Investment Basics Flashcard

Front

What are considered common investment vehicles?

Back

Stocks, bonds, and mutual funds

Front

How do shareholders typically earn a profit from stocks?

Back

By receiving dividends

Front

What is the primary risk associated with stocks?

Back

High volatility

Front

What does purchasing a bond essentially mean?

Back

Lending money to the issuer

Front

What is the main advantage of bonds over stocks?

Back

Greater stability

Front

What is a mutual fund?

Back

A collection of stocks and bonds

Front

Why is diversification important in investing?

Back

It reduces overall risk

Front

What is not a guaranteed outcome of investing in a professionally managed mutual fund? Options: Access to multiple stocks, Professional management, Diversification

Back

Profit