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54 Cards in this Set
- Front
- Back
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Common Stock |
-corporate ownership -may pay dividends -voting rights -capital appreciation |
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Preferred Stock |
-Pays fixed dividend -receives dividends before common -no voting rights -inflation risk, interest rate risk -income |
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Growth stock |
-more volatile -little to no dividends -long term growth, retirement savings, hedge against inflation |
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Utility Stock |
Company has stable earnings and the stock is less risky than most stocks -high dividend payout -stable income |
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American Depository Receipt |
A receipt of ownership in a foreign corporation -US market and US dollars -SEC registered Market, exchange rate risk -MAY pay dividends |
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Bond |
-stable interest income -conservative -inflation risk, interest rate risk, default risk, reinvestment risk -longer maturity = more risk |
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Corporate Bond |
-secured or unsecured -fixed and fully taxable interest -current income for Specific period |
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Convertible Bond |
-convertible into fixed number of common shares -lower interest rate -income with potential for long term growth |
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Zero Coupon Bond |
-issued at deep discount -matures at par value -accretion treated as interest -interest rate and inflation risk |
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High Yield Bond |
Also called junk bonds -high risk with speculative rating -higher coupon |
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Money Market Instruments |
Short term debt, low yields -very save and liquid |
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Municipal Bond |
-pays federally tax exempt interest -GO bonds have less credit risk -revenue bonds -lower coupon than corporate bond |
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Private Activity/ Industrial Development Bond |
Issued by municipalities -proceeds benefit private party or corp -Rated based on entity/corp -higher yielding muni |
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Municipal Note |
-Safe and liquid short term muni -Typically money market -Fed tax exempt -Low yield -RAN, TAN, BAN, GAN |
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Variable Rate Demand Obligation (VRDO) |
-Long term debt with short term trading features -Lower yield, greater liquidity -Interest rate reset periodically -Investor may put bond to issuer at reset |
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Treasury Note |
-Semiannual interest -Mature in 2-10 years -Quoted in 32nds -interest exempt from state/local tax |
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Treasury Bond |
-Semiannual interest -Mature in over 10 years -Quoted in 32nds -interest exempt from state/local tax |
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Treasury Bill |
-Short term and liquid -Safe investment with low yield -Maturities up to 1 year -No interest |
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Treasury Inflation Protected Security (TIPS) |
-Conservative long term income investment -Low fixed rate interest -Adjusted for inflation -Not growth oriented |
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Treasury STRIPS |
Safe and conservative investment created from t notes and t bonds that had interest and principal payments separated and resold as 0 coupon securities -pays fixed lump sum at maturity -maturities 2-20 years -subject to inflation risk |
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Government agency mortgage backed securities |
Debt certificates that make fully taxable monthly payments of principal and interest derived from residential mortgage payments -federal or govt-sponsored -prepayment risk |
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Collateralized Mortgage Obligation (CMO) |
-Privately issued mortgage-backed bond -Uses principal and interest collected on mortgages to fund bond classes (tranches) -Monthly income |
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Planned Amortization Class (PAC) |
A CMO tranche that provides investors with the most predictable payments |
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Support/companion Tranche |
CMO tranche which has the most prepayment risk, variability in payments, and unpredictable maturity |
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Z Tranche |
-last CMO tranche to be paid -receives no payments until all other tranches are paid off |
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Long Options (buying calls/puts) |
-Allows investors to speculate on price movement of stocks without buying shares outright -short term and may expire worthless |
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Short options (selling calls and puts) |
-Seller accepts potential future obligation in exchange for premium paid -Potential future loss may be unlimitied |
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Long straddle/combination |
-Buying both a call and a put on the same stock to speculate on volatility -Loss of combined premiums occurs if price remains stable -Straddle= same stock, exp, strike price -Combination= same stock, different exp and/or struck price |
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Short straddle/combination |
-Selling a call/put on the same stock to generate combined income on premiums -Straddle=same stock, expiration, strike -Combo=same stock, diff exp/strike -Possible unlimited future loss |
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Debit spreads |
The sale and purchase of the same type of option on the same stock -the premium paid us greater than the premium received (net debit) -net premium is maximum loss, Max gain is difference in strike prices minus the net premium |
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Credit spreads |
Sale and purchase of the same type of option on the same stock -premium received is greater than the premium paid -net premium is sellers Max gain , Max loss is difference in strike prices minus net premium |
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Protective put |
A put purchased on a long stock position used to hedge the downside risk of the stock |
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Covered call |
A call sold against a long stock position, generates income (premium) and lowers the cost of the stock by the premium received -limited upside potential |
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Protective call |
A call purchased to hedge a short stock position -used to hedge the upside risks of the stock position |
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Covered put |
The sale of a put against a short stock position -generates income, but limits potential gains |
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Direct participation program (DPP) limited partnership |
-distributes passive income and passive losses to partners -tax deductions/credits -limited liability -illiquid, subject to tax law changes |
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Mutual Fund |
Offers shares of a portfolio that is diversified based in the type of fund -less risky than buying individual securities -redeem shares at NAV |
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Growth fund |
-managed portfolio consisting of common stocks with strong upside potential -little to no dividends |
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Income fund |
A managed portfolio that primarily consists of bonds, preferred stocks, and possibly high dividend paying common stocks -investors seeking current income |
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Specialized/sector fund |
A managed portfolio that invests in one specific industry or geographic area -least diversified fund -higher risk, higher potential returns |
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Balanced fund |
A diversified and managed portfolio that consists of both stocks and bonds -provides growth and current income |
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International stock fund |
A managed portfolio that consists of stocks of foreign corporations -priced in US dollars -provides diversity |
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Index fund |
A passively managed fund that buys and holds securities that mirror a specific index (ex. The S&P 500) |
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Exchange traded fund (ETF) |
Offers shares that track an index and trade in the secondary market like common stock -unlike mutual funds, shares are priced and traded in real time |
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Exchange traded note |
Similar to an ETF, but considered unsecured debt. Subject to default risk -often tracks the performance of an exotic mix of assets |
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Closed end fund |
Issues a limited number of shares which are priced and traded in real time. Share price based on supply and demand, not NAV |
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Business development company (BDC) |
An unregistered closed end investment that invests in developing companies -more volatile than mutual fund, high potential rewards |
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Real estate investment trust (REIT) |
Portfolio consisting of income producing properties and/or mortgages -distributes 90% net income to investors, does NOT distribute losses -divs taxed as ordinary income -NOT an investment company |
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Hedge Fund |
A private investment fund that is not an investment company. May use exotic strategies like short selling, leverage, derivatives, ILLIQUID |
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Variable annuity |
An investment contract with an insurance company. Risk is assumed by annuitant -can be set up to provide periodic payments for life -income grows tax-deferred |
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Fixed annuity |
An investment contract with an insurance company, risk assumed by company. -may provide fixed payments for life -income grows tax-deferred -investment returns at fixed rate |
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ROTH IRA |
Tax free investment account available to persons with earned income. Qualified withdrawals are tax free |
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Coverdell education savings account |
A tax free investment account established to help pay a child's education expenses -withdrawals are tax free if used for qualified education expenses |
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529 College Savings Plan |
A tax free investment account established to help pay higher education expenses -no income limit -withdrawals are tax free if the funds are used for qualified higher education expenses |
