Chapter 11: Investment Planning Flashcards
long-term process of purchasing securities wherein stability of value and the level of return are somewhat predictable.
investing
short-term buying/selling of securities in which future value and expected return are highly uncertain.
speculating
you should establish and build up an emergency fund and buy insurance coverage before building up an investment portfolio.
true
money that is accumulated beyond basic emergency savings.
investment capital
in order to successfully invest:
1. determine amount to earn
2. determine time you have to earn
3. determine the expected rate of return
true
future amount of money desired / future value of annuity factor =
yearly savings
a set amount of periodic savings built into a budget.
systematic savings plan
a written statement explaining how to accumulated investment capital will be invested to reach a targeted goal.
investment plan
- enhance current income
- save for major expenditures
- retirement funds
- shelter from taxes
These are the 4 main objectives of…
investing.
- common stock
- bonds
- preferred securities
- convertible securities
- mutual fund
- exchange traded funds (ETFs)
- exchange traded notes (ETNs)
- real estate
These are all forms of…
investment vehicles.
investment vehicle where each share represents a fractional ownership position in a corporation of equity.
common stock
investment vehicle that is a liability of the issuer and has interest.
bonds
a stated return is also referred to as…
interest.
investment vehicle that is issued as stock, has a fixed dividend rate, and is purchased for the current dividends they pay.
preferred securities
investment vehicle that has a fixed-income obligation that carries conversion feature permitting investor to convert it into a specified number of shares of common stock.
convertible securities
investment vehicle where shares are sold to investors who become part-owners of the fund’s securities portfolio.
mutual fund
investment vehicle that represents a portfolio of securities and are set up to track a basket/index of securities of a sector.
exchange traded funds (ETFs)
investment vehicle where senior, unsecured, unsubordinated debt securities are issued by an underwriting bank.
exchange traded notes (ETNs)
investment vehicle that involves speculating in raw land to limited partnership shares in commercial property.
real estate
arena where stocks, bonds, and other financial instruments are traded.
securities markets
securities market where long-term securities are traded.
capital markets
securities market where short-term, low-risk credit instruments w/ maturities of 1 year or less are sold.
money markets
what are the 2 main types of securities markets?
- primary markets
- secondary markets
primary markets are used from newly issued investments.
true
type of firm that specializes in selling new security issues.
investment banking firm
a selling group is made up of several brokerage firms.
true
spreads risks associated with selling new securities.
underwriting syndicate
a document that describes a firm and an issue.
prospectus
secondary markets permit investors to execute transactions among themselves.
true
when buyers and sellers group together to trade securities, these are called…
securities exchanges
What does NASDAQ stand for?
National Association of Securities Dealers Automated Quotation System
What does OTC market deals stand for?
over-the-counter
what 2 types of markets constitute secondary markets?
- broker markets
- dealer markets
act that requires security issuer must file registration statement w/ the securities and exchange commission (SEC).
securities act of 1933
what is the name of the agency of the U.S. government that enforces federal securities laws?
Securities and Exchange Commission (SEC)