Investment Starting Investment 5

Question 1

What is the main advantage of a Traditional IRA over a Roth IRA?

Accepted Answer

Contributions may be tax-deductible now

Answer

Traditional IRA contributions may lower your taxable income today, with taxes paid on withdrawal.

Question 2

What is a 'bull market'?

Accepted Answer

A market with rising prices and optimism

Answer

A bull market is characterized by rising prices and investor optimism.

Question 3

What is a 'bear market' generally defined as?

Accepted Answer

A decline of 20% or more from recent highs

Answer

A bear market is typically a drop of 20% or more from recent peaks.

Question 4

Why is it risky to try to 'time the market'?

Accepted Answer

Missing the best days can sharply reduce returns

Answer

Predicting market moves is unreliable, and missing the few best days greatly hurts long-term returns.

Question 5

What does 'time horizon' mean for an investor?

Accepted Answer

How long until you need the money

Answer

Time horizon is the length of time you plan to hold an investment before needing the funds.

Investment Practice Test