Chapter 13: Investing Fundamentals

These flashcards cover key concepts related to investing fundamentals, including risk factors, income and growth, and principles of asset allocation.

Safety in investments

Means minimal risk of loss.

Risk in investments

A measure of uncertainty about the outcome of an investment.

Risk-Return Trade-Off

The expectation that choosing higher risk investments will yield higher returns.

Risk Tolerance

An investor's ability and willingness to withstand losses in the value of investments.

Components of the Risk Factor

Includes inflation risk, interest rate risk, business failure risk, market risk, and global investment risk.

Investment Income

Income generated from investments, such as interest or dividends.

Investment Growth

Increase in the value of an investment, usually with little or no immediate income.

Investment Liquidity

The ability to buy or sell an investment quickly without a significant impact on its value.

Asset Allocation

The process of distributing investments among various asset categories to reduce risk.

Calculating Rate of Return (%)

Formula: ((Ending Value - Initial Value) + Investment Income) / Initial Value.