ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Since investments are considered unearned income, taxes do not have to be paid on earnings.
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Taxes are often owed on profits generated from investments.
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Taxes only have to be paid on employer-sponsored investment accounts.
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Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.
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Detailed explanation-1: -Answer and Explanation: The answer is C). The idea behind diversification is that by adding stocks with different risk characteristics, investors could reduce exposure to idiosyncratic risks.
Detailed explanation-2: -Stocks, real estate, and precious metals are all ownership investments. The buyer hopes that they will increase in value over time. Lending money is an investment. Bonds and even savings accounts are loans that earn interest over time for the investor.
Detailed explanation-3: -Our view is that a track record of ten years is necessary to evaluate a manager’s potential. Longer track records compensate for the effects of a manager’s particular investment “style.” Every manager’s style produces better results in some market conditions than others.
Detailed explanation-4: -Establish a financial plan based on your goals. Be realistic about your goals. Start saving and investing today. Build a diversified portfolio based on your tolerance for risk. Minimize fees and taxes. Build in protection against significant losses. Rebalance your portfolio regularly. Ignore the noise.