investment, retirement, and estate planning test

investing

long term perspective - purchasing securities where the value and level of return are somewhat predictable

speculating

short term buying and selling of securities; return is highly uncertain

risk adverse

average investor; more adverse, the lower the returns are

security

tradable financial asset of any kind

security market

arena where stocks, bonds and other financial instruments are traded

account executive

professional who assist in investing

porfolios

collection of investments, combines personal and financial goals together and investment objectives to give structure to investments

diversification

combine securities with dissimilar risk-return characteristics, which reduces risk for a more predictable return

IPO - initial public offering

1st time a private company offers shares to the public

stocks

form of equity, shares of stock represent ownership in corporation b

bonds

form of liability, investor receives interest income

mutual fund

organization that invests and manages a diversified portfolio of securities

ETF - exchange traded fund

pooled investment security that holds multiple stocks, operated much like mutual funds

capital gains

realization of change in market value by selling security; taxes at reduced rate

dividend

payment from certain kind of stocks when company makes a profit

required rate of return

minimum rate of return an investor feels should be earned in compensation for the amount of risk associated

rate of return equation

(ending value - beginning value) / beginning value = % rate of return

bear market

market is falling downward trend

bull market

market is trending upward

4% rule

withdraw 4% of funds in 1st year of retirement and remove that $ amount, adjusted for inflation every year

social security

paid through income tax, can be taken out as early as 62, average person gets $1900/month

401K

pre-tax, employer match, max contribution of 23,500/year, can take out at 59 1/2

Roth 401K

made after tax, no taxes on withdraws made after 59 1/2

403b

similar to 401k, typically for non profits

SEP IRA

simplified employee pension - usually for small businesses; must give same amount to all employees

IRA - individual retirement account

traditional: pay taxes in retirement. Roth: pay tax while working, grows tax free

annuities

created by life insurance companies to provide a series of payments through life

beneficiary

person who receives estate benefit

executor

person in charge of completing will goals + distribute assets and settle debts

trust

legal relationship when one party transfers property to second party for 3rd party benefits

grantor

person who creates a trust

trustee

organization selected by grantor to manage property in trust

power of attorney

authorizes another person to take over their affairs and act on their behalf

intestacy

dying without a will

probate

legal process when a person dies