Investment Basics Quiz

Investment Basics

• Investment is acquiring assets with the intent to generate income and accumulate wealth.
• Three basic categories of investments: Ownership, Lending, and Cash Equivalents.

Ownership Investments

• Ownership investments are volatile but potentially profitable.
• Examples include stocks, real estate, precious metals, company stakes, business ventures, precious objects, and collectibles.

Lending Investments

• Lending investments generally have lower risk than ownership investments, resulting in modest rewards.
• Examples include lending money, bonds, and savings accounts, which earn interest.

Cash Equivalent Investments

• Cash equivalent investments are easily and quickly convertible to cash.
• Examples include money market accounts and funds, which offer modest interest.

Bank Deposits

• Bank deposits are money placed into a bank.
• Considered a liability owed by the bank to the depositor.
• Two types: Demand deposits (checking accounts) and time deposits (certificates of deposit).

Insurance Investment Plans

• Combine insurance coverage with an investment component.
• A portion of premiums is invested after a certain period.
• Growth in premium value translates to investment growth.
• Provide financial security and growth.

Real Estate

• Land plus permanently attached features (water, trees, buildings, etc.).
• Considered real property, distinct from personal property (vehicles, furniture, etc.).
• Physical characteristics: immobility, indestructibility, and uniqueness.
• Four types: Industrial, Commercial, Land, and Residential.

Hard Assets

• Tangible physical items owned for long-term usage with expected future value.
• Classified as long-term (machinery) and short-term (metals).
• Examples include buildings, equipment, machinery, furniture, vehicles, and gold.

Mutual Funds

• Companies that pool investor money to invest in securities (stocks, bonds, etc.).
• The combined holdings are called a portfolio.
• Investors purchase shares representing ownership and income generated.
• Types include money market funds, bond funds, stock funds, and target date funds.

Stocks and Bonds

• Buying stocks represents purchasing ownership in a company.
• Share prices can rise with company performance and profits.
• Bonds represent loans to bond issuers (companies or government agencies).
• Unlike stocks, bonds do not confer ownership, but they earn interest.

Test your knowledge on the fundamentals of investments! This quiz covers various categories such as ownership, lending, and cash equivalent investments. Understand the differences and examples of each type to accumulate wealth effectively.