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Terms in this set (17)
A term used in the context of the purchase of expensive items such as a car and a house. It is the initial upfront portion of the total amount due and is usually given in cash at the time of the purchase. A loan is then required to make the full payment.
A professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money markets instruments, and/or other securities. In one of these investments, the manager trades the fund's securities, realizing capital gains or losses, and collects the dividend or interests income and passes it along to the individual investors.
A Roth IRA
An IRA where contributions are made with after-tax dollars. You pay your taxes on the money before you contribute to this IRA, but when you withdraw your money, at the age of 59 1/2, withdrawals are usually tax free.
The initial amount of an investment.
A traditional IRA
An IRA where contributions are made with pre-tax dollars. You only pay taxes on the money when you withdraw amounts, beginning at the age 59 1/2.
A debt security in which the issuer (or borrower) owes the holder (or owner) a debt and is obliged to repay the principal and interest at a later date, called maturity. These securities are usually issued for a fixed amount of time (the maturity) longer than ten years. They are usually much safer and less risky than other securities and some are guaranteed by the federal government.
The capital raised by a corporation through the issuance, sale, and distributions of shares. A person that holds at least a partial share of this has a claim to a percentage of the company's worth.
Money Market Fund
A mutual fund investing in short term money market instruments, such as certificates of deposit (CD's), treasury bills, etc. The fund's net asset value is usually $1 a share and its interest rate goes up or down. Most offer check writing privileges, as well. Most people with any kind of serious money will have these because although they are not guaranteed by the federal government, they are very safe and do earn a decent interest rate. Savings accounts in banks do not earn very good interest rates.
A fee paid on borrowed assets. It is the amount of that fee, usually given as an annual percentage rate.
A type of employer-sponsored retirement plan that allows a worker to save for retirement while postponing payment of income taxes on the saved money and its earning until withdrawal (at the age of 59 1/2). The employee elects to have a portion of his or her wage paid directly, or "deferred", into this account. The employee can select from a number of investments options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some fix of the above.
A tax advantaged retirement savings plan available for public educations organization, some non-profit employers and self-employed ministers in the United States. Simply put, employee salary deferrals are made before income tax is paid on it, and allowed to grow tax deferred until the money is taxed as income when taken out of the plan, at the age of 59 1/2.
Exchange Trade Fund
A marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund does. Unlike mutual funds, however, these securities trade like a common stock on a stock exchange. These securities experience price changes throughout the day as they are bought and sold and typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
A retirement plan account, sanctioned by the federal government, which provides some tax advantages for retirement savings.
The concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. The advantage to this is that any money you earn is usually reinvested and is now earning money along with the original principal.
6000 and 7000
Maximum amounts one can invest in an IRA when they are below 50 and above 50 respectively.
A place or instrument where stock brokers and traders can buy and/or sell stocks (also called shares), bonds, and other securities. The largest of these is in New York City.
NASDAQ, the Dow 30, and the S&P 500
The names of the three major indices investors use in the U.S. to watch how the market is performing as a whole.
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