ch C Flashcards
6 steps to controlling assets
- Take inventory
- keep track of expenses
- prepare a budget
- pay of debts
- start a savings plan
- borrow only to buy assets
Interest on mortgage is ____
tax deductible
contratian approach
buying stock when everyone is selling
criteria for the right investment
risk, yield, duration, liquidity, tax consequences
reducing risk via diversification, meaning….
buying difference types of investments
What are robo advisors?
automated online tools that use advanced algorithms to make suggestions, manages and re balance portfolios
If a company reaches business objectives then increases _____
potential for capital gain (positive difference between the price at which you buy and then sell)
blue chip stocks
regular dividends and price appreciation
growth stocks
earnings growing at a faster rate
income stocks
high dividend yield that pace w/ inflation
penny stocks
ownership in companies with high risk industries
market order
broker to buy / sell a stock immediatly
limit order
tells broker to buy/ sell at a specific price
bonds sold at a discount
price is less than face value
bonds sold at premium
has value, price above face value
advantages of bonds
guaranteed income and limited risk
When interest rates rise the bonds ___-
fall
mutual funds
investment company pools money to buy stocks/bonds and investments
load fund (mutual fund)
charges investors a commission to buy/sell shares
no load fund (mutual fund)
no commission
open end fund (mutual fund)
will accept investments of any interested investors
closed end funds (mutual funds)
limit # of shares, once fund reaches target #, no new investors can buy into fund
ETF
mix of stocks and mutual funds
traded on securities exchanges, like stocks
term insurance
simple least expensive pure insurance protection for a couple of months
whole life insurance
combines pure savings and insurance. how much payment towards invesments
variable life insurance
type of whole life insurance that invests cash value of policy in stocks and other high yield securities
insurance companies sell annuities that are contracts
to make regular payments to a person for life/ fixed period
fixed annuities
investments that pay at a specified interest rate
variable annuities
provide investment choices identical to mutual fund
Patient protection and Affordable Care Act
initially required nonexempt individuals to maintain a min level of ins or tax penalty until 2017
HSA (health savings account)
tax deffered
disability insurance
ins that pays part of cost of a long term sickness or accident
Homeowners/ renters insurance
guaranteed replacement cost
covers depreciated cost
Social Security -1935
fund of money, continuous flow of contribution and payments
maintaining social security requires
reducing benefits/ late retirements/ limiting cost of living adjustments and increasing taxes
IRA
tax deffered investment plan that enables you to save part of income for retirement
traditional IRA
allows people who qualify to deduct from their reported income the money they put in their account
tax deferred contributions
no current taxes but earnings gained in IRA are taxed as income when they are withdrawn
ROTH IRA
no upfront deductions, earnings grow tax free
for self employed…. SEP Ira
anuual contribution limit: 56000$
simple IRA
for companies with less than a 100 employess
401K plan
employee sponsored savings plan that allows you to deposit a set amount of pre tax and collect compounded earnings tax free free until withdrawl
benefits of 401K
- contributions reduce present tax income
- Tax is offered on earnings
- employers will match contributions
