NAB Investment Basics 3

Question 1

What does 'capital gain' refer to in investing?

Accepted Answer

The profit made when an asset is sold for more than its purchase price

Answer

A capital gain is the positive difference between an asset's selling price and its original purchase price.

Question 2

What is 'dollar-cost averaging' as an investment strategy?

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of market price

Answer

Dollar-cost averaging means investing a consistent amount regularly, buying more units when prices are low and fewer when prices are high.

Question 3

In investing, what is a 'dividend'?

Accepted Answer

A portion of a company's profits distributed to shareholders

Answer

A dividend is a payment made by a company to its shareholders, usually from profits, as a reward for holding the company's stock.

Question 4

What is 'inflation risk' in an investment context?

Accepted Answer

The risk that returns will not keep pace with rising prices, eroding purchasing power

Answer

Inflation risk is the danger that your investment returns grow more slowly than inflation, meaning your money buys less over time.

Question 5

What does 'asset allocation' mean in portfolio management?

Accepted Answer

Deciding what proportion of a portfolio to invest in each asset class

Answer

Asset allocation is the strategy of dividing a portfolio among different asset categories — such as stocks, bonds, and cash — to balance risk and reward.

(NAB) National Australia Bank Practice Test

(NAB) National Australia Bank Practice Test

NAB Investment Basics 3