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FIPF CH8
Foundations in Personal Finance Chapter 8
| Term | Definition |
|---|---|
| Diversification | The practice of dividing the money a person invests between several different types of investments in order to lower risk |
| Investing | setting money aside to grow wealth |
| Investment | money set aside for more than 5 years for long-term growth |
| Liquidity | Assets that can be converted quickly into cash without penalty |
| Portfolio | List of investments |
| Risk | Degree of uncertainty of return on assets |
| Risk Return Rate | Substantial reward compared to amount of risk taken |
| Share | Piece of ownership in a company, mutual fund or investment |
| Stock | Securities that represent part ownership in a corporation |
| Tax Favored Dollar | Tax deferred or tax free investment in retirement plan |
| Dividend | Distribution of earnings to stockholders |
| Rule of 72 | the time it will take to double a sum of money by dividing 72 by the expected interest rate to determine the number of years. |
| The ROTH IRA | funded with after-tax money so you can use your Roth tax free in retirement. |
| IRS~Internal Revenue Service | Agency responsible for collecting taxes and the interpretation and enforcement of the tax code |
| 529 Plan | A plan set up to allow families to set aside funds for college |
| Speculative | Purchasing risky investments that present the possibility of large profits but pose high risk of loss |
| 401k | a retirement savings plan offered by corp to its employees. |
| 403b | nonprofits |
| Commodities | Agricultural or mining products. |
| SEC - Securities and Exchange Commission | The government agency responsible for regulating the stock market. |
| FDIC | Federal agency that insures |