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174 Cards in this Set
- Front
- Back
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74% of Americans age 65+ have incomes < ?
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$15,000/yr
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57% of Americans age 65+ have incomes < ?
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$10,000/yr
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How much debt do Americans have? (not including mortgages)
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$1 trillion
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Half of American households have accumulated less than ____ in net financial assets?
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$1000
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What are 6 things you cannot control?
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1. social sercurity
2. employer 3. taxes 4. inflation 5. rising costs 6. risk of a single investment |
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What are 5 things you can control?
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1. cash for retirement
2. alt. sources of income 3. ways to reduce taxes 4. maximizing your invesment potential 5. diversify |
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Why do people still retire in poverty?
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they are still working for their money, they haven't figured out how to make their money work for them
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Whats the average Social Security check?
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$14,000/yr
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Your income is importmant but what really matters is?
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how much you save
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take any 100 people from 25-65 and?
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36 are dead
54 are broke 5 are working 4 are financially independent 1 wealthy |
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What % of Americans have credit cards?
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80%
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What % of Americans have a credit card balance
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70%
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Average credit card balance?
With what interest rate? |
$9,000 w/ 18% interest
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5 things to keep yourself poor
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- lack of understanding about how money works
- no financial goals - no financial plans - overpaying for basic items - procrastination |
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Social Security predicts that it will pay out more benfits than it collectes in?
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2012 - as early as 2007
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to save social security we can?
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- raise taxes
- lower benefits - privatize the system |
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social security wasn't meant as a full retirement only as a ___
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"cushion"
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one needs how much take home pay to retire on (%)
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80%
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If one takaes social security at age 62, what will be cut
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20%
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can't take from an IRA until age ?
must withdrawl by age? (traditional) |
- 59.5
- 70.5 |
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what percent of bankruptcies are Ch 7
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70%
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what % of benefit managers say their companies offer 401k retiremetn accts
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40%
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how many dont participate, contribute some, and contribute max?
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- 57% - zero
- 24% - some - 15% - max |
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half of all Americans ages __-__ haven't started saving for retirement?
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18-34
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half of all Americans ages __-__ haven't started saving?
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35-54
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what are the ingredients for making money?
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time & consistency
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inflation doubles every
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20 years
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what must beat what to make money
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inflation and taxes!
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what is saving?
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putting your money aside for future use
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what is investing?
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putting your money to work
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Why do people save?
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- purchases
- emergencies - additional income |
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how many months of saving do you need for an emergency
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6 months
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where do people usually put their money (to save)
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- commercial banks
- savings banks - savings & loans - credit unions |
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what are commercial banks?
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full service
most common |
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what are savings banks?
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financial institutions owned by depositors
(FDIC) found in Northeast |
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what are savings & loans
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- thrift
- pushed savings |
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what are credit unions?
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- financial institutions that ofer memberships to people who share a commond bond
- savings and lending |
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what is redlining?
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not lending money to people in poor or high crime areas because they argues that property values would go down
- laws have been passed to stop this practice (not successful) |
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what should you look for in savings?
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- interest
- compound daily is best - also compound interest is very important |
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what is interest
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the return for letting others use you money
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what are different savings accounts
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- passbook
- certificate of deposit (FDIC) - money market account (interest changes over time) |
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in general money market accounts pay more than ____ but less than ____?
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- passbook
- CD's |
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the more kept in a money market...
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the higher the rate (FDIC)
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Principal is?
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the money you deposit
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what is simple interest
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paid one time a year at the end of the year on the ave. balance in the account
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what is compound interest?
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is paid on the principal plus any previously earned int.
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Interest rates are always quoted per?
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year
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what is the second most important factor
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insurance protection if financial institution fail
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what is the FDIC
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Fed. Deposit Ins. Corp.
- insures depositors money up to $100,000 totally |
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what is the SAIF
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Savings Association Ins. Fund
- insures S&L's |
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what is the NCUSIF
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Nat. Cred. Union Share Ins. Fund
- Insures credit unions - in best shape financially |
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some reports show that FDIC would be lucky to pay ___cents on the dollar
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10 cents
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What is the third most important factor of savings?
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liquidity
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what is liquidity
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- the case and speed with which savings can be converted into money
- passbook is most flexible |
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What entices depositors?
