Math of Finance Midterm
Terms in this set (7)
Stocks vs Bonds
When you buy a bond you are lending money - corporation, government, bank
When you buy a stock you are buying partial ownership of the corporation
Roth IRA is an after-tax retirement account that allows you to set aside a specified amount each year and let it grow with interest. Earnings and withdrawals after age 59.5 are tax-free.
•Income invested in these accounts is not subject to tax in the year it is earned.
•Income tax is paid on all amounts withdrawn from these accounts in the year withdrawn.
•Always invest enough of your own funds each year to get the maximum employer matching funds.
401k and Regular IRA
Tax exempt for that year
Deposit money into "before tax" income
Pay income tax for all funds when withdrawn
Investment accumulates tax free
Disadvantages of Mutual Funds
Can't choose stocks
Don't get the full amount of what you invest
Actively Managed Funds
Analysts and professionals actively pick different stocks to buy and sell, and put in the fund. You are at the mercy of their decision making. There are charges...
You are purchasing a piece a bunch of companies based solely on their current value. Ex You will buy the top 500 in the S&P. Not managed...