Q What are “defined-benefit” and “defined-contribution” retirement plans?

— I.S., Grafton, Vermont

A You may know them by different names. A pension, for example, is a defined-benefit plan because the amount you’ll receive from it is fixed in advance.

A 401(k) or 403(b) account, in contrast, is a defined-contribution plan because you determine the amount you (and perhaps your employer) contribute to it — by specifying that, say, 5% or 10% of your paycheck be routed to your 401(k) account.

While the amounts of each contribution are known, it’s not known how big your account will become over time, as much depends on the performance of the investments you choose.

Defined-benefit pensions were much more common in past decades, and defined-contribution plans are much more prevalent today. This has shifted both risks and responsibilities: Employers bear more responsibility with defined-benefit plans, as they have to accumulate funds sufficient to meet their future obligations. With defined-contribution plans, it’s on the employee to decide how much to save and invest.

You can learn more about 401(k) plans and other retirement issues at Fool.com/retirement.

Q How should I invest money I’m saving to buy a house in a few years?

— R.D., Adrian, Michigan

A Stocks are generally best for building wealth, but keep any money you’ll need within five (if not 10) years out of stocks. The stock market can be volatile, and you don’t want to have it crash right before you withdraw funds for your down payment.

Keep your short-term savings in safer places, such as high-yield savings accounts, money market accounts or certificates of deposit (CDs). You can find good rates for such accounts at Bankrate.com (under “Site map”) or at Fool.com/money (under “Banks”).

Stock splits tend to get many investors excited. They certainly seem wonderful: One day you own, say, 100 shares of a stock and a few days later you own 200 or 300 or 700 or more. What’s not to like?

That’s less meaningful than it might seem, though. Here’s why: Imagine that you own 100 shares of Wireless Pie Co. (ticker: WIPIE), which delivers pies electronically. When the shares are trading for around $40 apiece, the stock splits 4-for-1. You will now have 400 shares of Wireless Pie, but there’s a catch: At the same time that your shares multiply in number, their price is adjusted downward proportionately — in this case to about $10 per share.

So before the split, you owned 100 shares of a $40 stock, for a total value of $4,000. After the split, you own 400 shares of a $10 stock — for a total value of $4,000. Not much really changes with stock splits.

Note that splits come in a wide variety — they’re often 2-for-1, but other kinds include 3-for-2, 3-for-1, 7-for-1 or even 50-for-1. In June 2024, for example, Chipotle Mexican Grill executed a 50-for-1 split. Pre-split, the shares were trading for around $3,300 apiece, and post-split for around $66. Companies often split their shares to keep them affordable for most investors.

“Reverse splits” exist, too, and work as you might imagine: Your number of shares decreases while the share price increases. Reverse splits are typically executed by struggling companies, in order to make their shares look less like a penny stock or to avoid getting delisted from a stock exchange that has minimum price levels.

Don’t get too excited over stock splits. Yes, it can be fun to suddenly own lots more shares, but the company’s prospects haven’t changed, nor has the total value of your shares. Remember, too, that a lower price doesn’t suddenly make a stock a bargain, and that a high-priced stock can be on its way to much higher prices.

My most regrettable investment moves happened years ago. I invested in both Apple and Netflix. I held on for a while and made a decent amount on both, but I was new to investing and should have held on and never sold. Those two sales probably cost me a million dollars in profits I could have had. Don’t get me wrong — my accounts have done fine, but they could have done a lot better.

I learned to try not to pay attention to business news. The news is not built to give you thoughtful guidance; it is to scare you and get eyeballs on it.

— P.K., online

The Fool responds >> A lot of headlines are indeed designed to grab eyeballs, and many news stories are not very meaningful for long-term investors. For example, if a company’s factory burns down, its

performance can take a hit, but it’s likely to recover and keep growing.

You were smart to invest in both Apple and Netflix, as both have been phenomenal performers. The trick about selling is to ask yourself whether you believe your shares will keep growing and become more valuable over time. With great companies, investors who hang on through thick and thin for years — if not decades — are often richly rewarded.

(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)

I trace my roots back to Indianapolis in 1876, when a Civil War veteran launched me, aiming to develop and sell products to ease people’s pains. My staff treated World War I soldiers in France. In 1923, I introduced the first commercially available insulin. I mass-produced penicillin in the 1940s and was among the first to manufacture the Salk polio vaccine. Today, with a recent market value of over $700 billion, I’m a major pharmaceutical concern, tackling diabetes, Alzheimer’s disease, immune system disorders, cancer and more. I recently employed 46,240 people, more than half outside the United States. Who am I?

Last week’s trivia answer

I trace my roots back to 1914 in Minnesota, where a Swedish immigrant began shuttling miners between the small towns of Alice and Hibbing in a seven-passenger vehicle. Some years later I was renamed after a swift beast. By 1933, I’d grown to encompass 40,000 route miles in the United States. For a while I diversified into toiletries, airport services and more. In 2021, I was acquired by the German company Flix, which owns other transportation businesses globally. Flix boasts more than 5,500 vehicles and more than 400 million passengers since it launched in 2013. Who am I? (Answer: Greyhound)

You may know Meta Platforms (Nasdaq: META) for its social media services, but it’s also become a major player in artificial intelligence (AI). Meta AI, the company’s chatbot available across its Facebook, Instagram, WhatsApp and Messenger properties, has become a leader in generative AI.

As of the company’s third quarter, Meta AI had more than 500 million monthly active users. And in early October, Meta said that over 1 million advertisers in the last month had used its generative AI tools to create more than 15 million ads.

There’s still a lot of uncertainty around generative AI, but having the biggest user base of any AI chatbot is an advantageous position. And Meta’s advertising business, with the help of its AI infrastructure, continues to deliver strong results. In the third quarter, its advertising revenue jumped 19% to $39.9 billion, making up nearly all the revenue for the company.

Some recent policy shifts have caused controversy, but Meta Platforms has been growing rapidly and delivering huge profit margins. Its stock is also reasonably priced at a recent price-to-earnings (P/E) ratio of 29.

(The Motley Fool owns shares of and recommends Meta Platforms. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors.)