup and view all the answers

What does the information demonstrate about Alex's investments?

He most likely would have benefited by diversifying. Signup and view all the answers

When investors purchase a commodity, they believe:

The commodity's price will go up after purchase. Signup and view all the answers

Which statement best describes stocks?

They are an investment in a company's progress and profits. Signup and view all the answers

Which investment is best for someone who is likely to need cash soon?

Savings account Signup and view all the answers

Which investment has the least liquidity?

Corporation Signup and view all the answers

Study Notes

Savings Account

Best for using money in the near future without immediate needs.
Not ideal for long-term, ongoing savings or frequent transactions.

401(k) vs. IRA

A 401(k) is employer-sponsored, contrasting with individual retirement accounts (IRAs).
Contributions to a 401(k) can be made before taxes.

Income Sources for Seniors

In 2010, investment income was the fourth largest source of income for individuals aged 65 and older.

High-Risk Investments

Stocks in start-up companies are categorized as high-risk investments due to their volatility and potential for loss.

Investment Diversification - Gale

Gale's investments varied, indicating that had she solely invested in stock without diversification, she would face financial losses.

Investment Diversification - Alex

Alex would have benefited from diversifying his portfolio, reducing risk and potentially increasing profits.

Commodity Investment Belief

Investors in commodities anticipate a rise in prices post-purchase.

Understanding Stocks

Stocks represent ownership in a company's growth and earnings, highlighting their role as investments in corporate success.

Best Investment for Immediate Cash Needs

A savings account is the most suitable investment for individuals needing quick access to cash.

Investment Liquidity

Corporations are considered the least liquid investment compared to mutual funds, checking accounts, and other liquid assets.

Description

This quiz focuses on key concepts related to investing and savings accounts. Test your knowledge on the functionalities of various savings and retirement accounts. Perfect for anyone looking to enhance their understanding of personal finance.