Question

In: Finance

Which of the following statements are true? Usually: 1) the younger you are -- the more...

Which of the following statements are true?

Usually:

1) the younger you are -- the more stocks you should have

2) retirees or people about to be retired should have the majority (75-100%) of their retirement portfolio in bonds as they won't be able to recover from a stock market crash while in retirement.

3) stocks are always riskier than bonds

4) if you don't have any wealth (assets) you don't need a will

5) A term insurance policy for a 20-year-old is cheaper than a policy for a 30-year-old

6) It's a good idea for your children to have life insurance

7.0.3

Expert Solution

1) the younger you are -- the more stocks you should have - TRUE .

Stocks give higher return in long term than any other asset class, but they carry a higher risk as well. For long investments, young people should therefore have more stocks / stock based investment

2) Retirees or people about to be retired should have the majority (75-100%) of their retirement portfolio in bonds as they won't be able to recover from a stock market crash while in retirement. - TRUE

With no source of income, retirees should keep the investments safe. A stock crash would wipe all their gains. And they may not have time or resources to recoup

3) Stocks are always riskier than bonds - TRUE

Stocks are riskier than bonds. Stock prices fluctuate hugely, with both large upward and downward movements. The capital invested is at risk. Bonds are relatively safe, with less chances of losing the capital. However, bonds also carry interest rate (changes in interest rate) and default risks.

4) if you don't have any wealth (assets) you don't need a will - TRUE

If you don't have an assets, you don't need a will. However, if you have spouse, children and you have liabilities/ or small assets, a will is always helpful

5) A term insurance policy for a 20-year-old is cheaper than a policy for a 30-year-old - TRUE

Term insurance is a pure insurance plan. 30 year old are closer to average mortality period than 20 year old. Thus they are charged a relatively higher premium.

6) It's a good idea for your children to have life insurance - TRUE

Life insurance for children acts a long term saving and investment. Also the premium rates are locked for entire term of policy (Much lower rates for children than adults) . Children would be covered irrespective of their future health.

jeff jeffy answered 2 years ago

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