Smart Investing Strategies for Students

What is a stock market index, and why is it important for investors?

• A stock market index is a measure of the performance of a specific group of stocks, and it is important because it helps investors track market trends.

• A stock market index is a list of all stocks available for trading, and it is important because it shows the total number of stocks.

• A stock market index is a tool for predicting future stock prices, and it is important because it guarantees investment returns.

• A stock market index is a government report on economic performance, and it is important because it dictates interest rates.

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DOK Level 2: Skill/Concept

Which of the following is a key advantage of investing in real estate?

• Real estate investments are always liquid and easy to sell.

• Real estate investments provide guaranteed returns.

• Real estate investments can offer tax benefits and potential for appreciation.

• Real estate investments require no maintenance or management.

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DOK Level 2: Skill/Concept

What is the primary purpose of a 401(k) retirement account?

• To provide a savings account with high interest rates.

• To offer a tax-advantaged way to save for retirement.

• To allow unlimited withdrawals without penalties.

• To invest exclusively in real estate.

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DOK Level 2: Skill/Concept

How does diversification help reduce investment risk?

• By concentrating investments in a single asset class.

• By spreading investments across various asset classes to minimize the impact of any one asset's poor performance.

• By investing only in government bonds.

• By focusing solely on high-risk, high-reward stocks.

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DOK Level 2: Skill/Concept

Which of the following best describes a mutual fund?

• A mutual fund is a type of savings account with a fixed interest rate.

• A mutual fund is a collection of stocks, bonds, or other securities managed by a professional.

• A mutual fund is a government bond with a guaranteed return.

• A mutual fund is a real estate investment trust.

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DOK Level 2: Skill/Concept

What is the main difference between a traditional IRA and a Roth IRA?

• Traditional IRAs offer tax-free withdrawals, while Roth IRAs offer tax-deferred growth.

• Traditional IRAs require mandatory withdrawals at a certain age, while Roth IRAs do not.

• Traditional IRAs are only for self-employed individuals, while Roth IRAs are for everyone.

• Traditional IRAs allow for unlimited contributions, while Roth IRAs have contribution limits.

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DOK Level 2: Skill/Concept

Which of the following is a characteristic of a bear market?

• Rising stock prices and investor optimism.

• Declining stock prices and investor pessimism.

• Stable stock prices and neutral investor sentiment.

• Volatile stock prices with no clear trend.

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DOK Level 2: Skill/Concept

What is the role of a real estate investment trust (REIT)?

• To provide a platform for trading stocks and bonds.

• To allow individuals to invest in large-scale, income-producing real estate.

• To offer insurance for real estate properties.

• To manage personal real estate properties for individual investors.

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DOK Level 2: Skill/Concept

How does a target-date fund work in a retirement account?

• It invests in a single stock with a fixed maturity date.

• It automatically adjusts its asset allocation to become more conservative as the target retirement date approaches.

• It guarantees a fixed return by the target date.

• It invests only in government bonds until the target date.

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DOK Level 2: Skill/Concept

What is the benefit of dollar-cost averaging in investment?

• It ensures buying only when prices are low.

• It reduces the impact of market volatility by investing a fixed amount regularly.

• It guarantees higher returns than lump-sum investing.

• It eliminates the need for portfolio diversification.

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DOK Level 2: Skill/Concept