Savings Options
This term describes how quickly and easily an asset can be converted into cash without losing value. It is important to consider when comparing different savings options.
What is liquidity?
Putting your money to work to earn more money over time is called this.
What is investing?
Buying shares of stock in a company means you are buying ownership in that company. This is called __________ - financing.
What is equity-financing?
Contributions to this IRA are made with after-tax money, and withdrawals in retirement are tax-free.
What is a Roth IRA?
On the investment pyramid, investments listed towards the top are _____ risk and _____ reward.
What are high risk and high reward?
This offers easy access to your money and earns a small amount of interest, often under a half percent.
What is a savings account?
This strategy reduces risk by spreading investments across different types of assets and industries.
What is diversification?
These are the two main ways investors make money from stocks.
What are:
- Selling shares at a higher price than you bought them for
- Earning dividends
Contributions to this type of IRA are made with pre-tax dollars, and you pay taxes when you withdraw the money later.
What is a Traditional IRA?
This type of stock comes from companies that are well-established and offer consistent returns.
What are blue-chip stocks?
This option requires you to keep your money locked in for a set time, offering higher interest in exchange for less liquidity.
What is a Certificate of Deposit (CD)?
These investments involve pooling money with others to buy a mix of stocks, bonds, and other assets managed by professionals.
What are mutual funds?
This type of stock offers voting rights but is more volatile than some other types of stock.
What is common stock?
These are savings accounts designed specifically for education expenses, offering tax advantages if used for college.
What is a 529 savings account?
This type of stock does not offer voting rights but usually provides guaranteed dividends and higher claim to assets if a company goes bankrupt.
What is preferred stock?
This type of account combines features of checking and savings but often requires a high minimum balance and stricter requirements.
What is a money market account?
These government or corporate debt securities typically offer lower risk and lower returns compared to stocks.
What are bonds?
This type of stock typically consists of young, entrepreneurial companies and is high risk.
What is growth stock?
This employer-sponsored retirement plan is common for for-profit companies and often includes employer-matching contributions.
What is a 401k?
Buying bonds from a company or the government is called __________ - financing.
What is debt-financing?
Savings accounts, money market accounts, and CDs are insured by this government agency for up to $250,000 per depositor.
What is the FDIC (Federal Deposit Insurance Corporation)?
This type of investment fund aims to mirror the performance of a specific stock market benchmark, such as the S&P 500, by holding all the same stocks in the same proportions.
What is an index fund?
This U.S. government agency regulates stock trading, prevents insider trading, and licenses brokers.
What is the SEC (Securities and Exchange Commission)?
This retirement plan is offered to employees of non-profits and government organizations.
What is a 403b?
Rank these investments from MOST to LEAST liquid: a house, a share of Apple stock, a $20 bill, a rare pair of Jordans, a certificate of deposit (CD).
MOST
A $20 Bill
A share of Apple Stock
A CD
A rare pair of Jordans
A house
LEAST