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91 Cards in this Set

  • Front
  • Back

Fiscal Policy

Controlled by politicians, how money is spent

Monetary Policy

Federal Reserve, Ben Bernanke, not controlled by government, control interest rates of the world (QE3)

Leading Economic Indicators

Employment Rates, CPI, PPI, Stock Prices (these things happened, we have an idea of what will happen in the future)

Lagging Economic Indicators

The market did this, and lo and behold, this happened.


Stretches; steakhouse/diamonds = consumer discretionary (buy when the times are good)


Doesn't change, consumer staples (food/milk)

Renting vs. Buying

Things to consider:
Do you have down payment?

Credit Rating - Above 680

Debt to income ratio - (33%-36%) - doesn't count utility bills

How long will you stay there - min of 5-7 years

Pay for commissions and closing feeds

PMI (Private Mortgage Insurance)

Protects the bank (not you). Not enough for down payment (<20%) you may be forced to buy.

Calculate compounded interest

CD says 4% annually, but is compounded quarterly - more than 4%. BONDS DON'T COMPOUND (they have coupons)


Dashboard to give you idea on financial health, a comparison. Some for corps, some for you. Debt to Income ratio is the most important to a consumer, along with credit score.

Use min monthly payment for debt (w/monthly income!)

Demographic household spending cycle

19 - leave home

25.5 - get married

27 - have child

33 - buy first home

34 - largest debt to income ratio

43-47 - buy largest home

then cycle repeats

*starts on needs, changes to wants over time

Impact of the Baby Boom

(1957-1961) Not as many babies born then until 2007.

1 out of 5 people in US is a baby boomer (just below Japan, Italy, and Germany)

Credit Limits

Can only use up to 50% of my limit (by end of month)

Credit Scores

Impacts lots of things. Cost of car insurance (pay all at one time!), mortgages, etc.

Systemic Risk

The sick hand, whole body dies. Crash of '08

Systematic Risk

Undiversifiable risk from the market. It goes up, you go up. It goes down, you go down.

Unsystematic Risk

Risk you choose. Picking a specific company is diversifiable

S&P 500

UNMANAGED Index, made up of 500 U.S. based companies that best represent the U.S. economy. Blitzer at S&P selects the companies. Divided into subsectors (technology, energy, staples, etc).
Market cap weighted index!

Stock Market Capitalization

Small, Mid, Large. Lots of people want shares for a price. 68% of mutual funds are large. 18% of stocks are large.

Market Capitalization

1 share of a company stock times the number of shares outstanding

Growth Stocks

Investors that look at a company and believe the future value of the company will be much greater than it is today.

Value Stocks

Buy stocks when it's a fair value for the stock based on the business today (when price = business model). Most pay dividends (Buffett)

Risk Management Strategies

In regards to Harley Davidson: Retain (ride if I want), Reduction (use safety equipment), Avoid (never ride), Transfer (insurance).

Law of Large Numbers

How insurance works. Transfer risk, low probability of occurrence but a high cost to you (if it does happen). Homeowners insurance (houses burning down, not common). Retain when it has a high probability of happening or a low cost to you.


Decide the cost of insurance (Law of Large Numbers) probability of occurrence.

Insurable interest

Decides whether or not you can take out an insurance policy on someone and be the beneficiary. Needs a financial interest

Open Peril Policy

To cover bad things that can happen. Everything is covered, except for things excluded in the document.

HO3 & HO5

Homeowner's policy (HO5 is broader)


Renter's Insurance Policy

Effective Yield

Bond and coupon rates. Coupons don't change, value of the bond changes whether it is trading at a premium or a discount. (interest rates up, effective yield of rate discount = down) Teeter-totter. Can trade at Premium (interest is down), Discount (interest is high or credit quality is down), or Par. Will mature at Par.

Bond Ladder Strategy

Buy bongs that have different maturities. Counters Reinvestment Rate Risk.

Secured Bond Holder

Has ability to go after inventory (or other things company owned) if it goes under.

Unsecured Bond Holder

Has no ability to go after assets. (Higher risk, but a higher coupon too)

Incidents of ownership (life insurance)

Change beneficiary, make payments, owner of policy

Viatical Settlement

Someone buys your policy after issuance

Moral Hazard

I make 5k, have 10k in disability

Life Insurance (lil side notes)

All Life Insurance is annual renewable term. Permanent has a cash value, term doesn't.

