Investing 101
What does the S&P 500 track?
The 500 largest publicly traded companies in the U.S.
What does "pay yourself first" mean?
Saving or investing before spending on discretionary expenses
What is a fiduciary?
A financial professional who is legally and ethically required to act in the best interest of their client.
What is disability insurance?
Insurance that provides income replacement if you become unable to work due to illness or injury.
What is the maximum Roth IRA contribution for someone under 50 in 2024?
$7,000
What is the term for a stock’s first sale to the public?
Initial Public Offering or IPO
What is a credit score range typically between?
300-850
What is AUM?
Assets Under Management—the total market value of investments managed by a financial advisor or firm.
What does liability insurance cover?
It covers legal and financial responsibilities if you are found at fault for causing harm or property damage.
What is the difference between a traditional IRA and a Roth IRA?
A traditional IRA allows tax-deductible contributions and is taxed upon withdrawal, while a Roth IRA is funded with after-tax money and withdrawals are tax-free.
What is the name for a stock that does not pay dividends but reinvests profits?
Growth Stock
What is the 50/30/20 budgeting rule?
A budgeting guideline that suggests spending 50% on needs, 30% on wants, and 20% on savings and debt repayment.
What is Monte Carlo simulation?
A financial planning tool that runs thousands of possible scenarios to predict the likelihood of different investment outcomes.
What is a deductible?
The amount you must pay out-of-pocket before insurance coverage kicks in.
What is the age you can withdraw from a 401(k) without penalty?
59½ years old
What is the average annual return of the U.S. stock market over the past 100 years?
10-11%
What is the Rule of 72?
A formula to estimate how long it takes for an investment to double by dividing 72 by the annual return rate.
What is a revocable trust?
A trust that allows the grantor to make changes or revoke it during their lifetime.
What is the difference between term and whole life insurance? (In honor of Neil Foley)
Term life insurance provides coverage for a fixed period, while whole life insurance lasts a lifetime and includes a cash value component.
What is the tax advantage of an HSA?
Contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.
What is the difference between the bid price and ask price of a stock?
The spread
What is dying intestate?
Dying without a will, which means the state determines how assets are distributed.
What is a donor-advised fund (DAF)?
A charitable giving account that allows donors to contribute and distribute funds to charities over time while receiving immediate tax benefits.
What is an umbrella policy?
Extra liability insurance that provides additional coverage beyond standard home and auto policies.
What is a backdoor Roth IRA?
A strategy where high-income earners convert a traditional IRA into a Roth IRA to bypass income limits.