Investing Basics
This is the term for money earned on an investment after buying low and selling high
What is a capital gain?
This employer sponsored account lets you invest pre-tax dollars for retirement
What is a 401k?
This is the term for owning a small piece of a company by purchasing its publicly traded shares
What is a stock?
This is the term for spreading investments across different asset types to reduce the impact of any single loss
What is diversification?
This is the term for the total value of everything you own minus everything you owe
What is net worth?
This type of investing strategy involves buying index funds and holding them long term rather than actively trading
What is passive investing?
This individual retirement account lets your money grow tax-free and is funded with after-tax dollars
What is a Roth IRA?
This is the term for a loan you give to a company or government in exchange for regular interest payments
What is a bond?
This term describes how much an investment's price swings up and down over time
What is volatility?
This is the dedicated pool of cash set aside specifically for unexpected expenses like car repairs or medical bills
What is an emergency fund?
This concept describes the snowball effect of earning returns on top of your previous returns over time
What is compound interest?
This type of account has no tax advantages but gives you full flexibility to invest in anything with no contribution limits
What is a brokerage account?
This is the cash payment some companies send to shareholders regularly as a reward for holding their stock
What is a dividend?
This is the term for a prolonged period of rising stock prices where investor confidence is high
What is a bull market?
This small annual fee charged by funds directly reduces your investment returns and should always be kept as low as possible
What is an expense ratio?
This is the name for a portfolio that mirrors a market index like the S&P 500 rather than trying to beat it
What is an index fund?
This account type is specifically designed to save for education expenses and grows tax-free
What is a 529 plan?
This is the term for a stock that pays consistent dividends and is known for stability rather than rapid growth, often found in industries like utilities and consumer goods
What is a blue chip stock?
This is the term for how much of your portfolio is held in stocks versus bonds versus cash
What is asset allocation?
This term describes the danger of increasing your spending every time your salary goes up making it hard to ever save more
What is lifestyle inflation?
This term describes the risk that comes from putting too much money into a single stock or sector
What is concentration risk?
This is the maximum amount you can contribute to a Roth IRA annually as of 2024
What is $7,000?
This measures how sensitive a stock is to overall market movements, where a value above one means it moves more than the market
What is beta?
This ratio measures a fund's return relative to the risk it took, where a higher number means better risk adjusted performance
What is the Sharpe ratio?
This is the term for borrowing money to invest, which amplifies both gains and losses
What is leverage?