Free Investment (Investor's Knowledge) Questions and Answers 1

Question 1

What is the definition of "false diversification"?

Accepted Answer

Owning a lot of investment that all move up and down together

Answer

When all your investment move to different rhythms

Answer

When some of your investment are up while others are down

Question 2

What exactly does it mean to be diversified?

Accepted Answer

Owning investment that react differently to market or economic events

Answer

Owning at least 20 stocks in whatever industry you think will perform best

Answer

having as much money in bonds as you do in stocks

Question 3

A key difference between ETFs and mutual funds is which of the following?

Accepted Answer

ETFs trade through the trading day while mutual funds trade once per day

Answer

Mutual funds have managers while ETFs are unmanaged

Answer

ETFs are passively managed while mutual funds are actively managed

Question 4

What do you get when you buy a mutual fund share?

Accepted Answer

An ownership stake in the mutual fund company

Answer

The right to vote at shareholder meetings for the companies the mutual fund owns

Answer

A share of all the investments the fund owns

Question 5

What is the difference between a Roth and a conventional?

Accepted Answer

Roth contributions are after-tax, while traditional retirement contribution are pre-tax

Answer

Roth contributions are pre-tax, while traditional retirement contributions are after-tax

Answer

Roth are people who want a non-traditional retirement

Question 6

What exactly is a basis point?

Accepted Answer

A measure used to express differences in interest rates is equal to 0.01%.

Answer

A term the financial industry invented to further confuse investors about how their investments are performing.

Answer

A measure used to express differences in interest rates is equal to 0.1%.

Question 7

What is a mutual fund's sales load?

Accepted Answer

A commission paid by the investor when buying or selling the fund.

Answer

Another name for an expense ratio

Answer

How many shares of the mutual fund are sold on any given day

Question 8

If bonds and interest rates were on a playground together, they'd be on the:

Accepted Answer

Seesaw

Answer

Monkey bars

Answer

Slide

Question 9

What does "shorting" a stock imply?

Accepted Answer

To sell stock you don't own

Answer

To sell part of your losing position in stock

Answer

To only pay for part of your stock purchase

Question 10

If you purchase stock in a corporation...

Accepted Answer

You own a part of the company

Answer

You are liable for the company's debts

Answer

You have lent money to the company

Answer

The company will return your original investment to you with interest

Answer

Don't know