The Basics of Liquefaction
This business term refers to an owner needing cash immediately and sells their assets?
Liquefaction
Compound interest is frequently compared to this "effect" for your money
Snowball effect
This is defined as putting money in a safe space for short-term goals
Saving
This term means spreading your money across many different investments to reduce risk
Diversification
Strategy involves investing a set amount of money into the market every set time period, such as weekly or monthly
Dollar Cost Average
Business owners often liquefy assets because they owe money to these people
Creditors
If you start with $1,000 and earn 10% interest, this is your total at the end of the sixth year
1771.56 Dollars
This involves putting money into something expected to grow and become more valuable over a long period
Investing
This famous company appeared to be a "superstar" but was actually hiding its financial report card from everyone
Enron
This passive strategy seeks to match the market rather than trying to outperform it
Index Investing
Instead of cash, giving someone this item that is of no use to you for a $20 debt is a simple example of liquefaction
Gift card, small jewelry, etc.
Why do Banks offer Compound interest?
To incentivize people to put their money into the bank
Saving protects your money for today, while investing protects your money for __
Tomorrow
Thousands of people lost their jobs and this type of "savings" when Enron collapsed
Retirement savings
Two "pro" of Dollar Cost Averaging
Decreased impulses/emotions
Discipline
Easier on the budget
Etc.
Liquefaction involves selling anything that can be turned into this
Cash
Following the previous question, what purpose does bank use those stored money for?
Investing
If a company kept on rising in the stock market for the last ten years, can you safely assume that it will keep rising?
No
What is one strategy similar to diversification?
Index Investing, Hedging, Asset Allocation, Vertical Integration, etc.
The "silly video" in the presentation was created to help the class understand market theory and this type of finance
Behavioural Finance
If a business owner settles a $20.00 debt by giving a creditor a gift card they cannot use, analyze how this specific transaction fulfills the core objective of liquefaction.
It converts an asset that was "of no use" to the owner into an immediate settlement for a "creditor" who is owed money, fulfilling the need for "immediate profit" or value to resolve a debt
Are most loans simple or compound?
Compound
What is the most important aspect of investing?
Understanding
The Logan Paul example perfectly represents FOMO, what does it stand for?
FOMO
Fear of Missing Out
Evaluate the paradox of Index Investing: how can a strategy be characterized as "historically consistent" and "low risk," yet still be "inflexible" and offer "zero downside protection"?
EX: Because the strategy only "seeks to match the market" rather than "trying to out perform it," meaning the investor is locked into the market's movements and remains exposed to "concentration risks" and any general market decline