Chapter 1 Vocabulary Investment Any asset you put money into with the expectation that it will generate income or increase in value. ⸻ Portfolio A collection of different investments owned by an investor. ⸻ Return The reward earned from an investment through income and/or an increase in value. ⸻ Income Money earned from an investment, such as interest, dividends, or rent. ⸻ Capital Gain The increase in the value of an investment when it is sold for more than its purchase price. ⸻ Security A financial investment issued by a business, government, or organization that represents a financial claim. ⸻ Property A real asset that is generally less liquid than a security. ⸻ Real Property Land, buildings, and anything permanently attached to the land. ⸻ Tangible Personal Property Physical assets such as gold, artwork, antiques, jewelry, and collectibles. ⸻ Liquidity The ability to quickly buy or sell an investment without losing much of its value. ⸻ Direct Investment An investment in which the investor directly owns the asset. Example: Buying shares of stock yourself. ⸻ Indirect Investment An investment in which ownership is obtained through a professional investment manager. Example: Investing in a mutual fund. ⸻ Debt Security An investment in which the investor lends money and receives interest plus repayment of the loan. Example: Bonds. ⸻ Bond A debt security that pays interest and returns the principal at maturity. ⸻ Equity Security An investment that represents ownership in a business. Example: Common stock. ⸻ Common Stock A security that represents ownership in a corporation and may provide dividends and capital gains. ⸻ Preferred Stock A type of stock that pays fixed dividends but usually has no voting rights. ⸻ Derivative Security A financial security whose value comes from another underlying asset. ⸻ Option A derivative that gives the holder the right to buy or sell an asset at a specific price before a certain date. ⸻ Futures Contract A legally binding agreement to buy or sell an asset at a specified price on a future date. ⸻ Risk The uncertainty about the return an investment will earn. ⸻ Low-Risk Investment An investment with more predictable returns but generally lower average returns. ⸻ High-Risk Investment An investment with less predictable returns but higher potential returns. ⸻ Diversification Owning different types of investments to reduce overall investment risk. ⸻ Short-Term Investment An investment with a maturity of one year or less. ⸻ Long-Term Investment An investment with a maturity of more than one year. ⸻ Domestic Investment An investment issued by companies or governments within your own country. ⸻ Foreign Investment An investment issued by companies or governments outside your own country. ⸻ Financial Institution An organization that pools money from investors and makes loans or investments. Examples: * Banks * Insurance companies * Mutual funds ⸻ Financial Market A marketplace where buyers and sellers trade financial assets. Examples: * Stock market * Bond market ⸻ Individual Investor A person who manages and invests their own money. ⸻ Institutional Investor A professional organization that invests money on behalf of others. Examples: * Banks * Mutual funds * Pension funds * Hedge funds ⸻ Short-Term Investments Investments that mature in one year or less and have low risk. ⸻ Treasury Bill (T-Bill) A short-term U.S. government security sold at a discount and considered virtually risk-free. ⸻ Fixed-Income Security An investment that provides regular interest or dividend payments. Examples: * Bonds * Preferred stock ⸻ Mutual Fund A professionally managed investment that pools money from many investors to buy a diversified portfolio. ⸻ Exchange-Traded Fund (ETF) A diversified investment fund that trades on a stock exchange like a stock. ⸻ Hedge Fund A privately managed investment fund with higher minimum investments and greater risk than mutual funds. ⸻ Real Estate Land and buildings purchased as investments to earn rental income or increase in value. ⸻ Tangibles Physical investment assets other than real estate. Examples: * Gold * Silver * Artwork * Collectibles ⸻ Investment Horizon The length of time an investor expects to keep an investment before selling it. ⸻ Dividend A payment made by a corporation to its shareholders from company profits. ⸻ Capital Appreciation An increase in the value of an investment over time.

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize foods with the help of chlorophyll.

Mitosis

A type of cell division that results in two daughter cells each having the same number and kind of chromosomes as the parent nucleus.

Ecology

The branch of biology that deals with the relations of organisms to one another and to their physical surroundings.

DNA

Deoxyribonucleic acid, the molecule that carries the genetic instructions for life.

Osmosis

The movement of water molecules through a selectively permeable membrane from a region of lower solute concentration to a region of higher solute concentration.