Financial Algebra Unit 6 - Investing Strategies & Exponential Functions

401(k)

A tax-advantaged retirement account, sponsored through your employer who will often match your contributions

Active Investing

An investment strategy in which a manager selects specific assets for inclusion in the portfolio and charges a fee for their "expertise" in trying to outperform the market

Asymptote

A line that a curve continually approaches but does not meet at any finite distance

Behavioral Bias

Information that can influence your decisions

Brokerage Account

An account that lets individual investors trade stocks, bonds, mutual funds, and other investments

Change of Base

A formula used to evaluate logarithms

Chasing Trends

Basing your decisions on past performance

Compound Annual Growth Rate (CAGR)

The rate of return that would be required for an investment to grow from its beginning balance to its ending balance

Dollar-Cost Averaging

An investment strategy used to lower risk and volatility by spreading out your investment over time

Exponential Regression Model

The exponential function that best fits a data set

Exchange-Traded Fund (ETF)

A pooled investment that tracks an index and can be traded throughout the day.

Index Fund

A low-fee portfolio of investments chosen to track a specific market benchmark such as the S&P 500 or the Dow

Individual Retirement Account (IRA)

An investment account with tax advantages that individuals can open to invest for retirement

Limited Attention Span

Focusing attention only on information that easily comes to your attention

Logarithm

A math concept that can be used to solve for a missing exponent

Mutual Fund

A collection of stocks and/or bonds combined into one fund which will be traded as a unit, typically chosen and actively managed by an "expert" in exchange for a fee from each investor

Overconfidence Bias

Overvaluing the quality of information that you have and your ability to use it

Passive Investing

A low-cost investment strategy in which a computer balances a portfolio to track a market index with the goal of matching the return of the market

Pension

A retirement account, offered in some job sectors or companies, that an employer maintains to give an employee a fixed payout at retirement

r^2

A number between 0 and 1 that measures how well a model fits the data set

Regret Aversion

Avoiding the feeling of regret causes us to make illogical decisions

Robo-Advisor

An online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners

Roth [401(k) or IRA]

A retirement account that allows a person to set aside after-tax income up to a specified amount each year

Social Security

A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals

Target Date Fund (TDF)

A type of investment fund that rebalances its asset mix over time based on a projected retirement year

Traditional [401(k) or IRA]

A retirement account that allows a person to set aside pre-tax income up to a specified amount each year