Fp101 R7 Investments Worksheet
Answer the following questions in at least 50 words each:
What are the main differences between a 401K and a Roth IRA?
A 401K is an employer sponsored investment account into which you put part of your salary and do not pay income tax on that part. Your employer may even match some or all of your investment. A Roth IRA is an investment fund into which you can invest a portion of your income after you pay income tax on the money you invest.
How would you explain the difference between a stock, a bond, and a mutual fund?
A stock is a part ownership in a company. A bond is a debt issued by the company or by governments (federal, state, or local.) Mutual funds are companies that take in investment money from lots of investors and invest in bonds or stocks (or both). These are usually better investments.
What are the risks and rewards of investing?
A couple risks of investments are; the possibility that your investment will decline in value and you can receive less than what you paid for it. The issuer of an investment may not live up to its financial obligations. A reward would be having a chance of getting back more money than you originally invested.
How can you minimize the risks associated with investing?
You can reduce risk by putting your money in different types of investment with varying levels of risk or you can try pooling your investments, where you buy into funds and your money is invested with thousands of other people’s money. Always research your investments before you make them! Check out the investment history, earnings growth, management team and debt load.
What would affect your decision to invest?
The few different things that would affect my decision to invest would be; how much money I can spare, my risk tolerance, if I have enough in savings for emergency use, direction of the stock market and if what I investigated looked good into what stock to buy. Also, having to pay