Chapter 8- Investing and Retirement Flashcards
The process of setting money aside to increase wealth over time for long-term financial goals such as retirement.
Investing
Account or arrangement in which a person puts his/her money for long-term growth; invested money should not be used for a suggested minimum of 5 years
Investment
Quality of an asset that allows it to be converted quickly into cash without loss of value: availability of money
Liquidity
A list of your investments
Portfolio
Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit
Risk
Relationship of substantial reward compared to the amount of risk taken
Risk-Return Ratio
Piece of ownership in a company, mutual fund, or other investment
Share
Securities that represent part ownership or equity in a corporation
Stocks
Money that is invested, either deferred or tax-free, within a retirement
Tax-Favored Dollars
A market in which short-term financial instruments such as Certificates of Deposit, Treasury bills, and bank deposits are traded
Money Markets
Money Markets have (high, low) risk
low
Buying a small piece of a company. Your return comes as the company increases in value.
Single Stocks
Single stocks are (high, low) risk
High
A debt instrument by which the company owes you money. Your return is the fluctuation in price and interest rate paid
Bonds
Bonds are typically (high, low) risk
low
An investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and similar assets
Mutual Fund
Mutual funds are good (long-term, short-term) investments
long term
Mutual funds are _____ risk
low to moderate, depending on diversification
A qualified plan where everyone with an earned income is eligible for special tax treatment
Individual Retirement Arrangement (IRA)
Funded with after-tax money, which allows your money to grow tax-free.
Roth IRA
A savings account sold by an insurance company, designed to provide payments to the holder at specific intervals, usually after retirement
Annuity
Fixed annuities have a (high, low) interest rate
low.
Mutual funds sheltered by the annuity, which allows the mutual fund to grow tax-deferred
Variable Annuities
Real estate has a VERY ____ liquidity
low
Real estate is a (high, low) risk with a (high, low) return
High, High
Gold is a (good, bad) investment because….
bad, it’s rate of returns is about equal to inflation
Agricultural or mining products
Commodities
The buying and selling of stock purchases each day through speculation
Day Trading
When someone with a terminal disease sells their life insurance policy at less than fave value
Viaticals
The trading of securities
The stock market
Largest organized stock exchange in the US.
New York Stock Exchange
Bull market
Upward trends
Bear market
Downward Trends
When a self-employed person may deduct up to 15% of their net profit on the business by investing in this
Simplified Employee Pension Plan (SEP)
A retirement savings plan offered by a corporation to it’s employees. This account grows tax-deferred and may be matched by the company
401(k)
Found in non-profit organizations.
403(b)
Deferred Compensation. Available for gov’t employees
457
Like a CD in your 401(k). do not use because of low return
Guaranteed Investment Contract (GIC)
The practice of dividing the money a person invests between several different types of investments in order to lower risk
Diversification
