investing test Flashcards
risk tolerance
A measure of how much risk (potential loss) an investor is willing to take within his/her investment portfolio
risk tolerance includes the assessment of market risk, including:
volatility
Industry and sector news
Economic and political events
Regulatory and interest rate changes
other factors that can influence and investors risk tolerance, include the investors:
age
income
comfort level
short-term investment goals
long-term investment goals
personality
lifestyle
time horizon
aggressive investor
has a higher risk tolerance, and is willing to risk more of his/her money for the possibility of better returns
conservative investor
has a lower risk tolerance
An investor who sits in the middle between an aggressive and a conservative investor has
Moderate risk tolerance
diversification
investors can reduce risk by diversifying their investment portfolios/spreading investment dollars among different:
securities (stocks, mutual funds, bonds, etc.)
industries
sectors
risk management strategy
risk
the possibility of loss or the chance of losing all or part of the value of an investment
time horizon
The amount of time before invested funds need to be liquidated
risk management
having strategies that help mitigate risks associated with your investments
sector
A broad group of stocks, often in the same industry
industry
A more specific group of companies producing similar products or services
index
Reports changes in a specific sector, or in the economy
beta
Measures volatility, (rapid or unexpected changes.)
Market capitalization
The total dollar value of a companies outstanding shares of a stock
Mutual fund
an investment that pulls money from investors and invests in a diversified, portfolio of stocks, bonds, and other securities
investing
when you buy something with the expectation that it will earn you money over time
long-term goal
something you want to do in the future (several years away)
short-term goal
something you want to do in the near future (today, this week, this month, this year)
saving
money not spent (allowance, birthday present, part-time job, or other source in a piggy bank or bank account)
company
a business formed to manufacture or supply products or services for profit
product
an item sold by a company
brand
the name a company gives a product it makes a or service it provides
public company
a company whose shares can be purchased
private company
a company that is privately owned by a group of people; shares of the company cannot be purchased
stock
a share of ownership of a publicly traded company
common stock
corporate ownership and owners can vote in matters of the company; most large companies pay dividend on common stock and the stock may appreciate in value if the company does well
preferred stock
owners do not have voting rights but receive dividends before any returns paid to common stock owners
IPO (initial public trade offering)
a public offering in which shares of a company are sold to investors
stockholder/shareholder
the owner of a stock
stock exchange
a market in which securities are bought and sold
investment strategy
an individualist approach to investment risk
highest to lowest investment risks and rewards
commodities
collectibles
real estate
stocks
mutual funds
corporate bonds
government bonds
certificates of deposit
savings accounts
cash and checking accounts
why do companies issue stock?
they have an initial public offering to get cash by letting people own their company; they can grow
