University of Phoenix Material

Investments Worksheet

Answer the following questions in at least 50 words each:

1. What are the main differences between a 401K and a Roth IRA?

A 401k is a contribution plan that a person contributes to through an
employer and the employer normally will match what you put in. 401 plans
defer current taxation on a persons salary taxes are not paid on the
money until the money is withdrawal from the account. A Roth IRA is an
individual retirement plan the payments into a roth ira are not tax
deductible but the total earnings are tax free. Money can be withdrawn
from a roth ira without penalty after 5 years aslong as the person is 59%
years old also use the money for a purchase of a home.

2. How would you explain the difference between a stock, a bond, and a
mutual fund?
Mutual funds represents another way to invest in stocks and bonds or
cash altenatives you can think of a mutual fund like a basket of
stocks or bonds basically your money is pooled along with the money of
other investors into a fund which then invests in certain securities
according to a stated investment strategy.

3. What are the risks and rewards of investing?
Investor risk comes in different ways they can run a high risk of losing
money or gaining money. Downturn in stocks prices runs a risk of
inflation it will erode an assets purchasing power. There the risk of
political instability affecting international markets but without risk to
get a better reward.

4. How can you minimize the risks associated with investing? The best way
to minimize the risk associated with investing is really getting to
know what you are investing in and getting to know each risk with each
stock bond or mutual fund you are investing in.

5. What would affect your decision to invest? The lack of funds and
knowledge on what im investing in when you invest something there is
always a risk of no return or losing out complete the stock market
goes up and down so there is always a uncertainty of investing but
when you do invest just do your research run the number of demand and
supply and what our current economic status is.