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Investing Unit Review

Active investing seeks to outperform the market through strategic stock selection and timing, while passive investing aims to replicate market performance via index funds or ETFs. An IRA is individually managed, whereas a 401(k) is employer-sponsored. A brokerage account allows for investment transactions, differing from a bank account, which is primarily for cash management.

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170 views1 page

Investing Unit Review

Active investing seeks to outperform the market through strategic stock selection and timing, while passive investing aims to replicate market performance via index funds or ETFs. An IRA is individually managed, whereas a 401(k) is employer-sponsored. A brokerage account allows for investment transactions, differing from a bank account, which is primarily for cash management.

Uploaded by

adamkhayat2021
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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19. Explain the difference between active investing and passive investing.

Active Investing Passive Investing

Active investing aims to beat the market by passive investing aims to match the
making proactive investment decisions like market's performance through index funds
selecting speci c stocks or timing the or ETFs.
market

20. What is one difference between an IRA and a 401(k)?


401(k) is typically sponsored by your employer, while an IRA is opened and managed
individually.

21. Match the following fund types with their description:

a. Mutual Fund: I. Pools money from many investors to buy a


diversified portfolio of stocks, bonds, and other
b. Index Fund: securities, managed by a professional for a fee
c. Exchange-Traded Fund II. Adjusts its asset allocation and risk level over time
(ETF): based on a specific retirement goal date.
III. Aims to mirror the performance of a specific
d. Target-Date Fund (TDF) index, like the S&P 500, by holding all or most of
the securities in the index.
IV. Can be bought and sold on the stock market, just
like individual stocks.

22. In your own words, explain what a brokerage account is and how it is different from a
bank account.

A brokerage account is an investment account where you can buy and sell investments
like stocks, bonds, and mutual funds. A bank account, which is for storing and accessing
cash for daily expenses.

23. How is a bond different from a bond fund?


Bonds o er a xed income stream and a guaranteed return of principal at maturity, while
bond funds o er diversi cation, potentially higher returns, and more liquidity, but don't
guarantee a xed return or principal value at maturity

www.ngpf.org Last updated: 7/15/24


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