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If you trade the forex markets regularly, chances are that a lot of your trading is of the short-term variety; i. From my experience, there is one major flaw with this type of trading: h igh-speed computers and algorithms will spot these patterns faster than you ever will. When I initially started trading, my strategy was similar to that of many short-term traders. That is, analyze the technicals to decide on a long or short position or even no position in the absence of a clear trendand then wait for the all-important breakout, i. I can't tell you how many times I would open a position after a breakout, only for the price to move back in the opposite direction - with my stop loss closing me out of the trade. More often than not, the traders who make the money are those who are adept at anticipating such a breakout before it happens.

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Module 4 investing money working for you answers to guess

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That is, irrespective of which index and which particular set of controls are used, women are consistently less financially savvy than men column 1 and this result persists after controlling for many demographic characteristics column 6. This result extends findings using only the simple financial literacy index in Lusardi and Mitchell ; b and is supportive of similar evidence in a wide range of countries. However, women answer between a quarter to a half of a standard deviation fewer questions correctly.

The better-educated are also found to be more financially sophisticated in both tables, with those having a college degree or more having the greatest advantage compared to the reference case, a high school dropout. With the simple index, those with graduate degrees are about a third of a standard deviation more likely to respond correctly, while using the PRIDIT index the magnitude is a bit larger, at half a standard deviation. Specifically, African-American and Hispanic respondents have lower measured levels of financial sophistication than do their White counterparts the reference group in columns 3 and 6—8 of both tables.

Relatively speaking, Hispanic respondents are at the greatest disadvantage, underscoring about a third to a half a standard deviation across tables. This corroborates our findings from prior waves of the HRS that measured only basic financial knowledge Hilgert et al. In this older population of Americans, there is only weak evidence that age is related to financial literacy scores.

This is due to the fact that age is correlated with cognition, risk aversion, and planning controls, as is evident from a comparison of Columns 4 and 5. Since we have a single HRS cross-section with which we can examine the key outcomes of interest, naturally we cannot disentangle age and cohort effects Lusardi and Mitchell, b.

Interestingly, only the cognition score retains its statistical significance in Column 6 of both tables when all other controls are included, though in both cases the estimated magnitudes are quite small. Nevertheless, in other work Behrman et al. Another contribution of this paper is to examine whether and how responses varied according to the order of question wording.

First, Column 7 adds a simple control variable to the set of regressors indicating which wording each respondent received first. Here we see that the patterns of financial sophistication documented earlier are not attenuated with this control, which is statistically significant when using the PRIDIT index Table 3 Nor are controls on risk aversion and financial planning horizon influential for the financial literacy outcomes we examine here.

One key subgroup stands out as influenced by the order of the question, namely women. Thus when women were shown the first wording, they were more likely to score better on both simple and PRIDIT sophistication indexes, holding other factors constant.

To explore this in more detail, Table 4 illustrates exactly which wording induced HRS women to be more likely to answer questions correctly. Two important conclusions emerge from this analysis. This is evident both from the lower significance levels of the chi-squared tests performed on the First Wording group in Table 4A , as well as from the strongly negative coefficient on the female and first wording interaction term in Table 4B. This is somewhat puzzling but it confirms with evidence from other countries.

For instance, Lusardi and Mitchell c , show that women respond similarly in countries as different as Sweden, Italy, Germany, New Zealand, Australia and Russia; i. Because of a lack of confidence or perhaps due to lack of knowledge, women are sensitive to how the question was framed. Other studies have also suggested that context also matters for financial literacy questions. For example, Schmeiser and Seligman report that the proportion of correct answers changed if a question was posed in the context of math, medicine, or consumer decisions.

This paper documents a quite striking dearth of financial sophistication among the older American population. Our special-purpose HRS module has permitted us to quantify just how little respondents know regarding capital markets, risk diversification, fees, financial savvy, and investing.

Furthermore, we have exploited differences in question wording to show that people are likely guessing and are often influenced by the way in which survey questions are framed. Finally, we make a methodological contribution by examining alternative ways to combine answers to financial literacy questions into an overall index.

This helps identify which particular questions are most valuable in measuring financial literacy at older ages. Moreover, we showed that the PRIDIT index we used is highly correlated with an alternative measure that simply sums correct answers, indicating for the older population that both approaches do a reasonably good job in capturing observed variation in financial sophistication.

