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Saving/Investing

Types of Investments

TermDefinition
Mutual Funds A type of growth investment that takes money from many investors and uses it to make growth or income investments based on a stated investment objective; a diversified portfolio of equities, bonds, or other securities
Savings Account Low risk and earn a small amount of interest; very liquid.
Collectables Items that are relatively rare in number; these items are bought in hopes they will increase in value over time.
Money Market Deposit Accounts Offered by banks & credit unions; work like checking accounts, but the # of checks you can write a month is limited; earn a higher interest rate than savings accounts but a lower interest rate than CDs; require higher min. balance than savings accounts.
Real Estate Investors buy property hoping to generate a profit; less liquid than stocks because it’s more complicated to sell.
Money Market Mutual Funds Offered by mutual fund companies (an investment company that invests shareholders’ money in a diversified group of securities) & brokerages; designed to be a stable way to save your money & earn potential income; earn a higher interest rate than MMDAs.
U.S. Savings Bonds An agreement where the federal government can use your money for a set period of time and you will get paid a specific amount of interest in return; designed to be held for up to 30 years.
Stocks Having this in a company means that you own part of that company. These are generally riskier investments than income investments, but tend to make more money than income investments.
Corporate & Government Bonds These typically pay the highest interest rates of all the income investments. One type is safer than the other because one is backed by the U.S. government; however, the other type usually offers higher interest rates.
Certificates of Deposit (CD's) When you buy this, you are loaning a bank money for a set period of time and getting interest in return. The longer the term, the longer the rate of interest paid. If you cash it in before the maturity date, you lose a few months interest.
Dollar Cost Averaging The practice of investing a fixed amount into the same investment at regular intervals regardless of what the stock market is doing.
Inflation The rise in the cost of goods and services over time
Mutual Fund An investment security that is actually a diversified portfolio of equities, bonds, or other securities.
Yield A bond’s potential return is referred to as this.
Stock Market The place where stocks are bought and sold.
Stocks An investment that makes the investor a part owner of a company
Liquid Means that it can be easily converted into cash.
Rate of Return Simply the annual percentage return on investments.
Savings Account The most liquid income investment.
Diversification Spreading your money among different savings and investments.
Dividends The portion of the profits paid to the shareholders of a company.
Compounding The process of earning interest on interest.
Time Value of Money The relationship among time, money, and rate of interest.
Earned Interest The payment you receive for allowing a financial institution or corporation to use your money.
Rule of 72 35. Used to determine how long it takes for your money to double.
Created by: aforester
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