Investing Basics
Money set aside for the future. These accounts are considered safer because they are FDIC insured.
What is savings?
Money set aside for unplanned expenses. You should have a minimum of 3 months of net pay in the bank for this, but 1 year would be safer.
What is an emergency fund?
Ownership interest in a publicly held company. This type of investment may have temporary setbacks, however, gains typically exceed losses over 30-40 years.
What are stocks?
The potential for change in the value of an investment.
What is investment risk?
A collection of investments.
What is a portfolio?
A strategy to earn more on your money than the rate of inflation. It's purpose is to grow your principal.
What is investing?
The ability to meet current and future needs while living comfortably.
What is financial security?
Any place where investments are bought and sold.
The chance that the rate of inflation will rise faster than your investment rate of return.
What is inflation risk?
A technique for making investment choices by following the prices of stocks and other investments over time.
What is investment tracking?
A debt instrument that is issued by a corporation or government.
What is a bond?
An investment that is not subject to taxation.
What is tax-exempt?
A prolonged period of rising stock prices and general feeling of investor optimism.
What is a bull market?
The chance that activities or events that affect a company will change the value of an investment in that company.
What is company risk?
Holding a variety of investments for the purpose of reducing overall risk.
What is diversification?
The accumulation of assets over your lifetime.
What is wealth?
A postponement of taxes to be paid.
What is a tax deferral?
A period of steadily decreasing stock prices and investor pessimism.
What is a bear market?
The chance that factors affecting an industry as a whole will affect the value of an investment.
What is industry risk?
Investing the same amount of money on a regular basis regardless of market conditions.
What is dollar-cost averaging?
A measure of how quickly an asset can be turned into cash.
What is liquidity?
Unplanned or possible events.
What are contingencies?
The chance that changes in the business cycle will affect the value of an investment.
What is market risk?
The chance that actions taken by the government will affect the value of an investment.
What is political risk?
A strategy that involves a planned approach to making investments on a regular basis.
What is systematic investing?