Investing

investing

The process of setting money aside to increase wealth over time for long-term financial goals such as retirement

savings

Money put aside for future use; growing your money is not the top objective

compound interest

Interest earned on both the principal amount and any interest already earned

simple interest

Interest paid on the principal alone

reasons to put money in a savings account

Low risk, emergency fund

tips for first time investors

Keep investments diverse; don't be too risky; keep money invested for a long period of time

diversity

Variety

stock exchange

A market for buying and selling stock

two ways to profit from owning stocks

Capital gains, dividends

capital gains

The positive difference between the purchase price of a stock and its sale price

dividends

Payments of cash from a corporation to its stockholders

shareholder

An owner of shares in a company

risk of purchasing stocks

Stock prices may drop

stocks

Securities that represent part ownership or equity in a corporation

bonds

A certificate issued by a government or private company that promises to pay back a loan with interest to the buyer

what a bond holder receives

Interest

asset allocation

The process of spreading your assets among several different types of investments to lessen risk

mutual funds

An investment program funded by shareholders that trades in diversified holdings and is professionally managed

portfolio

A collection of financial assets

index fund

A mutual fund that tries to match the performance of a particular index by investing in the companies included in that index

S&P 500

Market index of U.S. equities based on the performance of 500 large-cap stocks representing various sectors of the overall equities market

financial planner

A professional consultant who provides financial advice for a fee or commission

things to consider when picking a financial planner

Fees, experience, credibility, history of success