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- free gifts
- grace days (method of figuring interest - look for int. that pays from day of deposit to day of withdrawl_ - convenience (location and free service) - personal service |
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insurance should be based on how much you ____, not how much you can _____
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need
afford |
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one should have how many policies per person
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one!
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when were stock mutual funds started?
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1920's
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Real rate of return that on should get from investment?
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2% over and above inflation and taxes
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there is no other ownership that keeps out running inflation except for
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stocks!
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do not pay taxes on money that you are not
- Put you money in? |
spending
- tax defferals |
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inflation on the news? reality?
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- 3-3.5
- 5% |
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4 ways to earin money from investing
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- rent
- interest - capital gains - dividends |
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to have a chance to make more money on your investments, you must be able to accept more
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risk!
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general rule of investing
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"the greater potential rate of return, the greater the risk"
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Diversification
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helps reduce the risk of total loss
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the right way to invest depends on
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your personal financial situation
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what is a bond
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a printed promise to pay a definite amount of money with interest at a specified future date and time
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when one buys a bond they are a ____? with stocks?
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- loaner
- owner |
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you lend money to whom with a bond
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government
municipality corporation |
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every bond has what printed on it?
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face value & interest rate to be paid
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How often is interest paid
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twice a year
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bonds are considered safe why?
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you are guaranteed a fixed interest
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rate of return on bonds is highere than
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reg. savings & CD's
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do bond holders get paid first
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Yes
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what are government bonds?
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one of the safest and most popular bonds, purchased through US savings banks
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how much are government bonds?
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50-10,000
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where are government bonds sold
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commercial banks, S&L's, credit unions, post office
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What are the two common types of savings bonds
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series EE, series HH
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How much are series EE?
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$50-$10,000
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what is face value
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amount printed on the bond, you pay half of face value
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when is interest added
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every 6 months
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how long will the interest be figured on a bond
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30 years, it cant be sold but cashed in at a bank
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how much are series HH bonds
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500- 10000
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how do you purchase them
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with series EE or other government investments
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HH bonds are aquired for their
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full face value
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int rates are ____ and added every
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fixed - 6 months
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government gets money from
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borrowing (bonds) & taxes
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when can you sell a bond
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anytime
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government bonds are the safest investment why
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they are backed by the government
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corp. bonds
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raise $$ by selling bonds
- can be sold to investors |
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what kind of amt on corp. bonds
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fixed amt. paid off after a specified time
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what are junk bonds/high yield
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businesses in difficulty raise $ and offer high int. rates to get people to buy
- very risky! |
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How can you tell if a bond is a good risk
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-check the rate of return
- go to a bond rating service (Moody's, S&P) |
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whats safest/riskiest bond rating
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AAA-safest
D-Riskiest |
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Stocks represent?
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ownership
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a share is?
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unit of ownership
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stockholders are
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investors in stock
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how does one make a profit with stock
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- dividends
- capital gains |
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what are dividends
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earned when a company makes a profit and shares
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what are capital gains
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when stock is sold for more than its purchase price
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you never gain or lose until
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you sell
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one should invest only what one can
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afford to lose
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to minimize risk some investors invest only in
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blue-chip stock
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blue chip stocks are sold by well-established coroporations that have?
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- reputation for financial stability
- superior management - record of growth and earnings |
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blue chips are low risk yet
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cost more
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blue chips value does not change rapidly and most return comes from
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dividends
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investors buy and sell in 2 ways
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- stock exchanges
- NASDAQ |
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transactions are held by
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brokerage firm
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the person who handles the transaction is
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stockbroker
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firms charge fees, how much?
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a % of the total value of the transaction
- traded in round or even lots |
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what are discount brokers
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brokers who simply carry out the transaction
- offer no info or advice |
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what is a stock exchange
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a location where orders to buy and sell stock are sent & carried out
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largest stock exchange
- where? |
New York Stock Exchange
- Wall Street, New York |
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what is the NASDAQ
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National Association of Securties Dealers Automated Quotation system
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what does the Nasdaq do?
