ch. 2- investment Flashcards
Define Aggressive Growth Stock Mutual Fund.
mutual find that seeks to provide maximum long-term capital growth from stocks of smaller companies
What is another name for the Aggressive Growth Stock Mutual Fund?
small-cap fund
Define Annuity.
savings account with an insurance company, don’t have to pay tax on them
Define Bond.
an issuer such as a corporation or government agency
Define C.D
Certificate of Deposit. savings account with a higher interest rate because of a longer savings commitment
Define Commodity.
a food, metal, or fixed physical substance that investors buy usually through future contracts
Define Diversification.
to spread around one’s investment dollars
Define Dividend.
distribution of a portion of a company’s earnings
Define Fixed Annuity.
type of annuity that guarantees a certain rate of return
Define Futures.
a term used to designate all contracts covering the sale of commodities
Define Investments.
arrangement one would put money in for long-term growth
Define Growth Stock Mutual Fund.
fund that buys stock in a medium-sized company
What is another word for Growth Stock Mutual Fund?
mid-cap fund
Define Large-Cap Funds.
funds compromised of large companies
Define Liquidity.
the availability of getting money out without loss of value; more liquidity, less return
Define mid-cap fund.
mutual fund containing a group of medium-sized companies that are growing
Define Money Market.
mutual fund that seeks to maintain a stable share price & to earn current income by investing in interest-bearing instruments with short term maturities
Define mutual fund.
a pool of money invested in different investments
Define portfolio
a list of your investments
Define Rental Real Estate.
buying real estate to rent out as an investment
Define Risk.
degree of uncertainty of return on an asset
Define International Stock Mutual Fund.
mutual fund that contains international countries
Define Risk Return Ratio.
relationship of substantial reward in comparison to the amount of risk taken
Define Savings Account.
accounts that allow regular deposits and withdrawals
Define Share.
price of ownership in a company or mutual fund
Define Single Stocks
buying stock in only one company
Define Small-Cap Fund
mutual fund that invests in companies whose market is less than $1 billion
Define Speculative.
risky investments that present the possibility of large profits but also a higher than average possibility of loss
Define Track Record.
the past history of something
With investments, how far back should you look on the track record?
5-10 years
Define Variable Annuity.
annuity covered by the annuity covering making it tax-deferrable
What is the KISS method of investing?
Keep It Simple, Stupid
How should you never invest?
- just for tax savings
- using borrowed money
What is diversification’s relationship with risk?
it lowers risk
Throughout stock market’s history, what percentage of 5 year periods make money? 10 year periods?
97%; 100%
Saving is…. years….. Investment is…. years…..
Saving is 5 years or less. Investing is 5 years or more
What is the relationship with liquidity and return?
when there is more liquidity, there is usually less return
What is a bear market? Bull market?
stock market prices are down; bull- stock market prices are up
What is the risk in money market mutual fund?
low risk
Single stock has what kind of risk?
extremely high risk
For single stocks, when does your return come?
as the company increases in value or pays you some of the profits
What are dividends?
the profits of a company
For bonds, when does your return come?
in the fluctuation in price and the interest rate paid
Do many do well with single bond purchases?
no
Who manages mutual funds?
portfolio managers
For mutual funds, when does your return come?
as the value of the fund is increased
Long-term investments properly diversified include the following mutual funds:
1) International
2) Aggressive Growth (Small-cap)
3) Growth (Mid-Cap)
4) Growth & Income (Large Cap)
What is the least liquid consumer investment?
real estate
What is usually the interest rate for fixed annuities? Good or bad investment?
5%, bad
List 4 horrible investments.
fold, commodities/future, day trading, viaticals
What are viaticals?
pay to be a beneficiary of a dying person
Building wealth takes time. It’s not like a _________; its like a ________________
microwave; crock pot
What is the best place for an emergency fund?
C.D or money market
How do you go about finding the right person to help you invest?
find someone with a teacher’s heart
What are some investments that don’t give you a high rate of return?
fixed annuities & single stocks
How are single stocks and mutual funds different? Which is the better investment?
Mutual Funds are investors pooling their money together and it is usually low risk. Single stocks are usually bought by one person & has high risk. Mutual funds are better
