FBLA

Investment

  • Investment → An asset or good acquired to generate income or appreciate in value over time.

  • Three Major Asset Classes → Stocks, Bonds, and Cash.

  • Market Capitalization → Total market value of a company’s outstanding shares.

  • Stock Prices → Increase when a company’s value rises.

  • Dividends → A portion of a company’s yearly profit paid to shareholders.

Stocks

  • Stock → Ownership in a company.

  • Cap Sizes → Large-cap, mid-cap, small-cap, international, developing market.

  • Risk Level → Riskiest investment in a portfolio.

Bonds

  • Bond → Loan to a company/government with fixed interest payments.

  • Interest Rates & Bond Value → When interest rates increase, bond values decrease (and vice versa).

  • Risk Level → Less risky than stocks.

Cash

  • Cash Investment → Not risky but loses value due to inflation.

Other Asset Classes

  • Examples → Real estate, commodities, currencies, futures, and options.

Saving

  • Saving → Setting aside money for emergencies or short-term goals.

  • Benefits → Liquidity, security, ideal for short-term planning.

  • Risks → Low returns, inflation risk.

Types of Savings Accounts

  • Bank/Credit Union Savings Accounts → Low interest, high liquidity.

  • Interest-Earning Checking Accounts → Minimal interest, transaction-friendly.

  • Money Market Accounts (MMAs) → Higher interest, limited transactions.

  • Certificates of Deposit (CDs) → Higher interest, locked for a fixed term.

  • U.S. Treasury Bills & Savings Bonds → Safe government-backed options.

Checking Account

  • Definition → Allows frequent transactions via checks or debit cards.

  • Trade-off → High liquidity, but low/no interest earnings.

Money Market Account (MMA)

  • Definition → Interest-bearing account with some check-writing privileges.

  • Comparison → Higher interest than savings accounts, limited withdrawals.

Certificates of Deposit (CDs)

  • Definition → Fixed-term savings with a higher interest rate.

  • Withdrawal Penalty → Applies if money is accessed early.

Investing vs. Saving

  • Investing → Wealth growth through assets like stocks/bonds.

  • Saving → Money set aside for short-term needs/emergencies.

  • Average U.S. Personal Savings Rate → 3.2%.

Pension Plans

  • Definition → Employee benefit providing retirement income.

  • Types

    • Defined Benefit Plan → Promises a set retirement payout.

    • Defined Contribution Plan → Employer & employee contributions fluctuate with the market.

  • ERISA (1974) → Protects private retirement plans.

Loans

  • Loan → Borrowed money to be repaid with interest.

  • Secured Loan → Backed by collateral (e.g., mortgage, car loan).

  • Unsecured Loan → No collateral, higher interest (e.g., credit cards).

  • Revolving Loan → Can be borrowed, repaid, and borrowed again (e.g., credit cards).

  • Term Loan → Fixed installment payments over time (e.g., mortgages).

Mortgages

  • Definition → Loan agreement where property is collateral.

  • Payment Components → Principal, Interest, Taxes, and Insurance (PITI).