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61 Cards in this Set
- Front
- Back
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Should stock be a majority of assets at an old age?
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No
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Diversification
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reduction of risk by spreading investment dollars over numerous stocks and or bonds to minimize the impact should one of the investments turn bad
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Allocation or "reallocation
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based on life circumstances
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Stocks are more risky than mutual funds
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true
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compound interest
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incentive for saving when your young
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Retire at age 67
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true, do NOT retire at age 65
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coupon rate
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interest rate
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face amount
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amount the bond pays at maturity;
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Investment banking firms do NOT regulate Wall Street.
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True
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Prospectus
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NOT a contract for annuity
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Salary reduction plan
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retirement plan that takes its contribution before withholding taxes are calculated. Your salary is reduced and taxes are lower after the contribution is taken
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401K
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corporate retirement plan;
exclusinos that allow you to take money at age 56 |
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403B
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retirement plan for religious, educational, and other nonprofit groups. This plan may use tax-deferred annuities instead of mutual funds
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What are 4 ways that a corporation raises money?
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bank, Wall Street(stock), bonds, and reinvest dividends in company
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Reinvest mutual fund earnings
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good, builds stake in fund by using profits
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reverse mortgage
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a loan available to seniors, and is used to release the home equity in the property as one lump sum or multiple payments
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treasury bond
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longest-term investment issued by the Federal Government
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maturity (bond)
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when a bond reaches the end of its financial life and the face value or principal is returned to the owner
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bonds are callable
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true; some are convertible
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As interest rate goes up, what happens to the price of bonds?
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goes down
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Bond
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debt has to be repaid
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specialist
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new york stock exchange
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downsizing
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reducint the number of employees
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prospectus
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legal document that makes stock transparent; NOT contract to buy annuity
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mutual funds
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most popular financial item;
50 stocks in 1 share, less risk than 1 stock |
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ETS
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basket of stocks, made up of index
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Dow Jones Industrial Average
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index
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Closed-end Mutual Fund
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fixed number of shares are issued and the value of the fund is more a function of supply and demand
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Open-end mutual fund
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the largest number of funds on the market;
issue new shares when someone wants to buy into the fund, rather than matching an existing shareholder who wants to sell |
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dividend
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growth stock, plow dividend back in company
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growth stock
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represent companies that are growing at a faster pace than the market in general
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stocks are risky, bonds are guaranteed.
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True
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risk averse
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investors tendency to avoid unnecessary risk
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allocation
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way you divide assets in stock, bonds, and cash
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core holding
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mutual fund or exchange traded fund that is broad based and central to an investor's investment strategy
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liquidity
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mutual fund are liquid
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What is more liquid, a mutual fund or real estate?
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Mutual fund
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Index
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a measure of changes in a group of individual data points
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risk premium
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the reward for taking a risky investment
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risk tolerance
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how much risk an investor is willing to take in a stock
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expense ratio
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percentage of assets used to cover the expenses of the mutual fund
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front end fee
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fee applied to an investment at the time of initial purchase
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value funds
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stock that has been incorrectly valued by the market
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growth fund
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grow and keep on growing, investors choose growth stocks for their above-average growth rates and hope the stock price follows the growth
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income-fund: pay stock
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mature, stable companies that pay consistent dividends
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preferred stock
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pays higher dividend
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sector fund
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invests primarily in only one industry or sector
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E.T.F.
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sector funds, only sold on American Stock exchange by stock brokers
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E.P.S. (earning per share)
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way of reporting earnings or profits on a per share of stock
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declaration date (dividends)
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the date on which the firm's directors meet and announce the date and amount of the next dividend
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ex-dividend date
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The first day of trading when the buyer of a stock is no longer entitled to the most recently announced dividend payment
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time value money
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a dollar tomorrow is worth less than a dollar today;
a dollar today is better than a dollar tomorrow |
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stop loss order
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stockbroker to execute a sell order when the price of a stock drops to a specific level
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defined benefit plan
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calculate retirement benefits using a formula that applies a percentage to an average salary and adds in a longevity bonus for the number of years worked
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stock picking mistakes
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love, hot tips, and poor diversification
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DJIA
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30 stocks, 25% of whole stock market
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medicare
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A United States government program providing certain kinds of medical care to persons over 65 years of age
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qualified retirement plan
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example: IRA
definition: designated for special treatment such as tax-deferred growth while funds remain in the account |
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Worst way to retire?
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reverse mortage
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Roth IRA
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best IRA for young people
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defined contribution plan
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provide the employee an opportunity to invest pre-tax money deducted on a regular basis in a group of mutual funds and other investments
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