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bus fin > Q2 L2: investments (INCLUDED) > Flashcards

Q2 L2: investments (INCLUDED) Flashcards

1
Q

An investment is an asset or item acquired with the goal of ______________________ or ________________.

A
  • generating income
  • appreciation
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2
Q

refers to an increase in the value of an asset over time

A

appreciation

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3
Q

When an individual purchases a good as an investment, the intent is?

A

not to consume the good but rather to use it in the future to create wealth.

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4
Q

It lways concerns the outlay of some asset today like _________, ___________, or ___________ in hopes of a greater payoff in the future than what was originally put in.

A

An investment
- time, money, or effort

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5
Q

____________________ is an ___________ or item that is purchased with the hope that it will generate income or appreciate in value at some point in the future.

A
  • An investment
  • asset
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6
Q

An investment can refer to?

A

any mechanism used for generating future income, including:
- bonds,
- stocks,
- real estate property,
- or a business, among other examples.

Additionally, purchasing a property that can be used to produce goods can be considered an investment.

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7
Q

has the goal of generating income and increasing value over time.

A

investing

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8
Q

In general, any action that is taken in the hopes of raising future revenue can also be considered an?

A

investment

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9
Q

why is there always a certain level of risk associated with an investment?

A

Because investing is oriented toward the potential for future growth or income, but investment may not generate any income, or may actually lose value over time.

For example, it’s also a possibility that you will invest in a company that ends up going bankrupt or a project that fails to materialize.

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10
Q

saving vs. investing

A

saving
- is accumulating money for future use and entails no risk

investing
- is the act of leveraging money for a potential future gain and it entails some risk.

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11
Q

Types of Investments?

A

(11) (EISBMECRACC)
1. Economic Investments
2. Investment Vehicles
3. Stocks
4. Bonds
5. Mutual Funds
6. Exchange-Traded Funds
7. Certificates of Deposit
8. Retirement Plans
9. Annuities
10. Cryptocurrencies
11. Commodities

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12
Q

Within a country or a nation, ____________________ is related to investments.

A

economic growth

  • When companies and other entities engage in sound business investment practices, it typically results in economic growth.
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13
Q

what type of investments?

For example, if an entity is engaged in the production of goods, it may manufacture or acquire a new piece of equipment that allows it to produce more goods in a shorter period of time. This would raise the total output of goods for the business.

A
  1. Economic Investments
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14
Q

Taken in combination with the activities of many other entities, this increase in production could cause the nation’s __________________________________to rise.

A

gross domestic product (GDP)

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15
Q

__________________________ provides a variety of services to individuals and businesses, including many services that are designed to assist individuals and businesses in the process of increasing their wealth.

A
  1. Investment Vehicles
    - An investment bank
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16
Q

may also refer to a specific division of banking related to the creation of capital for other companies, governments, and other entities.

A
  1. Investment Vehicles
    - Investment banking
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17
Q

what do Investment banks do?

A
  • underwrite new debt and equity securities for all types of corporations,
  • aid in the sale of securities, and
  • help to facilitate mergers and acquisitions, reorganizations, and broker trades for both institutions and private investors.

(HAU)

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18
Q

Investment banks may also provide guidance to companies that are?

A
  1. Investment Vehicles
    - considering issuing shares publicly for the first time, such as with an initial public offering (IPO).
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19
Q

most well-known and simple type of investment.

A
  1. Stocks
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20
Q

When you buy stock, you’re buying an?

A

ownership share in a publicly traded company.

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21
Q

Many of the biggest companies are publicly traded, meaning you can buy stock in them. for example?

A
  • General Motors
  • Apple
  • Facebook
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22
Q

When you buy it, you’re hoping that the price will go up so you can then sell it for a profit.

A
  1. Stocks
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23
Q

The risk of buying stocks?

A
  • the price of the stock could go down, in which case you’d lose money. (since the stock market fluctuates)
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24
Q

they sell stocks to investors.

A

Brokers

  • You can either opt for an online brokerage firm or work face-to-face with a broker.
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25
Q

you’re essentially lending money to an entity.

A
  1. Bonds
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26
Q

Generally, this is a business or a government entity.

A
  1. Bonds
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27
Q

what bonds do each issues?

Companies =
Local governments =
The U.S. Treasury =

A

Companies = corporate bonds,
Local governments = municipal bonds
The U.S. Treasury = treasury bonds.

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28
Q

not a question

A

After the bond matures — that is, you’ve held it for a predetermined amount of time — you earn back the principal you spent on the bond, plus a determined rate of interest.

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29
Q

The rate of return for bonds is typically much lower than it is for stocks, but bonds also tend to be _______________.

A

lower risk.

30
Q

what risk/s is/are involved in buying bonds?

A
  • The company you buy a bond from could fold, or the government could default.
31
Q

are especially considered a very safe investment.

A

Treasury bonds

32
Q

a _________ of many investors’ money that is invested broadly in a number of companies.

