Investing Terms
Define Asset (in one sentence)
An asset is anything owned that has value and can provide future benefit (cash, stocks, property).
What is a stock?
A share of ownership in a company; shareholder can benefit from price appreciation and dividends.
Explain one key difference between saving and investing.
Saving is short-term, low risk, for emergency/near goals.
Investing is long-term, higher risk, for growth.
What does IRA stand for?
Individual Retirement Account
What year was Pokorney born?
1997
What does IPO stand for?
Why might a company choose to do an IPO?
Initial Public Offering.
Companies IPO to raise capital, allow early investors to exit/realize value, increase public profile.
What is a bond? (in one sentence)
A bond is a loan to an issuer (company or government) that pays interest and returns principal at maturity.
Give two reasons an individual should both save and invest.
Examples:
(1) Savings for emergency fund/liquidity
(2) Investing to grow wealth/beat inflation for long-term goals.
Identify two employer-sponsored retirement plans.
401(k), Pension Plans, 403(b)
What instruments did Pokorney play for high school band and show choir band?
Tuba
Guitar
Compound interest is interest earned on the original principal and on previously earned interest.
What is a mutual fund?
A pooled investment that buys a diversified basket of securities, managed by a fund manager.
Explain the relationship between risk and reward
Risk and reward are positively related. Higher potential returns usually come with higher risk of loss.
A defined contribution plan (like a 401k or 403b) is a retirement plan where the employee and/or employer contribute money to an individual account, and the final amount depends on investment performance.
A defined benefit plan (pension) guarantees a set monthly payment in retirement based on years of service and salary, regardless of investment results.
How many sibling(s) does Pokorney have?
List the name(s)
2
Megan
Marie
Define Liquidity (in one sentence)
Liquidity is how quickly an asset can be converted to cash without greatly affecting its price.
What is an index fund?
An index fund is a low-cost fund that invests in the same companies as a specific stock market index so it can match that index’s performance.
Explain why diversification matters when building a portfolio.
Diversification spreads risk across assets so a loss in one position has less impact on the whole portfolio.
Explain two differences between Traditional and Roth IRAs
Traditional contributions may be tax-deductible and withdrawals taxed. Cannot withdraw contributions or gains early.
Roth contributions are after-tax and qualified withdrawals are tax-free. Can withdraw contributions early.
What two colleges did Pokorney attend?
UW Whitewater
UW Madison
(UW Whitewater again)
Name the three widely followed stock market indices.
S&P 500
DJIA (Dow or Dow Jones Industrial Average)
NASDAQ
Explain the difference between owning a stock and owning a bond.
Stock = ownership equity (variable returns, dividends).
Bond = debt obligation (fixed interest, repayment schedule, preference in the case of bankruptcy).
1) What is dollar-cost averaging (brief definition)?
2) Give one way dollar-cost averaging can help an investor.
3) Lucas bought 100 shares at $75 and sells at $220. What is his capital gain or loss? (show work)
1) Dollar-cost averaging (DCA) = investing the same dollar amount at regular intervals regardless of price.
2) It smooths purchase price over time and reduces the risk of investing a large lump sum at an unfavorable time; buys more shares when price is low and fewer when price is high.
3) Initial Cost of 100 Shares:
100 x $75 = $7,500
Sale of Shares @ $220:
100 x $220 = $22,000
Capital Gain:
$22,000 - $7,500 = $14,500
What are the three legs of the traditional retirement stool?
Social Security
Personal Savings/Investments
Pensions
1) What kind of dog does Pokorney have?
2) List names we call him (up to 3 for 100 points each)
3) What is the name of Hallmann and Pokorney's cat?
1. Pug
2. Theodorable, Theo, T, Mr. Goodboy
3. Slim Shady