Pre-Study: Common Industry Terms & Ideas Flashcards
What are the main categories of investment products?
Stock
Bonds
Mutual Funds and ETFs
Insurance Products such as Variable Annuities
What is risk?
Risk is how safe your money will be
Diversification
The practice of spreading money among different investments to reduce risk (don’t put all your eggs in one basket)
Asset Allocation
Diversification of your overall financial situation
Bull Market
A time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.
Bear Market
A time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two month period.
Index
What is Return?
Return is how fast your money will grow
General Risk and Return correlation
As investment risks rise, investors seek higher returns
Considerations for Investments
Risk and Return
Fees
Asset Allocation
Liquidity
Fraud
Why is knowing about risks important?
If you’re not careful you can loose all the money you invest, including your principal.
Fees
How much it costs to invest
Liquidity
How easy it is to buy and sell the product
Fraud
Potential for investment fraud