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electronically links brokerage firms
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what are the 3 advantages of the nasdaq
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- less expensive
- can trade more kinds of stock - can operate for longer hours |
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price change according to what people
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are willing to pay
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stocks are bought and sold through what method
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auction method
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2 most common types of stock
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common & preferred
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what is preferred stock
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- has preference of payment over common
- non-voting share - pays a fixed dividend |
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what is common stock
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- voting stock
- doesn't pay a fixed dividend - dividends are set by the Board of Dir. |
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2 Classes of Stock
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- blue chip
- growth stock |
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-blue chip income?
- growth stock income? |
- dividends
- cap. gains |
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What if you dont have $ to invest? or don't want to invest in stocks and bonds?
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Mutual Funds!!
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what is a mutual fund
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a group of investments owned by many investors - investors buy shares of fund and pool their $
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what do you get from a mutual fund
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diversification - personal management
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what is the minimum investment for MF
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1,000
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your value of investment changes with
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value of stocks & bonds purchased by the fund
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your return from a MF is
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share of the dividends or cap. gains the fund earns
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all MF charge ?
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annnual maintance fee for services
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which funds perform the best
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index
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what is a load
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a sales fee that you pay when you invest
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what is a front end load
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pay a sales charge when you buy shares
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what is a back end load
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pay a sales charge when you sell shares
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a MF offers growth potential from
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- appreciation
- dividends - capital gains - compounding |
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whats a no-load
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do not charge a fee because they have no salespeople
- you invest directly with the fund - buy fund from brokerage firm |
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MF are required to provide investors with a publication called what?
- what does it contain |
prospectus
- describe how the fund is operated - its objective - the fees it charges |
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what does FICO show
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how you handle your DEBT!
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MF must give your money in (time)
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7 business days
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most businesses that buy and sell stock for consumers are members of
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NASD (nat. assoc. of Sec. Dealers)
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NASD organized and runs
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the nasdaq
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NASD does what with the NASDAQ
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- policies the behavior of its members
- certifies those who wish to become a stockholder - maintains a listing of complaints that have been filed against registered brokers |
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what is the SEC
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Securities and Exchange Committee
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who created the SEC? when?
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congress
- after crash of '29 |
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what is the SEC responsible for?
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enforcing the laws concerning the trading of stock and bonds
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what else does the SEC do
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- licenses stock brokers & investment advisors
- reduces the number of dishonest investment offers made to consumers - has power to shut down and prosecute |
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what is major job of SEC
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prevent insider trading
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what is insider trading
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stock info not made available to general public
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are pension plans good?
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no, they are thing of the past
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whats a 401k
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-tax deffered
-offered by employer -invested in stock market, MF -some companies allowed to choose -some employers match all or % -portable |
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whats a IRA
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- Individual Retirement account
- 3,000 for single, more for married couple - traditional is tax defferd |
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whats a roth IRA
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- you pay taxes before investing
- when you draw money is not taxed - good choice for young people - dont ever have to withdrawl |
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you can take money out of a roth IRA without penalty after how many years? for what reasons?
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- 5 years
- home, education, medical emergency |
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what is real estate
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any kind of property
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what is the largest single investment Americans will ever make
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their home
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the law allows you earn how much in capital gains w/out paying income tax
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500,000
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You may also deduct what on income
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interest and property tax
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what are the advantages of owning property that is not used by you
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income and capital gains
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what is required to invest in rental
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a large intial sume of $$
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rent should always cover
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expenses
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what is the key to making money off real estate
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location
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what are 3 disadvantages of real estate
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- bad choice
- need $$ to maintain - property does not always increase in value |
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what are the 3 basic principles of investing
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- seek diversification
- establish an investment goal to guide your investment - revise investment when conditions change |
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every fee charges what to cover its operation and management fees
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an annual fee
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what is the average expense ratio for a managed stock fund
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1.5%
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what do index funds charge for expense ration
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.2%
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front-end loads have what on the end of them? back ends?
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A & B
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what are the two major personality traits of a MF
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the size of the stocks it owns & the investment philosophy of the manager
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what are the three broad sizes of MF
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large-cap, medium-cap, small-cap
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what is a large-cap stock
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a big established company
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what is a small-cap stock
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young kid, new company that has considerable room to grow
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what performances figures should you pay attention to
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3, 5, 10 year
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your payment history makes up how much of your FICO
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35%
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