Flashcards Section 7, 8, 9 & 10

What are the benefits of investing in domestic markets?

Investors may have better knowledge of local markets, reduced currency risks, and more stable regulatory environments.

What are the risks of investing in domestic markets?

Overexposure to a single market can increase risk, especially if the local economy faces downturns.

What are the benefits of investing in international markets?

Diversification, access to new industries, and potential for higher returns from emerging markets.

What are the risks of investing in international markets?

Currency fluctuations, political and economic instability, and varying regulations.

What is currency risk in international investments?

Changes in exchange rates can affect the value of investments, potentially reducing returns.

What are value stocks?

Stocks that are considered undervalued compared to their financial performance, often trading at lower price-to-earnings ratios.

What are growth stocks?

Stocks that represent companies with higher-than-average growth potential, often having higher P/E ratios and reinvesting profits instead of paying dividends.

How are stocks classified based on market capitalization?

Stocks are categorized as small-cap, mid-cap, or large-cap based on the total value of their outstanding shares.

What is liquidity in stock investing?

Liquidity refers to how easily a stock can be bought or sold without significantly affecting its price.

What are penny stocks?

Low-priced stocks, typically trading below $5 per share, associated with small-cap companies and higher risks.

What are individual stocks?

Shares of ownership in a company that can be bought and sold on stock exchanges.

What are the advantages of investing in ETFs?

ETFs offer diversification, lower costs, and liquidity, allowing investors to trade them like stocks.

How do mutual funds work?

Mutual funds pool money from multiple investors to invest in a diversified portfolio managed by professionals.

What is an index fund?

A type of mutual fund or ETF that passively tracks a market index like the S&P 500.

Qual è la media del costo in dollari?

A strategy of investing a fixed amount regularly to mitigate market volatility and avoid market timing.

What is diversification?

Spreading investments across different asset classes to reduce risk and optimize returns.

What are the five major asset classes?

Equities, fixed income (bonds), real estate, commodities, and cash equivalents.

How does diversification reduce risk?

It helps minimize losses from a single asset or market downturn by distributing investments across various assets.

What is private equity?

Investments in privately held companies or buyouts of public companies, often requiring long-term commitment.

What are alternative investments?

Non-traditional assets like hedge funds, collectibles, and cryptocurrencies that provide diversification.

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