Investing & Markets: Checkpoint 2

Covers index funds, compound growth, and diversification in practice.

Five questions on index funds, the power of starting early, and keeping a portfolio balanced.

Question 1 of 5 An index fund is designed to:

Beat the market every year through active stock picking Match a broad market index by holding the same basket of stocks Only invest in one company Guarantee a fixed return

Question 2 of 5 Compared to actively managed funds, index funds typically have:

Higher fees due to expensive research teams Much lower fees, since no team is trying to pick winners The same fees always No fees whatsoever

Question 3 of 5 Why does starting to invest earlier often outperform investing more money later?

Early investors pay lower taxes Compound growth has more time to work on money invested earlier Government matches only apply to young investors Stock prices are always lower for new investors

Question 4 of 5 The 'rule of 72' is used to estimate:

How much tax you owe on investments How many years it takes an investment to double at a given rate The ideal number of stocks to own The maximum age to start investing

Question 5 of 5 'Rebalancing' a portfolio means:

Withdrawing all your money and starting over Periodically adjusting holdings to restore your original intended mix Only buying stocks that recently went up Something only professional investors can do

← Back to Diversification in Practice Next lesson → Retirement Accounts: 401(k)s and IRAs

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