INVESTMENT & SAVINGS (Chapter 1) Flashcards
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Seg-funds Terminology
Investing
The process of using savings to purchase investment products with the goal of making money.
Seg-funds Terminology
Share
Units of stocks issued by a corporation that represent ownership
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Return
Principal sum or capital, in an investment product that will be repaid to the investor plus a profit.
Seg-funds Terminology
Mutual Fund
A company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.
Seg-funds Terminology
Annuity
A contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future.
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Segregated fund
An investment pool used by insurance companies to offer both capital appreciation and death benefits to policyholders.
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Stock
A share in the ownership of a company
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Bond
- A promise by a borrower to pay a lender their principal and usually interest on a loan.
- Bonds are issued by governments, municipalities, and corporations.
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Rate of return
The net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost.
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Guaranteed Investment Certificates (GICs)
A deposit investment sold by Canadian banks and trust companies that allows investors to deposit money in the bank for a fixed length of time and then receiving interest on that money and the principal when the investment matures.
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Capital Investment
Acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. (Real estate, manufacturing plants, and machinery)
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Simple &
Compound interest
SIMPLE INTEREST
- A charge that borrowers pay to lenders for a loan.
COMPOUND INTEREST
- Simple interest on funds calculated on both the initial principal and the accumulated interest from previous periods
CHAPTER 1 - Investment & Saving
Commodity
- A basic good used in commerce that is interchangeable with other goods of the same type
Often used as inputs in the production of other goods or services.
Commerce can refer to an exchange of goods or services for money or something of equal value.
Seg-funds Terminology
Diversification
Strategy used in investment portfolios that combines asset classes and investments within those classes to spread out investing risk.
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Asset class
- A grouping of investments based on shared behaviors, characteristics, and regulations.
(Cash, Equities, Fixed income, alternative investments)
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Time value of money
- Present Value
- Future Value
Principles that are based on the potential for invested money to increase in value over time due to interest being earned.
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Liquidity
describes the ability to cash in, or sell, an investment quickly at or near its current market price.
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Time Horizon
A future event when invested money will be needed to meet financial objectives
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Canadian Investor Protection Fund (CIPF)
Non-profit insurance program designed to protect investors from the bankruptcy of an individual investment firm.
Seg-funds Terminology
Assuris
Non-profit organization that protects policyholders if their life insurance company fails.
CHAPTER 1 - Investment & Saving
Explain the different concepts of investing
- Pay yourself first
- Save 10% of take-home pay
- Save exceptional payments
- Set up savings buckets
- Budgetting
What are the 3 main asset classes?
- Stocks (also called equities)
- Bonds (also called fixed income or
debt) - Cash (also called money market instruments)
Extras
- Real Estate
- Commodities
Diversification can be accomplished in many ways, name at least three
- Buying stocks of a wide range of industries or companies
- Buying bonds with varying interest rates
- Buying shares
- Buying / Trading ETFs