Unit 4: Spending and Investing

Authority Bias

The tendency to attribute greater accuracy to the opinion of an authority figure (unrelated to its content) and be more influenced by that opinion

Bond

A security in which the investor loans money to a company or government, which then pays regular interest to the bondholder and returns the principal on the bond's maturity date

Brokerage Account

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

Capital Gain

Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for

Comparison Shopping

The process of comparing various factors for a product or service before making a purchasing decision

Confirmshaming

A dark pattern where the option to decline an offer is worded to shame the user into compliance

Diversification

The practice of investing in a large variety of stocks, bonds, and/or funds as a way to reduce your overall risk

Dividends

Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis

Exchange-Traded-Fund (ETF)

A collection of stocks and/or bonds that are traded on securities exchanges. Unlike mutual funds, they can be traded throughout the day like an individual stock.

Federal Trade Commission (FTC)

A government organization whose role is to protect consumers and competition by preventing anti-competitive, deceptive, and unfair business practices through law enforcement, advocacy, and education

Identity Theft

When someone steals your personal information to commit fraud such as applying for credit, filing taxes, or obtaining medical services

Influencer

A person who is able to generate interest in something (such as a consumer product) by posting about it on social media

Index Fund

A low-fee portfolio of stocks chosen to track or mimic a stock market index, thereby removing the human element of investing because no one is choosing the individual stocks

Mutual Fund

A collection of stocks and/or bonds combined into one fund which will be traded as a unit, typically chosen and actively managed by an "expert" in exchange for a fee from each investor

Philanthropy

Actions that promote the well-being of others, often through monetary donations

Phishing Scam

A type of scam in which personal information is requested, typically through an illegitimate email

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs

Rule of 72

A popular trick to find out how many years it will take your money to double depending on what interest rate you are receiving

Pyramid Scheme

An illicit business model where profits are based on the investor's ability to recruit other individuals who are enrolled to make payments to their recruiters. Generally, neither a product or service is delivered.

Rate of Return/ROI

The ratio of money gained or lost on an investment relative to the amount of money invested; also known as return on investment

Roth IRA

An individual retirement account that allows a person to set aside after-tax income up to a specified amount each year

Scarcity Bias

The tendency to assume things that are scarce are valuable and things that are abundant are not

Social Proof Bias

The tendency to behave in a particular way because others are doing so

S&P 500

An index of 500 large cap companies chosen based on their size, industry, and other factors, used to represent the entire market

Stock

A share of the value of a company, which can be bought, sold, or traded as an investment and which gives the investor small partial ownership of the company

Traditional IRA

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

Traditional 401(k) Plan

A retirement savings plan, sponsored through your employer who will often match your contributions, that allows an individual to save for retirement and have the savings grow while deferring taxes until funds are withdrawn

Ways of Influence

Factors such as authority, liking, or scarcity that have an effect on the way we make decisions