A
  1. Mutual Funds
    - pool
33
Q

can be actively managed or passively managed.

A
  1. Mutual Funds
34
Q

has a fund manager who picks companies and other instruments in which to put investors’ money.

A

An actively managed fund

35
Q

they try to beat the market by choosing investments that will increase in value.

A

Fund managers

36
Q

simply tracks a major stock market index like the Dow Jones Industrial Average or the S&P 500.

A

A passively managed fund

37
Q

Some mutual funds invest only in, etc?

A

Some mutual funds invest only in stocks, others only in bonds and some in a mixture of the two.

38
Q

carry many of the same risks as stocks and bonds, depending on what they are invested in.

A
  1. Mutual Funds
39
Q

The risk is lesser, though, because the investments are inherently diversified.

A
  1. Mutual Funds
40
Q

are similar to mutual funds in that they are a collection of investments that tracks a market index.

A
  1. Exchange-Traded Funds(ETFs)
41
Q

Unlike mutual funds, which are purchased through a fund company, ETFs are?

A

bought and sold on the stock markets.

42
Q

Their price fluctuates throughout the trading day, whereas mutual funds’ value is simply the net value of your investments.

A
  1. Exchange-Traded Funds(ETFs)
43
Q

are often recommended to new investors because they’re more diversified than individual stocks.

A
  1. Exchange-Traded Funds(ETFs)
44
Q

You can further minimize risk by choosing an ETF that?

A

You can further minimize risk by choosing an ETF that tracks a broad index.

45
Q

is a very low-risk investment.

A
  1. Certificates of Deposit
46
Q

You give a bank a certain amount of money for a predetermined amount of time. When that time period is over, ___________________________________________________. The longer the loan period, the higher your interest rate.

A
  1. Certificates of Deposit
    - you get your principal back, plus a predetermined amount of interest
47
Q

The risk of investing in Certificates of Deposits?

A

There are no major risks to CDs.
- They are FDIC-insured up to 250,000, which would cover your money even if your bank were to collapse.

48
Q

That said, you have to make sure you won’t need the money during the term of this investment, since?

A

That said, you have to make sure you won’t need the money during the term of CD, as there are major penalties for early withdrawals.

49
Q

There are a number of types of retirement plans. give one and elaborate.

A

Workplace retirement plans
- sponsored by your employer, include 401(k) plans and 403(b) plans.

50
Q

If you don’t have access to a retirement plan, you could get an?

A

If you don’t have access to a retirement plan, you could get an individual retirement plan (IRA), of either the traditional or Roth variety.

51
Q

It isn’t a separate category of investment, per se, but a vehicle for making investments, including purchasing stocks, bonds, and funds.

A
  1. Retirement Plans
52
Q

The biggest advantage for retirement plans?

A

other than Roth IRA plans is that you put in pre-tax dollars.

53
Q

You won’t pay taxes on the money until you withdraw it in retirement, when you will presumably be in a lower tax bracket.

A
  1. Retirement Plans
54
Q

The risks for the investment in a retirement plan?

A

The risks are the same as if you were buying the investments outside of a

55
Q

Many people use this as part of their retirement savings plan.

A
  1. Annuities
56
Q

When you buy an annuity, you?

A

you purchase a contract with an insurance company and, in return, you get periodic payments.

57
Q

When you purchase a contract with an insurance company and, in return, you get periodic payments.

A
  1. Annuities
58
Q

The payments may begin right away or at a specified future date. They may last until death or only for a predetermined period of time.

A
  1. Annuities
59
Q

are fairly low risk, they aren’t high-growth.

A
  1. Annuities
60
Q

They make a good supplement to retirement savings, rather than an integral source of funding.

A
  1. Annuities
61
Q

are a fairly new investment option.

A
  1. Cryptocurrencies
62
Q

____________ is the most famous cryptocurrency, but there are countless others.

A

Bitcoin

63
Q

are digital currencies that don’t have any government backing.

A
  1. Cryptocurrencies
64
Q

How do you buy cryptocurrencies?

A

You can buy and sell them on cryptocurrency exchanges. Some retailers will even let you make purchases with them.

65
Q

The risks for cryptos?

A

Cryptos often have wild fluctuations, making them a very risky investment.

66
Q

are physical products you can buy.

A
  1. Commodities
67
Q

They could be agricultural products like wheat, barley and corn, or energy products like oil, coal or solar power.

A
  1. Commodities
68
Q

some of the most common commodities are

A

Precious metals like gold and silver

69
Q

The risks for invessting in commodities?

A

Commodities investing runs the risk that the price of the product will go down quickly.

70
Q

For instance, political actions can greatly change the value of something like oil, while weather can impact the value of agricultural products.

A
  1. Commodities
71
Q

4 ways to reduce your investment risk

A
  1. Have a diversified portfolio of investments
  2. Know your investment goals
  3. Keep a close eye on your investments
  4. Watch out for scammers

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