Busfin 2 Flashcards
is an asset or item acquired with the goal of generating income or appreciation.
INVESTMENT
refers to an increase in the value of an asset over time.
APPRECIATION
always concerns the outlay of some asset today—time, money, or effort—in hopes
of a greater payoff in the future than what was originally put in.
INVESTMENT
can refer to any mechanism used for generating future
income, including bonds, stocks, real estate property, or a business, among other examples.
INVESTMENT
Within a country or a nation, economic growth is related to investments. When
companies and other entities engage in sound business investment practices, it
typically results in economic growth.
Economic Investment
An investment bank provides a variety of services to individuals and
businesses, including many services that are designed to assist individuals and
businesses in the process of increasing their wealth.
Investment Vehicles
may be the most well-known and simple type of investment. When you buy this, you’re buying an ownership share in a publicly traded company. Many of the biggest companies in the country — think General Motors, Apple and Facebook — are publicly traded, meaning you can buy it in them.
Stocks
sell stocks to investors.
Brokers
When you buy a _____, you’re essentially lending money to an entity. Generally, this is a business or a government entity. Companies issue corporate bonds, whereas local governments issue municipal bonds. The U.S. Treasury issues
treasury bonds.
Bonds
fund is a pool of many investors’ money that is invested broadly in
a number of companies.
Mutual Funds
can be actively managed or passively
managed. An actively managed fund has a fund manager who picks companies and
other instruments in which to put investors’ money.
Mutual Funds
carry many of the same risks as stocks and bonds, depending
on what they are invested in. The risk is lesser, though, because the investments
are inherently diversified.
Mutual Funds
are similar to mutual funds in that they are a collection of investments that tracks a market index. Unlike mutual funds, which are purchased through a fund company, ETFs are bought and sold on the stock markets. Their price fluctuates throughout the trading day, whereas mutual funds’ value is simply the net value of your investments.
Exchange-traded funds (ETF’s)
are often recommended to new investors because they’re more diversified than individual stocks. You can further minimize risk by choosing an
ETF that tracks a broad index.
ETF’s
is a very low-risk investment. You give a bank a certain amount of money for a predetermined amount of time. When that time period is over, you get your principal back, plus a predetermined amount of
interest. The longer the loan period, the higher your interest rate.
Certificate of Deposit
There are no major risks to ______. They are FDIC-insured up to 250,000, which would cover your money even if your bank were to collapse. That said, you have to make sure you won’t need the money during the term of the CD, as there are major penalties for early withdrawals.
CD’s
There are a number of types of ________. Workplace retirement plans, sponsored by your employer, include 401(k) plans and 403(b) plans. If you don’t
have access to a retirement plan, you could get an individual retirement plan (IRA),
of either the traditional or Roth variety.
Retirement Plans
aren’t a separate category of investment, per se, but a vehicle for making investments, including purchasing stocks, bonds and funds. The biggest
advantage for this — other than Roth IRA plans — is that you put in pre-tax dollars. You won’t pay taxes on the money until you withdraw it in retirement, when you will presumably be in a lower tax bracket. The risks for the
investments are the same as if you were buying the investments outside of a
retirement plan.
Retirement Plans
Many people use this part of their retirement savings plan. When
you buy a______, you purchase a contract with an insurance company and, in return, you get periodic payments. The payments may begin right away or at a specified future date. They may last until death or only for a predetermined period
of time.
Annuities
are fairly low risk, they aren’t high-growth. They make a
good supplement to retirement savings, rather than an integral source of funding.
Annuities
are a fairly new investment option. Bitcoin is the most
famous cryptocurrency, but there are countless others.
Cryptocurrencies
are digital currencies that don’t have any government backing.
-often have wild fluctuations, making them a very risky investment.
Cryptocurrencies
are physical products you can buy. They could be agricultural
products like wheat, barley and corn, or energy products like oil, coal or solar power. Precious metals like
Commodities
investing run the risk that the price of the product will go down quickly. For instance, political actions can greatly change the value of something
like oil, while weather can impact the value of agricultural products.
Commodities
4 ways to reduce your investment risk
- Have a diversified portfolio of investments
- Know your investment goals
- Keep a close eye on your investments
- Watch out for scammers
is earned or incurred for the use of the principal amount over the relevant time period.
Interest
If the interest earned or incurred is always based on the original principal,
then ___________ is assumed.
Simple Interest
The usual assumption in most business transaction is to use the ___________
Compound Interest
is simply earning interest on interest. This means that the basis for the computation of the applicable interest for a certain period is not only the original principal but also any interest earned in the
previous period assuming all cash flows would be paid or received in lump sum
upon maturity.
Compound Interest
