Securities & Investments Flashcards
Asset
anything that has economic value
Asset Allocation
The blend of assets chosen for an investment portfolio
Bonds
pay interest on the investment, but the amount of money that is invested can be locked and inaccessible until the end of the bond period
Bond Maturity
the date when a bond’s principal is repaid with interest
short-term bond
matures within 1-3 years
long-term bond
maturity period greater than 10 years
capital gain/loss
selling an investment for more or less than you bought it for
Asset classes
cash, equities, fixed income/bonds, alternative investments/real estate
ETF/Exchange Traded Funds
fund that tracks a specific industry, commodity, or index; trade like stocks
Index Fund
measures the performance of a group of assets
Mutual Funds
pool of money gathered from many investors and invested in stocks, bonds and other assets by a professional manager; considered some of the safest investments in the market for retirement accounts to invest in because of the diversification in assets that many aim for
Real Estate
Property that consists of land or buildings
Retirement Account
tax-advantaged account used to finance retirement
Security
A stock, bond or other investment instrument that can be traded; sale of securities is regulated by the SEC
SEC/Securities and Exchange Commission
protects investors, maintains fair, orderly, and efficient markets, and facilitates capital formation
Stock
a security that represents a share of ownership in a company; may also be called shares or equities
Bear Markets
stock prices are falling, and investing is risky but potentially very rewarding. Bear markets tend to occur during an economic downturn
Bull Markets
stock prices are rising, so investments aren’t as risky but don’t provide the same opportunity for a large reward. Bull markets tend to last longer than bear markets
Common Stock
voting rights, dividends fluctuate depending on current profit levels, more volatility
Preferred Stock
no voting rights, dividends are set, more stable (preferred stock dividends are prioritized over common stock dividends)
Stock Market Index
an index that measures the performance of a stock market, or of a subset of a stock market
Share
unit of ownership
Liquidity
how easily an asset converts to cash
Real estate investment trusts/REIT
mutual fund that invests in real estate
Ask
the amount a seller is willing to accept for a security
Bid
the amount an investor is willing to pay for a security
Balance Sheet
information about a company’s assets (left) and liabilities (right), and the shareholders’ equity that results
Income Statement
shows the company’s revenues and expenses during a particular period
Cash Flow Statement
a financial statement that shows how cash entered and exited a company during an accounting period
Current Asset
cash or can readily be converted to cash within the next year
Fixed/Long-term Assets
may not easily be converted into cash
Current Liabilities
to be settled over the next year; includes debt payments and taxes
Long-Term Liabilities
to be paid over a period greater than 5 years
ISA/Individual Savings Account
savings account you NEVER pay tax on; restriction on how much you can invest in a given year
Pension
a fund into which amounts are paid regularly during the individual’s working career, and from which periodic payments are made to support the person’s retirement from work
Revolving Credit
lets you borrow up to a predetermined credit limit. At the end of each billing cycle, you can either repay what you’ve borrowed in full or carry over (“revolve”) a balance to the next month, making only a minimum payment
Home-Equity Loans
allows you to borrow against the value of your home
Term Life Insurance
lower cost, covers holder in case of death during a predetermined time period, doesn’t accrue cash value
Whole Life Insurance
lasts your entire lifetime, builds cash value, higher premiums
Universal Life Insurance
allows you to adjust premiums, builds cash value, variable death benefit and cash value growth
Variable Life Insurance
cash value growth is tied to investments accounts such as mutual funds and bonds, fixed premiums, (guaranteed death benefit remains constant while the variable death benefit fluctuates)
Cash Value of Life Insurance
While premiums are paid and interest accrues, the cash value builds over time; can be borrowed against, cash can be withdrawn from it but this will reduce the death benefit
Unit Trust
a type of mutual fund where money from many investors (called “unit holders”), is managed by a fund manager to achieve a specific return
Open-Ended Investment Company
regular mutual fund
Closed-Ended Fund
has a fixed number of shares offered by an investment company through an initial public offering
Pricing
establishing a value for a product or service
Dealing
executing and trading financial instruments
Settlement
final step in the transfer of ownership involving the physical exchange of securities or payment; after settlement, the obligations of all the parties have been discharged and the transaction is considered complete
Investment Trust
