MODULE 7 - types of investments Flashcards
investment you acquire with goal of making money
investment
for cash reserve, retirement, tax deductions
why invest?
a savings account is a basic type of bank account that allows you to deposit money, keep it safe, and withdraw funds. Also, the money is earning interest at very low rate.
savings account
certificates that represent pieces of ownership in a company
stocks
when a company chooses to “go public”, the first sale of stock. It occurs in the primary market. The initial sale is when the company is paid. Ex. 1 million shares at $10 each = company receives 10 million dollars
initial public offering (IPO)
the initial sale of financial assets in which company receives money during an IPO
primary market
transactions that take place after an IPO
secondary market
an organized stock exchange in the secondary market in which stock sales occur (located on wall street)
new york stock exchange (NYSE)
an organized stock exchange in the secondary market in which stock sales occur. (no physical address)
national association of securities dealers automatic quotation (NASDAQ)
one who trades large volumes of stocks on behalf of large institutions
institutional investors
people who own stock in company
shareholders
the distribution of cash to shareholders
dividends
a government agency that regulates and monitors the stock market
securities and exchange commission (SEC)
a firm that provides access to stock market
brokerage
fee charge by brokerage firm for carrying out transaction
commission
offers a reduced level of service, lower costs, and often the ability to trade online
discount brokerage
a promissory note to repay a certain amount of money at some future point
bond
issued by the US treasury department to finance the debt of the government
treasury bonds
issued by federal agencies whose proceeds are used to buy mortgages to encourage home ownership
federal agency bonds
issued by state and local governments to finance large public projects such as water and sewer systems
municipal bonds
bonds issued by large company–they have all degrees of risk depending on the strength of corporation
corporate bonds
sells shares to investors in order to collect pool of money that is then used to buy various investments. Very popular in our society today
mutual funds
the process of investing in multiple investments
diversification
a savings account that holds a fixed amount of money for fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus the interest.
CDs
the 401K and roth 401K plans provide employees with an automatic way to save for their retirement while benefiting from tax breaks. the reward to employees who participate in these programs is they essentially receive free money when their employers offer matching contributions.
employer-sponsored savings plans
is an item of economic, commercial, or exchange value that has a material existence. For most businesses, physical assets usually refer to properties, equipment, and inventory.
physical assets
are objects that come out of the Earth such as wheat, cattle, soybeans, corn, oranges, gold, uranium, copper, aluminum, coals, cotton, and oil most, but not all, commodities trade on what is known as commodities exchange such as the chicago board of trade (CBOT) or the New york mercantile exchange (NYMEX). In this way, you can buy and sell commodities in similar way as stocks.
commodities
