Why invest vocab

Savings

the dollars that become available for investors to use when others save

Financial Assets

stocks or documents that represent a claim on the income and property of the borrower; CDs, bonds, treasury bills, mortgages

Credit Union

Nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services 

Diversification

the technique of spreading funds over a large number of investments to reduce the portfolio’s overall risk

Risk (financial)

–a situation in which the outcome is not certain, but the probabilities can be estimated

Bond

- a formal contract to repay borrowed money and interest on the borrowed money at regular future intervals

Coupon rate

stated interest on a corporate, municipal, or government bond

Maturity

life of a bond or the length of time funds are borrowed

beneficiary

person designated to take ownership of an asset if the owner of the asset dies

Individual Retirement Account (IRA)

- retirement account in the form of a long-term time deposit, with annual contributions not taxed until withdrawn during retirement

Capital Market-

market in which financial capital is loaned and/or borrowed for more than one year

Money Market-

market in which financial capital is loaned and/or borrowed for one year or less

Stockbroker

- person who buys or sells securities for investors

Mutual Fund

- company that sells shares of a portfolio of securities like stocks and bonds issues by other companies

401(k) plan-

a tax-deferred investment and savings plan that acts as a personal pension fund for employees

Vesting

- the length of time you need to work at the company before you can take the employer’s matching contribution with you

Stock or securities Exchange-

physical place where buyers and sellers meet to exchange securities

Dow Jones Industrial Average (DJIA)-

an index of 30 representative stocks used to monitor price changes in the overall stock market

Standard & Poors 500 (S&P 500)-

an index of 500 stocks used to monitor prices on the NYSE, American Stock Exchange, and the OTC market

Futures Contract-

an agreement to buy or sell at a specific date in the future at a predetermined price

Call Option-

a futures contract giving investors the option to cancel a contract to buy commodities, equities, or financial assets

Put Option

-futures contract giving investors the option to to cancel a contract to sell commodities, equities, or financial assets