Personal Finance Unit 3 Review

Investing

A long-term strategy (10+ years) aiming to build wealth and outpace inflation using stocks, bonds, and funds.

Saving

A low-risk strategy meant for short-term goals (0-5 years) using cash, t-bills, or money market accounts.

Trading

A high-risk strategy focused on quick, short-term profits, often involving individual stocks.

Bull Market

A market condition where investors are buying stocks, causing overall stock values to increase.

Bear Market

A market condition where investors are selling stocks, causing overall stock values to decrease.

Compound Return

Interest calculated on both the initial money invested and the accumulated interest from previous periods.

Diversification in "Types"

Spreading investments across various asset classes to reduce overall portfolio risk.

Diversification INSIDE types

Typically a fund, which spreads investments into multiple individual pieces inside that fund.

A Mutual Fund would buy multiple stocks

A Bond Fund would buy multiple bons

Dollar-Cost Averaging

Investing the same fixed amount of money at regular intervals over time to minimize market volatility..

This is a way to reduce risk as you won't miss investing.

Mutual Fund

An actively managed fund that pools money from many investors to buy a diversified portfolio of securities/securities.

Index Fund

A passively managed fund that aims to mirror the performance of a specific index like the S&P 500.

Exchange-Traded Fund (ETF)

A fund holding a basket of securities that can be bought and sold on the stock market like individual stocks. Like stock their value changes which makes sense as the value inside

Target-Date Fund (TDF)

A fund that automatically adjusts its asset mix and risk level over time as your retirement date approaches.

Robo-Advisor

An automated digital platform that manages investment portfolios based on your risk preferences for lower fees.

Traditional 401(k)

An employer-sponsored retirement plan allowing employees to contribute pre-tax salary portions.

IRA (Individual Retirement Account)

A retirement account opened independently with a financial institution, with lower contribution limits than a 401(k).

Roth IRA

A retirement account ideal for people with lower current income and tax rates, offering tax-free withdrawals in retirement.

Brokerage Account

An investment account used to purchase securities like stocks and bonds, unlike a standard bank account.

Bond

A fixed-income asset where you lend money to a corporation or government in exchange for repayment with interest.

Bond Fund

A fund that invests in a collection of different bonds to provide more diversification than a single bond.

Active vs. Passive Investing

Active uses a human manager trying to beat the market with higher fees; passive matches an index with lower fees.

Bond Prices and Interest Rates

When overall interest rates rise, existing bond prices decrease; when interest rates fall, existing bond prices increase.

Real Rate of Return

The rate of return that takes inflation into account, best used for determining future purchasing power.

Inflation and Purchasing Power

If an interest(or Return) rate is lower than inflation, purchasing power decreases over time.

Risk and Return

Investors expect higher returns when investing in higher-risk assets.

Employer 401(k) Match

Free money where an employer matches your retirement contributions up to a set percentage.

Risk Tolerance

Your comfort level with market volatility, used to shape your investment portfolio.

Social Security

A government program using current worker contributions to fund retirement benefits. 62 is considered early. 67 is considered full. 70 is considered max.

Medicare

A government program using current worker contributions to fund health care for elderly. You can qualify at 65. This often plays a part in retirement planning if you get health care through work.

Shareholder Rights

Owning a company portion and receiving potential dividends if they are paid.

Securities

Another name for Stock (or Share, or Shareholder)

Stock Price Influences

Driven by supply and demand, company news, upcoming events, and stock splits.

Asset Allocation for Youth

Younger investors can invest more in stocks because they have more time to take risks.

Bond Maturity

The date when a bond's principal is repaid to the investor by the issuer.

Bond Default

When an issuer fails to make promised interest or principal payments on a bond.

IPO (Initial Public Offering)

The first time a private company offers its shares to the public on a stock exchange.

Stock Split

When a company increases its number of shares while lowering the price per share proportionally, without changing total market value.

Active Stock Fund

A fund managed by professionals who try to beat market averages, typically featuring higher fees. Mutual funds tend to be Active Stock Funds.

Passive Stock Fund

A fund designed to track a market index with minimal trading and lower fees.

Bond Credit Rating

An assessment of an issuer's creditworthiness and likelihood of defaulting on a bond. These are letter grades ranging from AAA down. C/D is very risky and not likely to pay back

Bankruptcy on Bonds

If the issuer declares bankruptcy they will not pay the whole bond amount back. They might at most pay a small %. Municipal/Local Govt & Business have a risk of this. Under current law Federal/State do not

Price-to-Earnings (P/E) Ratio

A valuation metric calculated as a company's share price divided by its earnings per share.

Market Capitalization

The total dollar market value of a company's outstanding shares, calculated by multiplying share price by total shares.

529 College Savings Plan

A tax-advantaged account designed to encourage saving for future higher education expenses. ((Similar to a 401k but saving for College instead of Retirement))

Health Savings Account (HSA)

A tax-advantaged savings account for individuals with high-deductible health plans to pay for medical expenses.

Pension Plan

A retirement plan where an employer promises a specified monthly benefit upon retirement, unlike a 401(k). There is a risk of bankruptcy for some employers

Purpose of Buying Stock

Unless you talking megabucks where someone might be trying to take over a business and get control of 50%+.

Usually Purpose

1) Investment (Long Term Growth)

2) Trading (Quick Profits from buying low and selling high)

Value of Stock

Ultimately what someone is willing to pay for it

Based on Supply for Sale & Demand to Buy

Usually a combo of thinking

Current News/Expectations of company & its competition

Future Growth Possibilities

Name as many types of Assets as you can

1) Stock or Stock Funds

2) Bonds or Bond Funds

3) CDs / Savings / Cash

4) Cryptocurrency

5) Artwork

6) Real Estate

7) Buying/Investing in Private Businesses

8) Collectibles

9) Gold and other precious commodities

Name your teacher

I hope you got this one right.... It just seemed odd to make 49 cards and not 50!