Personal finance

Question 1

why have a CD account ?

Answer 1

• interest rates get locked (if fed cuts interest rates they will not be affected UNLIKE how in a high yield savings acc. will be impacted.)

Question 2

main advantage of CD/high yield

Answer 2

you don’t lose, no real risk unlike how the stock market is all risks

Question 3

real world what do you do w/ stocks and CDs/high yield accs ?

Answer 3

Split your assets, some in savings some in stocks

Question 4

CD latter

Answer 4

add more and more money in a CD saving account to build interest

Question 5

401K ?

Answer 5

some of your paycheck is set aside for retirement

Question 6

advantages of 401K

Answer 6

• Tax differs (bypasses tax filter, goes into the savings at 100%) BUT you will still pay a marginal tax rate
• most employers will match you (how much you put they will put in)

Question 7

roth IRA

Answer 7

money you put in AFTER taxes, so you dont have to pay taxes when you pull it out (there are restrictions ex: above 200,000 cannot use them, no more than 7000 put in a year)

Question 8

what is a stock

Answer 8

a % of ownership in a company in the hopes it will perform well. An investment partner.

Question 9

equity financing

Answer 9

cutting someone in a business for an investment & they will receive a portion of the profits. (if the business flops you are not indebted to the investor, but you get less reward if you succeed)

Question 10

debt financing

Answer 10

higher risk, higher reward/higher punishment. You will owe back what you take no matter what

Question 11

stock market investment

Answer 11

stocks will go down. (as of our lifespan we have only seen in grow. the due for a “correction” is (historically) growing close. month after month recently stocks have been rising. but the stocks going down can be detrimental. mindfulness is important. historically it rises 10% a year but it can crash at ANY time. overtime the returns have been decent.

Question 12

how do you know what companies to invest in

Answer 12

Using anticipation strategy. Assuming what will be most profitable in the FUTURE while the price is still decent.

Question 13

why doesn’t everyone just invest in the most profitable companies (apple, amazon)

Answer 13

price tanks. you can invest in the “good” companies but then when they only do “so well” instead of how well you thought they would do you could overall lose money.

Question 14

predicting stock prices is essentially playing supply and demand, why

Answer 14

the more people want, the higher the price.
less people want, lower prices.

Question 15

long vs short position

Answer 15

long: “buy low, sell high” (most buyers rely on long position) “loses are bounded”
short: “buy high, resell higher” “loses are unbounded”

Question 16

mutual fund

Answer 16

instead of an individual stock, you buy a little bit of everything (someone decides what goes in) BUT a % is paid to the management (very expensive for reliability)

Question 17

Index fund

Answer 17

similar to mutual fund except instead of a person, its passively managed (allocated by a formula, once it’s set those stocks will stay in it)

Question 18

stock split

Answer 18

every share you own can be split into an amount. you buy an initial stock for one dollar 60 years ago, if it never splits that could be worth 50,000, business do this to allow smaller time investors to take part in the market.

Question 19

a “bubble”

Answer 19

imagine two categories. 1. goods and services (intend to consume),
and 2. assets (intend to buy and sell later)
if price rises in 1 this repels buyers (ex. food getting too expensive).
If price rises in 2 this attracts buyers (everyone wants success)
vice versa too, price lowers in 1 more people want, price lowers in 2 less people want

Question 20

dividends in stocks

Answer 20

if a stock is a dividend stock, it is how it is distributed (typically once a quarter) and put into your account. distributing profits. DO NOT only invest in dividend yields. (forced tax liability.)