Investing Flashcards
To study key vocabulary in preparation for our vocabulary quiz
Define Trading
Trading in investing is the buying and selling of financial assets to make a profit. Traders often make transactions multiple times a day, week, or month.
Define Investing
The process of allocating money into financial assets, such as stocks, bonds, real estate, or mutual funds, with the expectation of generating income or profit over time.
What is Risk Management?
The practice of identifying, assessing, and prioritizing potential risks and taking steps to minimize or control their impact on investments.
What are stocks?
Shares of ownership in a corporation, representing a claim on part of the company’s assets and earnings.
What are bonds?
Debt securities issued by corporations or governments to raise capital, where the issuer promises to pay back the principal amount along with interest by a specified date.
What is interest?
The cost of borrowing money, typically expressed as a percentage of the principal amount, paid by the borrower to the lender.
What is compound interest?
Interest calculated on the initial principal and also on the accumulated interest of previous periods, leading to exponential growth.
What is an exchange?
A marketplace where financial instruments, such as stocks, bonds, and commodities, are traded.
What is a stock market index?
A measurement of the performance of a specific group of stocks, representing a particular segment of the market, such as the S&P 500 or Dow Jones Industrial Average.
What is a bull market?
A financial market condition where prices are rising or are expected to rise, typically reflecting investor confidence.
What is a bear market?
A financial market condition where prices are falling or are expected to fall, typically reflecting investor pessimism.
What are dividends?
Payments made by a corporation to its shareholders, usually in the form of cash or additional shares, as a distribution of profits.
What is an Initial Public Offering (IPO)?
The first sale of a company’s shares to the public, marking the transition from a private to a publicly traded company.
What is a brokerage firm?
A financial institution that facilitates the buying and selling of financial securities between investors and the stock market.
What is a share of stock?
A single unit of ownership in a corporation, entitling the shareholder to a portion of the company’s assets and earnings.
What is a small cap company?
A company with a relatively small market capitalization, typically ranging from $300 million to $2 billion.
What is price history?
The record of a financial security’s past prices, often used to analyze trends and make investment decisions.
What is bond maturity?
The date on which the principal amount of a bond is scheduled to be repaid to the investor.
What is default risk?
The risk that an issuer of a bond may fail to make interest payments or repay the principal amount at maturity.
What is a bond fund?
A mutual fund or exchange-traded fund (ETF) that invests primarily in bonds and other debt securities.
What is diversification?
The strategy of spreading investments across different asset classes, industries, or geographic regions to reduce risk.
What is return on investment (ROI)?
A measure of the profitability of an investment, calculated by dividing the net profit by the initial investment cost.
What is a portfolio?
A collection of financial assets, such as stocks, bonds, and other investments, owned by an individual or institution.
What is an index fund?
A type of mutual fund or ETF that aims to replicate the performance of a specific market index, such as the S&P 500.
What is dollar cost averaging?
An investment strategy where an investor consistently invests a fixed amount of money at regular intervals, regardless of market conditions.
What is active investing?
An investment strategy where investors or fund managers make specific decisions to buy and sell assets with the goal of outperforming the market.
What is passive investing?
An investment strategy that seeks to replicate the performance of a market index rather than trying to outperform it, often through index funds or ETFs.
What is a mutual fund?
A pooled investment vehicle managed by a professional manager, which invests in a diversified portfolio of stocks, bonds, or other securities.
What is a stock ticker?
A unique symbol assigned to a publicly traded company’s stock, used to identify the stock on stock exchanges and trading platforms.
What is a stock quote?
The price of a stock as quoted on an exchange, including information such as the bid price, ask price, and the most recent trade price.
