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Personal finance questions
Which of the following statements about diversification is NOT accurate:
| | | a strategy of considering the correlation between different investments |
| | | it is a strategy of spreading your invested money across more than one investment |
| | | an investment approach that is too complicated to effectively apply for the average person |
| | | not a way to avoid risk altogether, but a way to balance the likelihood of losses with gains |
The return-risk relationship means
| | | exchange for a higher potential rate of return, an investor will face greater uncertainty |
| | | a diversified mutual fund will have low risk |
| | | investment that is higher risk guarantees a higher return |
| | | the downside of risk is all that really matters to investors |
What is the primary purpose, or desired outcome, of investing money?
| | | to learn more about another aspect of the financial system |
| | | the thrill of risk |
| | | to earn a return |
| | | to contribute to healthy economy |
Which of the following statements does NOT appropriately reflect factors considered in diversification:
| | | types of investments |
| | | assessed risk and/or volatility character of the investment |
| | | amounts of money invested, most money in one investment vs only a little money invested elsewhere |
| | | companies, industries and countries |
When expressing a return, it is important to factor in some important context, such as:
| | | all of the factors noted here would be important context to better understand the return that has been earned |
| | | the amount of time it took to earn the return, typically adjusting to be shown annuallly |
| | | the amount of money the return was earned on, also known as principal |
| | | any fees or taxes that would reduce the overall return, or other streams of income the investment generated which would increase the overall return |
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