Yet the PRIDIT approach has the advantage of telling us which questions are most informative about overall financial sophistication levels. In our module, the questions related to knowledge of risk diversification, financial savvy, and numeracy were most informative.

For this reason, those seeking to measure financial literacy and sophistication will find it helpful in measuring knowledge of these specific topics. This suggests that it would be fruitful to study how financial sophistication questions are framed, so as to determine whether and how people develop a fuller understanding of retirement saving and investment. Moreover, the analyst must in mind that some questions are not effectively gender neutral. Our findings will be of interest to those seeking to enhance retirement security in the older population.

As employees and retirees are increasingly being asked to take on tasks requiring financial sophistication including saving, investment, and dissaving pre- and post-retirement, they are likely to do better if they are equipped with more and better financial decision-making capacity. One way to do this is to build human capital via educational and retirement planning programs, particularly starting young Lusardi, Mitchell, and Curto Instead, targeted programs are likely to better serve people who differ in terms of financial sophistication.

The research reported herein was conducted pursuant to grants from the U. Opinions and errors are solely those of the authors and not of the institutions with which the authors are affiliated. Those authors used Item Response Theory to develop their own summary financial knowledge measure. Schmeiser and Seligman use panel HRS data to ask whether financial literacy measures seem stable over time and are effective predictors of future changes in wealth.

These papers offer useful discussions of prior financial literacy measures. For a discussion of the pros and cons of employer stock, see Benartzi et al. This approach has recently been used to measure financial literacy in Chile see Behrman et al. This principal component vector captures more variance in the data than any of the other eigenvectors. Clair et al. Planning horizon refers to the time period over which the respondent makes financial decisions: new few months 1 , next year 2 , next few years 3 , next 5—10 years 4 , or longer than 10 years 5.

Risk aversion is measured using questions about income gambles and answers range from least risk averse 1 , next higher risk averse 2 , next higher risk averse 3 , and most risk averse 4. We construct the cognition index following Ofstedahl et al. The maximum possible score was 35, and the minimum zero. See also Loibl and Hira Olivia S. J Pension Econ Financ. Author manuscript; available in PMC May Annamaria Lusardi , Olivia S. Mitchell , and Vilsa Curto.

Author information Copyright and License information Disclaimer. Copyright notice. See other articles in PMC that cite the published article. Abstract Using a special-purpose module implemented in the Health and Retirement Study, we evaluate financial sophistication in the American population over the age of Keywords: Financial knowledge, framing, gender differences, retirement security.

Data and Methodology In , we queried about 1, randomly-selected HRS respondents using a special module assessing knowledge of the stock market and asset prices, investment strategies, risk diversification, the importance of fees, and related topics. Table 1 reports the specific language used in each question employed for the analysis; in each case with the answer which a sophisticated individual would provide indicated in bold: Table 1 Financial Sophistication Questions: Percent Correct. Open in a separate window.

Knowledge of capital markets 1. Please indicate whether you think each statement is true or false. If you are not sure, give your best guess. Risk diversification 4. Knowledge of fees 6. Constructing a Financial Literacy Index While the questions just described do measure knowledge required for financial decisionmaking, analysts often construct summary measures or indexes of responses to all questions to help categorize respondents as relatively more or less sophisticated.

Figure 1. The Distribution of Financial Sophistication in the Older Population Next we look more closely at how financial sophistication is distributed across the older population. Conclusion and Discussion This paper documents a quite striking dearth of financial sophistication among the older American population. Acknowledgments The research reported herein was conducted pursuant to grants from the U.

Financial literacy, schooling, and wealth accumulation. American Economic Review. Jul, Company stock, market rationality, and legal reform. Journal of Risk and Insurance. Household finance. Journal of Finance. Why does the law of one price fail?

An experiment on index mutual fund. Review of Financial Studies. Cognitive abilities and portfolio choice. European Economic Review. Numerical Ability Predicts Mortgage Default. Proceedings of the National Academy of Sciences. How financial literacy and impatience shape retirement wealth and investment behaviors. Financial literacy, information, and demand elasticity: Survey and experimental evidence from Mexico.

Household financial management: The connection between knowledge and behavior. Federal Reserve Bulletin. Investor sophistication and the participation, home bias, diversification, and employer stock puzzle. The financial knowledge scale: An application of item response theory to the assessment of financial literacy. The Journal of Consumer Affairs.

