Studied by 0 people
Looks like no one added any tags here yet for you.
Investment is the act of redirecting resources (money) from being consumed today
so that they may create benefits in the future
Investment matters because it
creates a pool of money for innovation; innovation is what drives the economy
In short, investment is the use
of assets to earn income or profit
When people save or invest their money, their funds become available
for businesses to use to expand to grow. In this way, investment promotes economic growth
A financial system is a system that
allows the transfer of money between savers and borrowers
Diversification is the
spreading out of investments to reduce RISK. everyone’s risk tolerance is different
A savings account or CD is very safe and will not lose money, however
your ROI will be extremely low
Money in the stock market, whether through buying the S&P 500, individual stocks, ETFs, or mutual funds
will bring a higher return, but more risk
Return is the money an investor
receives above and beyond the sum of money first invested
ROI is
return on investment
A savings account return is generally less than
1% to 4%, depending on the interest rates
The stock market has average
11% over the last 75 years
Bonds are basically
loans or IOUs, that represent debt the government or corporation must repay
The return on most bonds can vary generally from
1% to 5%
Corporations can raise money by issuing stock, which represents
ownership in the corporation
A portion of stock is called a
share
Stocks are also called
equities
Stockowners can earn profit in two ways:
1.Dividends which are portions of a corporation’s profits, are paid out to stockholders of many corporations;
the higher the corporate profit, the higher the dividend
Stockowners can earn profit in two ways:
2.Capital gain is earned when
a stockholder sells stock for more than he or she paid for it. a stockholder that sells stock at a lower price than the purchase price suffers a capital loss
Bull and Bear Markets
when the stock market RISES steadily over time,
a bull market exists
Bull and Bear Markets
when the stock market FALLS over a period of time
it’s called a bear market
The Dow Jones Industrial Average
The Dow is an index that shows
how stocks of 30 companies in various industries have changed in value
The Three Uses of Money
1.Money as Medium of Exchange (buying something)
medium of exchange is anything that is used to determine value during the exchange of goods and services
The Three Uses of Money
2.Money as a Unit of Account (prices/yardstick)
a unit of account is a means for comparing the values of goods and services
The Three Uses of Money
3.Money as a Store Value (stored away)
a store of value is something that keeps its value if it is stored rather than used
The coins and paper bills used as money in a society are called
currency
Commodity money consists of objects that
have value in themselves
-example: gold and silver
Commodity money has
intrinsic value
Flat money also called “legal tender,” has value because
the government decreed that it is an acceptable means to pay debts
example: all the currencies in the world
M1 consists of
assets that have liquidity, or the ability to be used as, or easily converted into cash
Components of M1 include all
currency, traveler’s checks, and demand deposits. demand deposits are the money in checking accounts
