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Questions and Answers
Asset allocation involves distributing investments across different asset classes to minimize returns and maximize risk.
Asset allocation involves distributing investments across different asset classes to minimize returns and maximize risk.
False
A bearish investor expects prices to rise in the market.
A bearish investor expects prices to rise in the market.
False
Compound interest is only earned on the principal amount of an investment.
Compound interest is only earned on the principal amount of an investment.
False
Diversification involves investing only in a single asset class to maximize returns.
Diversification involves investing only in a single asset class to maximize returns.
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An IPO allows companies to lower their capital and become privately traded.
An IPO allows companies to lower their capital and become privately traded.
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Liquidity refers to the ability to hold an investment for a long period of time without selling it.
Liquidity refers to the ability to hold an investment for a long period of time without selling it.
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A portfolio consists of a single investment held by an individual or organization.
A portfolio consists of a single investment held by an individual or organization.
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Risk tolerance is the ability to withstand potential gains or stability in investments.
Risk tolerance is the ability to withstand potential gains or stability in investments.
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Yield is the return on investment expressed as a dollar amount.
Yield is the return on investment expressed as a dollar amount.
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Study Notes
Investment Vocabulary
Asset Allocation
- Distribution of investments across different asset classes (e.g., stocks, bonds, cash) to balance risk and potential returns
- Strategic allocation of assets to achieve investment goals and manage risk
Bullish/Bearish
- Bullish: optimistic outlook on the market, expecting prices to rise
- Bearish: pessimistic outlook on the market, expecting prices to fall
Compound Interest
- Interest earned on both the principal amount and any accrued interest
- Can lead to exponential growth of investments over time
Diversification
- Spreading investments across different asset classes, sectors, or geographic regions to reduce risk
- Reduces exposure to any one particular investment or market
IPO (Initial Public Offering)
- First public sale of a company's stock
- Allows companies to raise capital and become publicly traded
Liquidity
- Ability to quickly buy or sell an investment without significantly affecting its price
- High liquidity investments can be easily converted to cash
Portfolio
- Collection of investments held by an individual or organization
- Can include stocks, bonds, mutual funds, and other securities
Risk Tolerance
- Ability to withstand potential losses or volatility in investments
- Influences investment decisions and asset allocation
Yield
- Return on investment, expressed as a percentage
- Can be used to compare the performance of different investments
Investment Concepts
Asset Allocation
- Distributing investments across different asset classes (e.g., stocks, bonds, cash) to balance risk and potential returns
- Strategic allocation of assets to achieve investment goals and manage risk
Market Outlook
- Bullish: optimistic outlook on the market, expecting prices to rise
- Bearish: pessimistic outlook on the market, expecting prices to fall
Compound Interest
- Interest earned on both the principal amount and any accrued interest
- Can lead to exponential growth of investments over time
Risk Management
- Diversification: spreading investments across different asset classes, sectors, or geographic regions to reduce risk
- Reduces exposure to any one particular investment or market
Publicly Traded Companies
- IPO (Initial Public Offering): first public sale of a company's stock
- Allows companies to raise capital and become publicly traded
Investment Liquidity
- Ability to quickly buy or sell an investment without significantly affecting its price
- High liquidity investments can be easily converted to cash
Investment Collection
- Portfolio: collection of investments held by an individual or organization
- Can include stocks, bonds, mutual funds, and other securities
Investor Traits
- Risk Tolerance: ability to withstand potential losses or volatility in investments
- Influences investment decisions and asset allocation
Investment Performance
- Yield: return on investment, expressed as a percentage
- Can be used to compare the performance of different investments
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Description
Test your knowledge of key investment terms, including asset allocation, market outlook, and compound interest.