a fund that is a public limited company
Hedge Fund
actively managed fund with freer rein to invest aggressively in a wider variety of financial products than most mutual funds; typically open-ended
Primary Market
the issuance and sale of securities to purchasers directly by the issuer (where governments and businesses offer new securities for the first time); most buyers are institutional investors
Secondary Market
Trades take place on the secondary market between other investors and traders rather than from the companies that issue the securities; typically associated with the stock market
Pig Market
investors assume high degrees of risk with a singular focus on short-term profit
Total Return
capital appreciation + income received on the portfolio in the form of interest, capital gains, dividends
Capital Gain
the profit earned on the sale of an asset which has increased in value over the holding period
Bond Duration
measures the bond’s sensitivity to interest rate changes
Futures Contract
a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future
Derivative
a contract that derives its value from the performance of an underlying entity
Options
a derivative that conveys to the purchaser (the option holder) the right, but not the obligation, to buy or sell a set quantity or dollar value of a particular asset at a fixed price by a set date
Swap
derivative contract in which one party exchanges or swaps the values or cash flows of one asset for another
Floating Interest Rate
does not have a fixed rate of interest over the life of the instrument
Arbitrage
the practice of taking advantage of a difference in prices in two or more markets
Financial Services & Markets Act
establishes the UK’s principal financial services regulators, the PRA and the FCA, and sets out their mandates; helps ensure regulators have the tools to regulate the sector
Money Laundering
illegally concealing the origin of money obtained from illicit activities by converting it to a legitimate source
Embezzlement
a trusted individual taking advantage of their position to steal funds or assets, most commonly over a period of time
Data Protection Act of 1998
(UK) gives individuals the right of access to information about themselves which is held by an organization, and sets out how personal information should be collected, stored and processed
Annuity
a series of payments made at equal intervals (regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments)
Top 3 U.S. Indexes
S&P 500, Dow Jones, Nasdaq
Short-Selling
selling a borrowed security and buying it back at a lower price profit from the decrease in its price
Long-Selling
buying then selling assets to profit from an increase in the asset’s price; less risky
Descriptive Vs. Analytic Information
Descriptive research classifies, describes, compares, and measures data. Meanwhile, analytical research focuses on cause and effect.
Demand Deposit Account
a bank account from which deposited funds can be withdrawn at any time, without advance notice
Prospectus
a disclosure document that describes a financial security for potential buyers
Trustee Vs. Executor
an executor administers the estate of the person who died, while a trustee administers a trust for the benefit of the named beneficiaries
Trust Fund
legal arrangements that allow individuals to place assets in a special account to benefit another person or entity
Income Stock
equity financial securities that pay regular and predictable dividends. They are purchased with the purpose of generating a steady stream of dividend flows.
Over-the-counter Stock
securities that are not listed on a major exchange in the United States and are instead traded via a broker-dealer network, usually because many are smaller companies and do not meet the requirements to be listed on a national exchange.
Growth Stock
publicly traded share in a company expected to grow at a rate higher than the market average
Value Stock
a stock that tends to trade at a lower price relative to its fundamentals. The idea behind value investing is that stocks of good companies will bounce back in time if and when the true value is recognized by other investors.
Commercial Paper
short-term unsecured promissory notes issued by companies
Wrap Account
an investment account where a “wrapped” fee or fees cover all of the management, brokerage and administrative expenses for the account
Declaration Date
the date on which the board of directors of a company announces the next dividend payment
Record Date
the last date in which shareholders are eligible to receive a dividend or distribution
FSA/Flexible Spending Account
a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don’t pay taxes on this money.
Living Will
Advanced Healthcare Directive; a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent
Intestate
a person who has died without having made a will.
Probate
legal process in which a will is reviewed to determine whether it is valid and authentic; happens after you die
How are dividends taxed?
Qualified dividends are taxed at a capital gains rate, while ordinary dividends are taxed at the standard federal/state rate
