Vocab 1
Annuity
A contract that pays you regular income, often used for retirement
Commodities
items that have the same value across the market with little or no difference in quality (soy, corn, fuel, gems, etc)
Market order
request to buy or sell stock at the current market price
Reinvesting
putting investment earnings back into other investments
Relationship between risk and potential return
The higher the risk, the greater the potential return (and visa versa)
Bear market
A period when stock prices fall (typically a 20% drop)
Direct investing
buying investments directly from the issuer or company
Money Market
type of account that requires a high minimum balance but pays higher interest than
typical savings accounts
Risk-free investments
guaranteed by the government; US savings bonds and Treasury Bills
Low-Risk options (savings and investing)
Savings: traditional and online savings accounts, money markets, CDs
Investing: bonds (municipal/government and corporate) and annuities
Bond
A loan you give to a company or government that pays you interest over time
Diversify
spread your investment across varying the risk levels
Mutual fund
professionally managed investment fund that pools money from many investors
Savings
bank account that earns interest; money set aside for the future (emergencies or specific goals)
Medium-Risk options:
Mutual finds, IRAs, 401k, 403b
Bull market
A period when stock prices rise (usually up 20%)
Limit order
A request to buy or sell stock at a certain price
Portfolio
collection of investments
Stockbroker
Someone who buys or sells stock – middleman (person or company) between the investor and the company offering the investment
High-Risk options
Stocks, commodities
Certificate of Deposit (CD)
A savings account that locks your money for a set time with fixed interest
Liquid
how quickly an asset can be converted to cash
Rate of return
gain or loss on an investment over a period of time
Pension, Traditional 401k, Traditional IRA, Roth IRA, 403b
Why is diversifying your portfolio beneficial?
Varying the risk level of your investments is a way to lower the overall risk. If high risk investments
don’t do as well as expected, there are still safer, lower risk investments