Know your subject: A gender perspective on investor information search. Journal of Behavioral Finance. Policymaking Insights from Behavioral Economics. Baby boomer retirement security: The role of planning, financial literacy, and housing wealth.

Journal of Monetary Economics. Planning and financial literacy: How do women fare? How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness. The outlook for financial literacy. Financial literacy and planning: Implications for retirement wellbeing. Financial literacy around the world: An overview.

Journal of Pension Economics and Finance. A Hazard to Your Wealth. Women in the C-Suite. Closing the Gap. I Want I Bonds. What did she invest in? Can you name two of the top three cryptocurrencies based on their market value? What percent of year old investors own individual stocks? How many countries have banned cryptocurrency? Can you name one? What percent of year olds have invested in, traded or used a cryptocurrency e.

Can you name it? What is the scrap metal value of a Tokyo Olympic Gold Medal? What percent of financial advisers are women? What percent of American families invest in the stock market? What was the first item ever purchased using bitcoin?

What has been the average geometric return for the stock market over the past 50 years []? Over a recent 20 year period, what percent of pros investing in large companies "beat the market? What is the average amount of retirement savings for year olds? View Google Doc. In this activity, students will: Use an online tool to explore annual returns for 9 asset classes over a year period Compare the relative performance of asset classes and consider risk vs return in investment strategies.

In this activity, students will: Make over 40 investment decisions as they allocate their savings between a multitude of investment options Receive short in-game lessons explaining the details of the specific investment Practice diversifying their portfolio to yield the highest return.

In this activity students will be able to: Try to time the market on the Initial Public Offering IPO for 7 well-known tech companies using an online interactive Calculate their return on investment if they sold their shares today Decide whether they think investing in IPOs is a sound investment strategy. In this activity, students will: Explore reasons why many people don't invest Analyze investment trends by income, race, and investing experience. In this activity students will be able to: Analyze the data in 3 different types of graphs Explain the importance of investing early for retirement Understand the power of compound interest over time.

In this activity, students will be able to: Use an inflation calculator to think about the relationship between interest and inflation. Learn why long term saving might not be enough for large purchases in the distant future. In this activity, students will be able to: Examine a number of cartoons about timing the market and choose one to analyze in more depth Explain the cartoon's key message about timing the market and how it depicts that message.

In this activity, students will be able to: Determine what features they value in a brokerage account and then conduct online research to determine which accounts best meet their needs. Compare and then select which brokerage account would be best for them.

In this activity, students will be able to: Walk step-by-step through an example of how dollar cost averaging works Conduct online research of historical stock prices Use a spreadsheet to examine effects of dollar cost averaging Understand how dollar cost averaging benefits them as investors. With this activity students will be able to: Understand how to read a bond market index fund fact sheet from Vanguard Identify important elements of a bond, such as level of risk, expense ratio, and interest rates.

With this activity students will be able to: Read a stock index fund fact sheet Understand the most important elements on the fact sheet, including fund description, fees, performance and composition. With this activity students will be able to: Read a target date fund fact sheet Understand the most important elements on the fact sheet, including fund description, fees, performance and composition.

Through a series of 5 rounds, students will: Combine with other companies Assess risk and return along the way Eventually create an index fund comprised of the Dow. In this activity, students will be able to: Learn about the structure of a popular index composed of the largest companies in the U.

In this activity, students will: Hypothesize how many items are in the jar and collaborate with classmates on strategies Analyze averages and compare to the actual value Explore behavioral finance in a fun and engaging activity.

In this activity, students will be able to: Look up historical stock prices on Yahoo! In this activity, students will be able to: Read an article of 25 things to know about investing and categorize the items based on their prior knowledge Exchange knowledge with a partner to further the learning [This activity has no answer key]. In this activity, students will be able to: Read research on the internet to answer basic questions about retirement age, Social Security, and pension programs.

In this activity, students will: Complete a mock k enrollment form Decide how much of their pay to invest Assess their own risk tolerance and select funds for their investment. In this activity, students will: Determine which type of IRA to sign up for and their contribution amount Choose whether to invest by using a robo-advisor, target date fund, or creating their own investment portfolio Select a brokerage firm and their IRA investments.

The Raging Bull. Unfortunately not many young people take advantage of the high ROI through investing in the stock market. A community called Financially Independent, Retire Young is a group of very young people that are able to retire early.

