Compound Interest
What is a disadvantage to investing in real estate?
Need to have a lot of cash; have to find good renters; least liquid type of investment
What is the stock market?
This is a collection of financial markets where people buy and sell ownership shares in publicly traded companies.
Why is the age 59 & 1/2 significant in relation to retirement?
The age when you can typically start withdrawing from a 401(k) or IRA without penalty.
What is a Mutual Fund?
An investment made up of a pool of money from many investors to invest in a diversified portfolio of stocks and bonds, managed by a professional.
What is a low risk investment? (2)
Money market
What is an advantage of mutual funds?
They give small investors access to professionally managed, diversified portfolios.
What is the S&P 500?
The most widely cited index that tracks the stock values of the 500 largest publicly traded U.S. companies.
What is a Traditional account?
Contributions to this type of account (like a 401(k) or IRA) are made with pre-tax money, meaning you pay taxes when you withdraw it in retirement.
What are Dividends?
When a company's value increases, this portion of its profit may be paid out to investors who own its stock.
What is a moderate risk investment? (2)
Bonds, mutual funds
What is a fund manager?
The fund manager’s job is to make sure the fund grows in value, so that it provides profit for investors
Name two other names of stock market indexes that we talked about in class (NOT the S&P 500)
NASDAQ & Dow Jones
What is an Employer Match?
This is the term for an employer adding money to an employee's retirement account, up to a certain limit, based on the employee's contribution.
What is a Bond?
When you buy this investment, you are essentially lending money to a corporation or government entity.
What is a high risk investment? (2)
Single stocks, real estate
You invest $10,000 at a 5% annual interest rate, compounded annually for 5 years. How much interest will you earn over 5 years?
$2,762.82
What is a bear market?
downward (red)
What is a Roth account?
where you contribute after-tax dollars, meaning no upfront deduction, but your investments grow tax-free
What is Real Estate Investing?
The primary disadvantage of investing in this asset, compared to a stock, is that it is the least liquid investment.
What is risk tolerance?
it's your psychological willingness to withstand financial uncertainty, guiding whether you're a conservative (low risk, low return), moderate, or aggressive (high risk, high return) investor
You invest $3,500 in a retirement account that offers an annual interest rate of 6%, compounded quarterly. You plan to leave the money in the account for 10 years. How much interest will you earn over 10 years?
$2,849.06
What is a bull market?
upward trend (green)
What is a 403(b)?
This retirement savings plan is similar to a 401(k) but is specifically offered by non-profits like schools, hospitals, and churches.
What is an Annuity?
A complex investment product sold by an insurance company that guarantees regular payments, often after retirement, usually in exchange for high fees.
What does risk-return tradeoff mean?