Isn't broad index diverse? Even textbooks say it is a low risk and good to control volatility? I think it is better tomanage volatility than divdend paying stocks. Thank you!
Let's see. In reference to question #12. A broad index is diverse, that is true. So this question is looking for what does not help to reduce volatility. Investing in an index fund helps to reduce nonsystematic (stock specific) risk. Volatility is measuring risk. An index fund has systematic risk because it is in the market. So consider these two investments...an index fund, let's say the S&P 500 fund, versus a dividend paying stock. Which ones price over time is more volatile? As a general rule the index will move and and down more than a dividend paying stock would (use this concept for the test). Dividend paying stocks' prices in the market tend to move more sideways than an index would, reducing volatility. Great question. Keep up the good work! 😀
For #15, I agree that a balanced fund does have stock/bonds and cash, but when there is a specific percentage in each asset class that is always an asset allocation fund. As far as #16, when saving for educational expenses an ESA is an option, sure. But with this question they gave you the kid is already age 17....so in an ESA there is an annual limit (currently $2,000 per year per child) and ESA's also have the funding age requirement (under 18), making the ladder of CDs the BEST choice. Thankfully money isn't owed all at once for college, but over time. Great questions. Keep up the good work. 😀
Hi Suzy ! Thank u👽📈
You are welcome! Thanks for watching 😀
Thankyou!!!
Thank you for watching 😀
Thanks!
Thank you for watching! 😀
Isn't broad index diverse? Even textbooks say it is a low risk and good to control volatility? I think it is better tomanage volatility than divdend paying stocks. Thank you!
Let's see. In reference to question #12. A broad index is diverse, that is true. So this question is looking for what does not help to reduce volatility. Investing in an index fund helps to reduce nonsystematic (stock specific) risk. Volatility is measuring risk. An index fund has systematic risk because it is in the market. So consider these two investments...an index fund, let's say the S&P 500 fund, versus a dividend paying stock. Which ones price over time is more volatile? As a general rule the index will move and and down more than a dividend paying stock would (use this concept for the test). Dividend paying stocks' prices in the market tend to move more sideways than an index would, reducing volatility. Great question. Keep up the good work! 😀
Hi I’m curious why #15 the answer isn’t a balance fund. How can I differentiate when to choose either. Also. Why isn’t #16 an ESA? Thank you! 😊
For #15, I agree that a balanced fund does have stock/bonds and cash, but when there is a specific percentage in each asset class that is always an asset allocation fund. As far as #16, when saving for educational expenses an ESA is an option, sure. But with this question they gave you the kid is already age 17....so in an ESA there is an annual limit (currently $2,000 per year per child) and ESA's also have the funding age requirement (under 18), making the ladder of CDs the BEST choice. Thankfully money isn't owed all at once for college, but over time. Great questions. Keep up the good work. 😀
Great explanations
Thank you for watching! We really do appreciate it!😀