#1
What is a mutual fund?
An investment vehicle where funds are pooled from multiple investors to invest in securities like stocks and bonds
ExplanationPooled investment for stocks and bonds.
#2
What is diversification in investment?
Spreading investments across different assets to reduce risk
ExplanationReducing risk through varied investments.
#3
What is a blue-chip stock?
Stocks of large, well-established, and financially stable companies with a history of reliable performance
ExplanationStable stocks from reliable companies.
#4
What does ROI stand for in finance?
Return On Investment
ExplanationReturn On Investment abbreviation.
#5
What is the time value of money (TVM) principle?
The idea that money can be invested to earn interest over time
ExplanationMoney's earning potential over time.
#6
What is an exchange-traded fund (ETF)?
An investment fund traded on stock exchanges, much like stocks
ExplanationStock-like traded investment fund.
#7
What is the role of a financial advisor?
To help clients manage their finances and make investment decisions
ExplanationAssisting clients in finance and investments.
#8
What is the formula to calculate compound interest?
P × (1 + r)^t
ExplanationCompound interest formula: P(1 + r)^t.
#9
What is the 'Rule of 72' in finance?
A rule to estimate how long it takes to double an investment
ExplanationEstimates doubling time for investments.
#10
What is a bear market?
A market with declining stock prices
ExplanationMarket with falling stock prices.
#11
What is dollar-cost averaging?
Investing a fixed amount of money in a particular investment regularly, regardless of its price
ExplanationRegular fixed investment, regardless of price.
#12
What does P/E ratio stand for?
Price/Earnings ratio
ExplanationPrice to Earnings ratio abbreviation.
#13
What is a hedge fund?
A fund that aims to protect investors against losses in a declining market
ExplanationProtective fund in declining markets.
#14
What is the difference between stocks and bonds?
Stocks represent ownership in a company, while bonds are loans to a company or government
ExplanationStocks as ownership, bonds as loans.
#15
What is the Sharpe Ratio used for?
To evaluate the risk-adjusted return of an investment
ExplanationAssesses risk-adjusted investment returns.
#16
What is a derivative in finance?
A financial contract whose value derives from the performance of an underlying asset, index, or entity
ExplanationFinancial contract tied to underlying performance.
#17
What is the concept of 'buy low, sell high' in investing?
Buying stocks when they are cheap and selling when they are expensive
ExplanationProfit strategy: buy cheap, sell high.
#18
What is the difference between a traditional IRA and a Roth IRA?
Traditional IRA contributions are tax-deductible, while Roth IRA contributions are not
ExplanationTax-deductible vs. non-deductible IRA contributions.
#19
What is the purpose of a stop-loss order in investing?
To minimize losses by automatically selling a security when it reaches a predetermined price
ExplanationMinimizing losses through automatic selling.