They do this by saving and investing a majority of their earnings and are now able to live off of that money. People are always interested in companies that decide to do an IPO or inital public offering. This is when companies decide to sell stock on the stock market. However, this may not be the safest investment making. Many young adults are interested in sneaker collecting.

This has led to the price of limited editions sneakers to skyrocket and what initially could have been purchased for around a hundred dollars can now be resold for thousands. Bonds lend your money to a company or to the government, and they pay you back later with some interest.

However there are negative interest rate bonds, which are bought by people who are afraid of investing in riskier investments. Many people choose to invest in gaming companies, as its market is worth a lot. There are funds where you invest in many different companies, so for those who want to invest but don't know much about games, this can be profitable. Active funds are investing in individual stocks, which is risky as the companies chosen might not do well. Index funds are accounts with lower fees that takes the average of the stock market making it a safer option.

The Coronavirus pandemic is having a global impact. America has seen its biggest stock market drop since the financial crisis, and companies who depend on factories in China are now stuck with no supply for demand. There has been a buzz around two of the largest companies in the US stock market, Apple and Tesla. Many investors and non-investors alike are chatting more and more about recent news related to these companies.

New data from Fidelity shows a trend with millionaires who have used k accounts to build their wealth. But what are k accounts and how can young professionals use them wisely to become the next generation of millionaires? However, you can still become a millionaire through investing and saving your money. The interesting trend that occurred when casinos closed and sports betting was no longer possible.

Why is it so tempting for people who invest to trade stocks instead of investing for the long term? Now the question is: "Why is it so rare for women leaders to get this kind of support? Their source of inspiration? Social media! This episode kicks off February in celebration of Black History Month. With the market swinging wildly, bank rates at a low point and inflation at record high levels - what are Americans to do with cash so it doesn't lose too much purchasing power?

Data shows many are turning to Series I Bonds! MATH: Rule In this activity, students will be able to: Use function notation to calculate how long it will take an investment to double using the rule of Source: NGPF. In this activity, students will be able to: Calculate return on investment percent growth using order of operations.

Apply the compound interest formula to calculate the growth of investments over multiple years. Analyze how investment fees impact long-term returns. In this activity, students will be able to: Write and solve exponential equation about investment growth over time. In this activity, students will be able to: Calculate standard deviation from a data set Use standard deviation to compare the risk of investing in stocks and bonds.

In this activity, students will be able to: Use a calculator to find the line-of-best fit for a data set. Analyze the key values in a linear regression, including the slope, y-intercept, and r-squared value. Use linear regression to analyze and compare short-term stock returns. In this activity, students will be able to: Solve multi-step equations using order of operations. Apply the formula for yield to maturity to find the rate of return, coupon rate, face value, price, or years to maturity for a bond.

In this activity, students will be able to: Use a chart of historical stock market returns to analyze the risk of investing over different time horizons. Source: Wisdom Tree Asset Management. In this activity, students will be able to: Compare the best, worst, and average annual returns over a 20 year period for portfolios with a different allocations of stocks and bonds.

Consider the risks and returns of investing in stocks and bonds. Source: Vanguard. Source: Richard Bernstein Advisors. In this activity, students will be able to: Analyze a historgram of stock market returns over 90 years. Source: Big Picture Blog. In this activity, students will be able to: Analyze the annual returns of small stocks, large stocks, government bonds and treasury bills over 90 years, compared to inflation.

Interpret the potential risk of an investment type based on the graph of its long-term returns. Source: Ibbotson Associates. Before you go to , here are some pro tips when adding NGPF Nearpod lessons to your account: You will need to be logged into your Nearpod account on nearpod. NGPF does not recommend downloading every Nearpod lesson at one time but only the ones you plan to use in the near future.

Adding a Nearpod lesson closer to your date of instruction will ensure you have the most up-to-date version. Don't show me this again. Sending form One more thing! Sign Up for Our Newsletter! Success message here.

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Start studying Module 4: Investing. steps to build wealth include 1) Have enough income to invest, 2) Make a plan, and 3) Put money to work by investing. Start studying Personal Financial Literacy Module 4 DBA. Learn vocabulary, terms -Riskiest of the investments, can earn or lose large amounts of money. If you decide to buy stock in a new or small company, only invest money that you can afford to lose. One of the most important ways to lessen the risk of losing.