Savings and investing
Terms in this set (50)
An account such as an IRA or 401(k) that helps an individual set aside money for retirement.
money market account
a savings account that requires a minimum balance and earns interest that varies from month to month or a type of savings account that pays a higher interest rate because the financial institution invests the money you deposit.
For the unexpected, opportunities, major purchases, flexibility, achieve goals
Tips for saving
1. Pay yourself first
2. Save by the numbers
3. Reward yourself
4. Savings and self control
5. Automatic savings
6. Payroll deduction
7. Checking account transfer
3 types of financial institutions
Commercial banks,credit unions,brokeridge firms
Operated for a profit which means the bank is earning money and it is mainly for individuals, businesses and the government to use and protected by the FDIC and accounts are insured up to 250,000
Operated as a non profit organization and owned and operated for the benefit of their members and limited to employee families of the company or organization they work for and is charged by the federal or state government and operating costs are relatively low, so in return you have lower interest rates.
Company that is licensed to buy and sell stocks or securities and act as the middle man between buyers and sellers and employs brokers who trade stocks and are paid on commission and money may earn a higher interest rate than a commercial bank.
Places to stash your cash?
CD's(Certificate of Deposit)
Money Market accounts
529 savings account
Assets purchased with the goal of providing additional income from the asset itself but with the risk of loss ultimately this is profit this includes stocks, real estate, mutual funds and bonds.
Profit or income generated by saving and investing money and if you want a higher return you need to take more risk
The possibility an investment will fail to pay the expected return (there should be no expectations for investments there is no guarantee)
the ease with which an asset can be converted into cash or how easily you can convert your investments into cash.
Emergencies, more liquid, little risk, lower return rates (0-4%), financial security
Long term goals, less liquid, higher risk, higher return rates (8-12%), Net worth
Which type of investment is considered to be the least liquid? Why?
Real estate because you have to sell it or close it and this could take a couple of months or because it could take weeks or months to sell them.
Long term goals
Money is invested and usually meant for your long term goals such as buying a home, education, retirement it is recommended you put 10% of your income towards savings and investing.
A form of lending to a company or the government
The specified time in the future when the principal (or initial investment) amount of the bond is repaid to the bondholder
There are two types of bonds
Government and corporate and lowest type of risk and fixed interest rate
The most common type of bond
ownership of residential or commercial property or land and it has potential for very high returns and this includes rental property and flipping homes
When a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds and they are funds that offer a diversified portfolio for a lower cost ( and with the expertise of a fund manager ); investors pool money to purchase stocks, bonds and other securities.
Reduce risk by spreading your money amongst a variety of investments and companies "Don't put all your eggs in one basket". Investor who spreads their money among different kinds of investment options,
Set percentage for retirement by the company not very common better to stay in one place.
Employee matching program can take this with you if you change jobs; choose own investment plan; contribution limits are set by employer.
Individual Retirement Account (IRA)
A qualified retirement plan that provides most individuals with a deferred federal income tax benefit.
Traditional: tax deferred until used later
Roth: pay taxes when you put the money in so your not taxed later
Maximum yearly investment is $2000
Contribution limits are set by the IRS
2 types of companies with stock ownership
Private and public
Can do whatever they want; no board of directors and not as easily recognized
Public has ownership, so they have a say what goes on and opportunity to earn more money
Location where orders to buy and sell stock are carried out
Person who handles the transfer of stocks and bonds between a buyer and seller
Share of stock
Unit of ownership in a corporation
Owners of a corporation
Price determined by the demand for the stock
a company that specializes in helping people buy and sell stocks and bonds
a person who believes that he will be paid back the money that he loaned or bondholder within a corporation
Lender(creditor) of the company that issued the bond.
Loans to the federal government with a promise to pay you interest
Securities and Exchange Commission and the agency that enforces the laws concerning the trading of stocks and bonds.
The chance that an investment will decrease in value.
The part of the profit that is returned to the stockholder
Selling a stock for more than what you paid for it
Blue Chip Stock
Stock issued by large corporations with long steady records of paying dividends
Stock that guarantee voting rights for its shareholders
Stock that has guaranteed dividends and less risk
Stocks that do not have dividends, often times the profit is reinvested back into the corporation
When a share of stock sells for lower than what was originally sold
Certificate of Deposit (CD)
A savings option in which money is left on deposit for a stated period of time to earn a specific rate of return
money market account
A savings option that typically pays more interest and usually requires a minimum balance but money can be withdrawn at any time
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