Basis points

For homes, charge 1 point = 1%. In our world 100 basis points = 1%


What IRA has on 1040 :(


What you see on the statement :D

Open End

Normal Mutual Fund in 401k (NAV)

Closed End

Fixed # of shares outstanding. When you go to sell it to get $, someone must actually buy your shares from you (usually at discount).

Unit Investment Trust

No manager, basket of stocks like ETSs

Closed fund

Fund that was open end and manager decided to close it. Open End and Closed Fund are the same funds, just open or closed.

Investment Policy Statement (IPS)

This is how I have to manage this money, playbook of investments. Must use discretion as a fiduciary. Needs to be signed and follow the guidelines.

12B1 fee

Internal fees paid every year inside of mutual funds. Does not include trading costs or commissions, cost of existence


Issued from life insurance company.
1. Living benefits (what you can get w/o having to annuitize [trade $ for an income over specified # of years])

2. Period Certain (will last at least # of years 10-20)

Marginal Tax Rate

Highest rate you'll pay on the last dollar earned. (matters for Roth conversion)

Effective Rate

Overall Income. Amount of taxes they've paid.

Tax Credit

Dollar-for-dollar reduction! Good :D (Have to pay taxes to use the credit)

Tax Deduction

Higher income earners; reduced amount of income that will be taxed. Kinda good :/


Mortgage interest, charitable, state taxes

Tax evasion

Jail! Don't report income

Tax avoidance

Penalties, taking deductions that you actually can't

Taxable interest

You'll get 1099R. Based on Marginal Bracket. (like for regular bonds)

Tax exempt

Municipal bonds. GOB(general obligation bonds pay you back) ROB (revenue- more risky but better coupons)

SS & Medicare

Up to 85% of what's received. More income, more you pay.


Goes to government for Social Security, maxed around 100,000 (50% you, 50% employer)


No cap, 2.9% per year (1.45% you, 1.45% employer). Self employed? You pay both w/ reduction

Taxes for IRA fund movement?

None, inside the candy wrapper!

Medicare vs. Medicade

Medicare - old people & federal

Medicade - poor people & state

Filing status

Single, Married Filing Jointly (or separately)


Annual Report


Money in motion




From employer at the end of the year, earnings


Withholdings from paychecks (exemptions)


Final tax for when you die - state

Charitable gifts

Give 50% of your income, if qualified organization. Itemized taxation 501c3 (nonprofit)


Classification for a nonprofit organization

Taxable gifts

Gifts where it's not present interest (strings) or money is above annual exclusion - 14k

Long term care insurance

Take care of you while in nursing home. Based on ADLs.


Get money out of IRA before 59.5 without 10% federal penalty.
Substantially equal, period payments, unchanged for the greater of 5 years or until 59.5.


Same as 72T but out of annuity; very rare


Transfer tax code. Move money in Life Insurance to Life Insurance or Annuity Contract. Move money in Annuity to Annuity.

Per Stirpes

Following the bloodline. Inheritance tax is cheaper when closer to bloodline. (No longer in Indiana).


Give asset ABOVE cost basis. Or cash, but try to give asset ABOVE basis.

Estate planning objectives

Reduce federal estate taxes, privacy, simplicity, and control where money will go. (CPS?)


Legal form of transferring assets when you die from one person to another. Probate and will go together. Probate is a process.


Another form of ownership. Must stronger than wills (most are revocable)

Operations of Law

Happen before probate or will or trust.

Beneficiary designation

Crummey Letter

Gift that would be in present interest, makes it present. Irrevocable trust, where money is used to pay premiums in life insurance policy.


Beneficiary says "I don't want this asset," lets you make the choice.

Modified Endowment Contract (MEC)

Put too much money in life insurance policy. Be like an annuity during life, 59.5 LIFO (interest out first - not basis) then act like an insurance policy at death (INCOME TAX FREE).

Roth IRA

No deduction, grows tax-free. No RMDs. If you have income, you can continue to make contributions

Traditional IRA

Tax deduction meow. 70.5 - have to RMD

Stretch provision (for IRA)

Beneficiary can take money out over their life expectancy and not yours (spouse). Everyone else can't use this, it would be an inherited IRA. Without stretch, taxes must be paid upon death within 5 years.


$ you can put in IRAs and 401(k)s based on earned income this year. Under 70.5 and have earned income.


Take money from IRA, pay taxes, then put it in Roth.

Basic Annuity Retirement Plan

Like a pension, no money left at end


Nonprofit (schools, hospitals, etc.)