Unit 6 Flashcards
Why Invest?
accumulates wealth faster, helps businesses
Interest Risk
could go up or down
Political Risk
economy changing due to choices made by politicians
Market Risk
when the economy goes into recession, caused by the business cycle
Non Market Risk
unpredictible events like a hurricane or COVID
Company/Industry Risk
company failing or whole industry isn’t doing well
Bonds
debt obligations of corporations or governments
Options/Futures/Penny Stocks
Options - financial instrutment that gives buyer has the right to buy or sell an underlying assest at a specified price on/before a certain date
Futures - same as Options but with contracts
Penny - stocks that trade at a low price, <$1
Rule of 72
72 / percent yield = number of years to double the money
Dividends
money paid to stockholders from the corporations profits
ROI (return on investment)
ROI = profit/orginal price of stock
Stock Index
benchmark that investors use to judge the perfomance of their investments
Bull vs Bear Market
Bull - good, rising stock & attitude
Bear - bad, declining stock & attitude
Buying on the Margin
borrowing money to buy stock (RISKY)
Short Selling
selling stock borrowed from a broker that must be replaced later (RISKY - loss can be infinite)
Stock Split
an increase in the number of oustanding shares of a company’s stock
Dollar Cost Averaging
technique involing the systematic purchase of an equal amount of the same stock at regular intervals
Reinvesting Dividends
using dividends previously earned on the stock to buy more shares
Advantages of Mutual Funds
high diversification, convenient, liquid, lower minimum investment, professionals
Prospectus
a disclosure document that describes a financial security for potential buyers
Net Asset Value
the market price for a share of a mutual fund
Reasons to invest in Real Estate
good for inflation, tax benefits, passive income, leverage
Leverage
the use of borrowed money to buy securities
Renting v Flipping (how they profit)
Flipping - investor buys a property with the intention of selling it for a profit within a short period of time
Renting - being a landlord, getting that consistent cash flow from your tenants
Estate
All that a person ownes, debts owed, at the time fo their death
Estate Tax
charged on the transfer of very large assets transferred upon death paid by the new owner of the assets
Codicil
an addition/supplement that explains, modifies, or revokes a will or part of one
Inheritance Tax
a tax on inherited property or money
Gift Tax
a tax on assets transferred from one person to another
IRA (Individual Retirement Account)
allows ppl to set aside up to a specified amount yearly & delay paying tax on the earnings until they begain withdrawing it at 59.5+
401k
employees contribute % of their wage for later profit (the company matches their contributions)
403b
operates like a 401k for employees of schools, non profits, and gov units
Power of Attorney
legal doc allowing someone to act on your behalf
