TAC

Active Investing

When investors actively buy and sell investments to make more money, sometimes called day trading.

Bond

A bond is a loan to a publicly traded company or governmental entity for a fixed period of time. In return, the borrower promises to repay the amount borrowed, plus interest.

Commissions & Trading Fees

Fees charged by financial institutions for conducting stock trades on your behalf and for administration of your account.

Common Stock

Ownership in a publicly traded company.

Cryptocurrency

A new form of digital money. Cryptocurrencies work using a decentralized technology spread across many computers that manage and record transactions. Decentralized means it is not controlled by one organization, therefore, making the transactions transparent so that anybody can access them.

Employer-Sponsored Plans 401(k), 403(b)

Plans opened for you through your employer, and both you and your employer can contribute funds to these plans for your retirement. Your employer’s contributions are called a “match”. When you save, they match your investment with additional funds typically up to a certain percentage.

Exchange Traded Funds (ETFs)

ETF’s function the same way as mutual funds but can be traded throughout the day like a stock or bond.

Growth Stock

A common stock bought for the potential for an increase in value as the company’s market value goes up.

Health Savings Account (HSA)

A qualified investment account that allows you to save money to cover current and future healthcare costs, be invested in the stock market, and when you reach your full retirement age, the funds can be used for any health-related expense.

Individual Retirement Account (IRA)

IRAs are accounts you open for yourself through a bank, credit union, or online trading platform. IRA’s are pre-tax money and grow tax deferred, while Roth IRA’s are post-tax contributions, and the gains are not taxed until you transfer the money back out of the account. With few exceptions, using IRA funds before your full retirement age will result in a hefty tax penalty on top of the requirement to pay the tax that you avoided by putting the funds into the qualified account.

Investing

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Investment Accounts

Accounts that hold assets, such as stocks, bonds, mutual funds, and exchange traded funds, just like a bank account holds cash.

Mutual Fund

An investment that pools the money of a large group of investors in a large group of stocks and bonds. Mutual funds offer diversification, professional management, liquidity (easily sell and cash out shares), and simplicity for investors.

Non-Qualified Accounts

Often called brokerage accounts. These investment accounts use after tax dollars, and the growth on the account is taxed annually as passive or investment income for the year. The advantage to a non-qualified account is that you can use these funds for any financial goal.

Passive Investing

Also called buy and hold investing. An investment strategy based on risk tolerance and longer-term growth. This usually incorporates a diversified portfolio and automated ongoing deposits.

Risk Tolerance

The level of volatility in the value of an investment an individual can accept. Risk tolerance assesses the level of discomfort with loss compared to the positive feelings that result in a gain.

Stock

An equity investment which represents ownership interest in a company.

SMART Goals

Specific Measurable Attainable Realistic Time-bound

529 Plan

A tax advantaged plan that is specifically designed to save for education expenses. It works much like a retirement account but is designed to be used for qualified education expenses. 529 plans can be used for different people, so if you save for one child and they don’t need all the funds you saved for them, you could use the leftover funds for another child, a grandchild, a spouse, or yourself.

Net worth

your assets - your liabilities

Housing Ratio

principal, interest, taxes,& insurance / (divided by) / gross monthly income …………….. Goal 18-25% of gross monthly income

Savings Ratio

amount saved / (divided by) / gross monthly income …………… Goal - 10-15% (employee + employer contributions)

Debt Ratio

all debt payments monthly / (divided by) / net monthly income Goal - less than 20% of monthly income