Dollars and Sense: Investing Challenge

OTC stocks aren't listed on an exchange and generally are offered by smaller, riskier companies. Usually, an OTC stock is stock in a company that doesn't meet the requirements of an exchange.

NASDAQ, or the National Association of Securities Dealers Automated Quotations System, is a place where people go to buy and sell shares of stock. This is not the same as the NASDAQ composite index, which tracks approximately 4,000 stocks.

A bear market is a declining market, usually beginning with a sharp drop in stock prices across the board. In a bear market, the economy tends to be weak. Unemployment increases and consumers spend less, which results in lower business profits.

Load refers to the sales charges added to a mutual fund when you purchase it. It's a commission to the salesperson. Load charges can be up to 8.5 percent of the selling price. Some mutual funds are no-load funds, however.

Because you invest your money into a Roth IRA after taxes, you don't have to pay taxes on the earnings upon withdrawal of the funds at or after the maturity date. This is different from other types of IRAs, 401(k)s, or 403(b)s where you'll pay taxes when you withdraw funds.

Whereas stocks represent partial ownership of a company, bonds are simply loans.

Contributors must start withdrawing funds by age 70.5. The funds withdrawn will be taxed as ordinary income.

Gold is by far the most popular because of its consistently rising value since 2001, especially as the U.S. dollar weakens.

With junk bonds, an acquiring company could borrow serious cash with little or no assets and use it to bid on another unwilling company. Believing that a change in management would make these targets more profitable, the acquiring company would then use the newly acquired assets to repay the debt it incurred to fund the takeover.

Charles Ponzi scammed others into investing in "International Postal Reply Coupons." In this scheme, he took investors' money and dealt out small payments to earlier investors.