Investiment Unit Flashcards
Dividends
Portion on a corporations earnings paid in stockholder
Credit union
Nonprofit financial cooperative owned by/operated for the benefit if it’s members.
Cashiers check
Special type of check that the bank guarantees to pay.
Certified check
Personal check that a bank certifies is genuine and that there is enough money in the account to cover the check.
Dow jones industrial average
DJIA
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded in the New York Stock Exchange and the NASDAQ.
Diversification
Spreading risk by putting money in a variety if investments.
Electronic funds transfer (EFT)
Movement of money electronically from one financial institution to another.
Mutual fund
Investment created by pooling the money of many people and investments in a collection of several securities.
Prospectus
Legal document that gives a detailed description of a security.
Roth IRA
Individual retirement account in which individuals contribute after-tax income and qualified withdrawals are not taxed.
Rule of 72
Equation that estimates how long it will take to double an investment with a fixed interest rate.
What’s something you should think about when your considering the best investment plan for you?
Tax advantages
Past history on rate of return
Liquidity
What can you do electronically on an ETF?
Deposit a check
Withdraw money
Wire money to another account
When you invest in a bond…
You earn a fixed amount of interest and the company/gov. is actually borrowing money from you
Certification of a deposit state
You deposit a certain rate for a certain time
Mutual funds are good because…?
They are managed by a professional, you are naturally diversified, and you can start with a modest amount of money
List Liquid investment characteristics
Easy to get your investment back, usually low risk, and appeal to the investor who does not have a lot of money.
List 2 stock exchanges
NYSE and Nasdaq
Roth IRA characteristics
You can withdraw tax free at the age of 59 and a 1/2, you use the after tax money to invest, they are tied to stock market performance, and they are usually a great choice for young investors
Difference between DOW and the Nasdaq composite is that…?
The Dow tracks 30 blue chips stocks while the Nasdaq comp tracks electronically traded tech stocks
When you diversify, you…?
Invest in a variety of different stocks in different industries, could be investing in a mutual fund, or could have CD’s, IRA’s, stocks, bonds and savings
The most liquid investment is…?
A checking account
The SEC…?
Keeps companies honest about info to their investors, regulated insider trade, and is a federal agency
Rule 72 characteristics
Requires the interest rate of your investment, shows that a higher interest rate will result in a lower number of years to increase your money, and is a simply an estimate (as guaranteed rates are often not possible)
A commercial bank…?
Has investors
Is usually backed by the FDIC in the amount of 250,000 per account
An example would be chase
Index examples
DJIA (Dow Jones)
S and P 500
Nasdaq composite
IRA characteristics
Not company based
Cannot withdrawal before age 59 and a 1/2 without penalties
Have tax advantages
You can choose the types of funds
When you invest in a 401k you…?
Utilize a vendor provided be the company you work for, your employer may match all or a portion of what you invest, you be taxed if you withdraw before age 59 1/2, you can invest up to 17,500 tax fee
Dollar cost average will…?
Even out the purchase prices of stocks over time, if you invest at regular intervals
A voided check means that…?
The check had been rendered without value by the payor
What’s important about these three terms?
Bounced check, insufficient funds, and overdrawn account
They mean the same thing
The best way to make sure your account is balanced?
Reconcile your account
Whats the Tradition pension plan? Why is it no longer offered?
A defined amount of money provided every month during retirement
They’re too expensive to provide anymore
401k plan
Employe contributes money to an account with an employer, usually matching up to a certain amount/percent
What does it mean that money put into the 401k is a pre-tax contribution?
The money goes into the account before you pay any tax from your paycheck
Difference between Traditional/Roth IRA
Traditional-money goes in pre-tax
Roth-the money goes after tax
10% penalty if you withdraw money early from…?
An IRA
What percent of your paycheck is deducted for social security?
6.2%
Who benefits from social security?
People who are disabled, retired, surviving family member of deceased worker
At what age can a person start collecting social security benefits?
62, only receive 75% of what the bank entitles you
What age can a person start collecting dull social security benefits?
66
IRA account that uses after tax dollars, no income tax
Roth IRA
IRA that uses pretax and will result in income
Traditional
Company pension plan characteristics
Both employer and employe contribute money, provisions provide a benefit each month for a retired person for as long as they live, and few companies provide pension to employe’s because they’re expensive
Difference between investing and saving?
Investing: achieving part ownership of a company, risk loosing money
Saving: giving bank money, they give some back
Blue chip stalks
A stalk of a large, well established and financially sound company that’s been opened for years
Common stock
Stock that has voting rights and receives dividends declared by the company.
Traditional IRA (or just IRA)
Traditional IRA contributions are tax-deductible on both state and federal tax returns for the year you make the contribution; withdrawals in retirement are taxed at ordinary income tax rates
