Investing Unit Review

Active Trading

Buying and selling investments in hopes of making a quick profit.

Asset Allocation

Dividing an investment portfolio among different asset categories (stocks, bonds, cash, etc.)

Bond

A security in which the investor loans money to a company/government, which pays regular interest to the bondholder until the bond’s maturity date.

Brokerage Account

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

Compound Return

Reinvesting earned interest back to the original amount of money invested as as to calculate the initial amount and accumulated interest.

Coupon

The annual interest payment on a bond (percentage of its face value).

Diversification

The practice of investing in a variety of stocks, bonds, and/or funds to overall risk.

Dividend

Money from the profits of a company paid out to its shareholders (often quarterly).

Dollar Cost Averaging

Putting a fixed amount into an investment over a period of time.

Exchange-Traded Fund (ETF)

A collection of stocks and/or bonds traded on securities exchanges. Can be traded throughout the day like an individual stock.

Individual Retirement Account (IRA)

An investing tool for individuals to set aside funds specifically for their retirement.

Inflation

The rate at which the price of goods increases and consumer purchasing power decreases.

Investing

Setting aside money to increase welath over time for long-term financial goals.

Investment

An asset/item acquired with the goal of making a profit.

Mutual Fund

A collection of stocks/bonds combined into one fund which will be traded as a unit, typically managed by an “expert” on behalf of the investor.

Passive Investing

A long-term strategy for building wealth by buying investments, holding them for a long time to minimize trading and costs.

Pension

A retirement account that an emplower maintains to give an employee a fixed payout at retirement.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents.

Purchasing Power

The number of goods and services that money can buy. Weakens due to inflation.

Risk

Degree of uncertainty on how likely the investor is to make money on an investment.

Robo-Adviser

An online wealth-management service that provided automated, algorithm-based portfolio management advice.

Roth IRA

An individual retirement account allowing a person to set aside after-tax income up to a specified amount per year.

S&P 500

An index of 500 large cap companies.

Shareholder

A person, company, or institution owning at least one share in a company.

Social Security

A federal program providing monthly benefits to millions of Americans (retirees, military families, disabled individuals, etc.)

Stock

A share of the value of a company that can be bought, sold, or traded as an investment. Gives the investor small partial ownership of the company.

Target Date Fund (TDF)

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

Traditional IRA

An individual retirement account allowing a person to set aside pre-tax income up to a specified amount each year.

Traditional 401(k) Plan

A retirement savings plan sponsored via employer who will match contributions. Allows a person to save for retirement and grow savings while deferring taxes.

Bull Market

Investors are buying stocks, causing stock values to increase.

Bear Market

Investors are selling stocks, causing stock values to decrease.