Investing Basics and Concepts

These flashcards cover key concepts related to investing, including definitions, differences between investing and saving, principles to follow, and terminology related to stocks.

What is investing?

Purchasing assets with the goal of increasing their value over time.

How long is the typical duration for investing compared to savings?

Investing is long term (years to decades), while savings is short term (3-6 months).

What is the K.I.S.S. principle in investing?

Keep it simple & straightforward; don't invest in what you don't know and be able to explain your investment to others.

What does the time/risk ratio indicate in investing?

The more time you have before you need to liquidate investments, the higher the risk you can afford to take.

What is an investment portfolio?

An individual's collection of investments that may include stocks, bonds, property, and retirement plans.

What is the Rule of 72 used for?

It calculates the approximate time it will take to double an investment by dividing 72 by the current yearly rate of increase.

What is a fiduciary?

A person entrusted with managing a third party's financial investments and required by law to act in the owner's best interest.

What is the difference between a stock and a stockholder?

A stock is a share of ownership in a company, while a stockholder is the owner of that stock.

Why do companies issue stocks?

To raise funds and pay for ongoing business activities.

What are dividends in relation to stocks?

Money paid to shareholders from the profits of the company, separate from the stock's value.

What is a stock exchange?

A location, platform, or app that allows individuals to buy and sell stocks.