Unit 4 Flashcards
Investing
a strategy to earn more on your money than the rate of inflation.
Wealth
the accumulation of assets over time.
Net Worth
the value of all the assets owned by an individual or institution MINUS the value of all of its outstanding liabilities.
Bond
a loan to a company or government that pays investors a fixed rate of return over a specific timeframe.
Stock
ownership interest in a publicly traded company.
Commodity
an item that has the same value across the market with little or no difference in quality among producers.
Futures Contracts
an agreement to buy or sell commodities for a specific price on a future date.
Proprietorship
a business owned by one person.
Partnership
a business owned by two or more people.
Franchise
a contract that gives you the right to sell a company’s products and services.
Stockbroker
a licensed professional who buys and sells stock on an exchange on behalf of the clients.
Stock Market
a place where stockbrokers buy and sell stock on a public exchange
Full-Service Broker
offers customized support and interaction in facilitating trades and managing portfolios for clients
Discount Broker
carries out buy and sell orders at a reduced commission rate however they provide no investment advice
Day Trader
a person who attempts to make money by buying and selling stocks over short periods of time
investment tracking
involves making investment choices by following stock prices over time
dividend
money paid (typically quarterly) by a company to its shareholders out of its profits (or reserves)
Bull market
when stock prices are steadily increasing
bear market
when prices are steadily decreasing
initial public offering
when a private company offers its stock to the public for the first time
buying on the margin
borrowing money from your broker to buy stock
selling short
involves selling stock that has been borrowed from a broker and replacing it later
stock split
an issue of new shares in a company to existing shareholders in proportion to their current holdings
Investment Risk
the potential for change in the value of an investment.
Inflation Risk
chance that the rate of inflation will be higher than the investment rate of return.
Industry Risk
chance that factors affecting an industry as a whole will negatively affect the value of an investment.
Political Risk
chance that a political event will affect the value of an investment.
Stock Risk
chance that activites or events affecting a company will change the value of an investment in that company.
SEC
protects investors from dangerous or illegal financial practices or fraud.
Insider Trading
buying or selling stock on confidential information.
Ponzi Scheme
a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
Diversification
holding a variety of investments for the purpose of reducing overall risk.
Dollar-Cost Averaging
the systematic purchase of an equal dollar amount of the same stock at regular intervals.
Mutual Fund
a professionally managed group of investments.
Tax Deferral
a postponement of taxes to be paid.
Tax Exemption
means savings and investments are not taxed.
Return on Investment
the amount that savings or investments grow expressed as a percentage.
