Basics
Difference between saving and investing
Saving is putting aside money to reach your goals while investing is putting your money into something specific with the expectation that its value will grow over time
Type of investment issued by companies who want to raise money
Stocks
Type of account which opened at a firm licensed to place investment orders
Brokerage Accounts
The average return rate of investing in the stock market between 2004 and 2013
9%
A person who is willing to miss out on higher rates of return in exchange for financial safety
Risk-averse person
Type of investment where you give loans to a corporation or government entity to raise money for specific project
Bonds
Type of retirement account that is open to everyone who has taxable income and you don’t pay tax on contributions or earnings until after you retire
Individual Retirement Agreement (IRA)
Plan which is funded and managed by an employer and is commonly known as a pension
Defined Benefit Plan
Earnings in a brokerage account on which you must pay tax each year
Capital gains
Type of investment that bundles combinations of investments including stocks, bonds, and other securities
Mutual Funds
Type of retirement account where you authorize a portion of your wages to be contributed to the plan before income tax is withheld from your paycheck
401(k) Plan
An investment account that allows you to contribute money to pay for a student’s qualified expenses at a college, university, or vocational school
529 Plan
When your employer contributes a certain amount to your retirement savings plan based on the amount of your own annual contribution
Employer Matching
Type of investment that bundles combinations of investments but trades like a stock on an exchange throughout the day
Exchange-Traded Funds (ETFs)
Type of retirement account that is similar to 401(k) and is offered by certain organizations such as schools, churches, and hospitals
403(b) Plan
An investment account that allows you to contribute money to pay for any level of education, from kindergarten through graduate school
Coverdell account
A non-government entity that gives you limited protection in certain situations including when an investment brokerage firm fails or fraud
Securities Investor’s Protection Corporation (SIPC)
Type of investment in which a savings account holds a fixed amount of money for a fixed period of time and is returned with interest
Certificates of Deposit (CDs)
Type of retirement account that is open to everyone who has taxable income and you pay taxes UP FRONT
Roth IRA
Plan that is established by an employer but requires that the employee manage it
Defined contribution plan