Investing 101
What is a stock and why do companies issue them?
A stock represents ownership within a company, allowing investors to become part-owners of a specific company that they invested in.
Companies typically issue stock to gain more capital for various of reasons such as business expansion, the ability to offer employees stock options, and various other needs.
This instrument represents a loan made by an investor to a borrower and typically includes interest payments
Bond
What is the difference between a bear and a bull market?
A bear market is a market that has been performing poorly over time
A bull market is a market that has been performing well over time
This metric is used by investors to measure how "risky" a security is. Hint: it starts with the letter "B"
Beta
This type of retirement plan is only accessible if you're 21 and older and have worked for at least 12 months
401(k)
Explain the risk to reward concept?
In short, the risk to reward concept entails taking on more risk for the potential of a greater reward. In contrast, the less risk you take, the less of a reward there is.
These instruments are issued by the U.S Government as a type of "bond" that investors can purchase. What are the names of all three and which are short, mid, and long term?
T-bills - short-term
T-notes - mid-term
T-bonds - long-term
What is volatility?
Volatility is the measurement of potential returns (or losses) for a specific security. In simplest terms, it's the upward and downward movement of the market.
As one of the most notorious investors, this individual looks for "Value" companies, among many other things to place their investments.
Warran Buffet
Withdrawing from your retirement before this age will subject you to an early withdrawal which comes with a 10% penalty
59 1/2
What does ETF stand for and what does it track?
An ETF or Exchange Traded Fund is a type of security that trades on an exchange and tracks a specific sector, index, or basket of securities (such as commodities)
What are at least two (2) alternative terms for "interest rate"
1. Coupon Rate
2. Yield
What is the S&P 500 and what does it stand for?
S&P 500 is also known as Standard & Poors 500
The S&P 500 tracks the 500 largest companies in the U.S. and is an index
In this City and State, the United States is experiencing the heaviest Supply bottlenecks, resulting in higher cost of goods and labor shortages
Los Angeles, California
Long Beach Port
What is the difference between a Roth IRA and an IRA in terms of tax implications?
An IRA will allow you to contribute pre-tax income, but tax you on your withdrawals later down the line
A Roth IRA will allow you to contribute post-tax income, but your withdrawals later down the line are considered to be tax-free
What is the tax rate for dividend income if it's short-term? How about the long-term tax rate?
Short term tax rates are just like your income tax. They vary from 10%, 12%, 22%, 24%, 32%, 34%, 37%
Long term tax rates vary from 0%, 15%, 20%
This type of interest is calculated on top of a loan with accumulated interest from previous years.
Compounding Interest
What is a REIT and what are they known for? Think risk against inflation and income
REIT - Real Estate Investment Trust
REITs are known to be a great hedge against inflation while also providing steady income through dividends. Dividends are typically paid on a monthly basis
This Company, currently, has the largest Market Cap in the United States
Extra points: What does Market Cap measure?
Microsoft
This type of investment instrument is typically used by either yourself or a professional investment manager to invest your funds in both 401(k)s and 403(b)
Mutual Funds
What is the difference between a value and a growth company and give an example of each?
Value companies are companies that are deemed to be "undervalued". Investors will invest in these companies for the longer term, expecting an increase in price. These companies traditionally pay a higher dividend. - Colgate/Hasbro
Growth companies are those that have a "higher" price range and are expected to continue to grow. These companies dump all of their revenue back into the business and rarely give out dividends. - Tesla/Google
Erin had just purchased her first bond for $10,000. He had agreed to a fixed 7% annual interest rate that will be paid to him for the next 5 years. How much will Erin have made on her maturity date?
Year 1 - $10,700
Year 2 - $11,449
Year 3 - $12,250.43
Year 4 - $13,107.96
Year 5 - $14,025.51
Made: $4,025.51
How long was the longest bull market in history? Extra points for year to year
11 years. From 2009 - 2020
This is the average amount of Student Loan debt that a 60-year-old has within the United States.
Remember Professor. Trent's slide?
$33,600
What is the difference between a defined benefit plan and a defined contribution plan?
A Defined Benefit Plan has a guaranteed and specific amount that is paid upon retirement. In this case, the risk is born on the employer
A Defined Contribution Plan allows employees and employers (if they choose) to contribute and invest funds to save for retirement