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Investment 101: Asset Classes & Risk Ladder

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Investment 101: Asset Classes & Risk Ladder

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Questions and Answers

What is the primary factor that determines bond rates?

Interest rates (correct)

Stock market performance

Federal Reserve's quantitative easing

Mutual fund's portfolio manager

What is the minimum amount required to invest in a mutual fund?

$10,000

$1,000 (correct)

$5,000

$500

What is the primary benefit of investing in mutual funds?

Lower management fees

Higher returns through active management

Diversification into multiple stocks (correct)

Guaranteed investment returns

What is the main difference between mutual funds and ETFs?

Trading hours Signup and view all the answers

What is the purpose of a portfolio manager in a mutual fund?

To allocate stocks and bonds Signup and view all the answers

What is an asset class?

A grouping of investments with similar characteristics Signup and view all the answers

What is the benefit of ETFs tracking an underlying index?

Broad coverage of various sectors and markets Signup and view all the answers

What is the safest asset class?

Cash Signup and view all the answers

What is a bond?

A debt instrument representing a loan Signup and view all the answers

What is a characteristic of a CD?

It has a fixed interest rate and a locked-up period Signup and view all the answers

What does the investment risk ladder show?

The risk level of different asset classes, in ascending order Signup and view all the answers

Why do CDs typically provide higher interest rates than savings accounts?

Because they are less liquid and have a locked-up period Signup and view all the answers