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Personal Finance
| Term | Definition |
|---|---|
| Diversification | The practice of dividing the money a person invests between several different types of investment in order to lower risk |
| Investing | the process of setting money aside to increase wealth over time for long-term financial goals such as retirement |
| Investment | Account or arrangement in which a person puts his/her money for long-term growth; invested money should no be used for a suggested minimum of five year |
| Liquidity | Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money |
| Portfolio | A list of your investments |
| Risk | Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit |
| Risk-Return Ratio | Relationship of substantial reward compared to the amount of risk taken |
| Share | Piece of ownership in a company, mutual fund or other investment |
| Stocks | Securities that represent part ownership or equity in a corporation |
| Tax-Favored Dollars | Money that is invested, either tax deferred or tax free, within a retirement plan |
| Capital Gain | When you sell a stock for more than you paid for it, the difference is called a capital gain, capital gain are income that must be reported on taxes |
| Capital Loss | When you sell a stock for is less than what you originally paid for the stock, the difference is called a capital loss |
| Common Stock | A share in a company’s assets and profits, the ownership of a publicly traded company is split up into the shares of stock being traded and held |
| Dividend | Money paid by a corporation to each shareholder |
| Money Market | a mutual fund or account that invests in short-term liquid investment. These funds generally pay better than savings accounts with a bank, but less than a typical stock mutual fund. These funds are considered very low risk. |
| Mutual funds | a mutual fund is a pool of stocks; bonds.and other securities managed by an investment company individuals can buy shares of the fund and profit from its investment gains. |
| Private corporation | An incorporated business that does not trade shares of stock on an open market. It is owned privately typically by a small number of people |
| Public Corporation | An incorporated business owned jointly by all stockholders. Stockholders vote on who will oversee the company as Board of Directors. Usually, The company profits are paid out the form of dividends |
| Rate of Return | The annual amount of money an investment makes, given as a percentage |
| Back End Load | Fees paid to the mutual fund company when selling a mutual fund |
| Expenses Ratios | For a mutual fund, and annual percentage the fund takes as payment. Expense ratios of different funds can be compared to find the best value |
| FDIC Insured | TheFDICis a government agency that insures depositor’ money. Bank and saving and loan companies that are FDIC-insured pay a percentage of their deposits to the FDIC to pay for the insurance |
| Front End Load | Fees paid to the mutual fund company as an entry requirement into certain mutual funds |
| Inflation | rise in prices that effectively makes cash have less buying power |
| Savings Account | A safe, low-return investment available from banks there is generally no minimum deposit for this type of account, making it perfect for kids and teens just staring out |
| Year to Date Return | On mutual fund statement, a comparison of how the fund has done compared to its value on the first of the year |
| Yield | for a saving account, the percentage of interest earned annually, for a stock, the annual dividend divided by the share price |
| 401(k) plan | A type of employer-sponsored retirement plan in which money is contributed on a pre-tax basis and all earnings are tax deferred |
| Annuity | An investment contract made with the issuer types immediate, deferred, fixed, variable |
| Defined-benefit plan | Defined-benefit plan: A type of retirement plan in which the amount invested in the plan is controlled by the employee, with no guarantee of benefits |
| Employer- sponsored retirement plan | A savings plan for retirement that is offered through a company’s benefits package; contributions are usually matched by the company |
| IRA | a type of retirement-savings plan that is not usually done through and employee traditional IRAs are tax deductible and earnings are tax deferred. |
| Keogh Plan | A retirement savings plan for self-employed professionals or owners of small businesses, it affords the same tax benefits as a 401 (k) |
| Pension | A fixed sum paid regularly by an employer to an employee after retirement |
| Retirement | Permanent Withdrawal from the workforce |
| Roth IRA | This type of individual Retirement account is not tax deductible, but may not be subject to income tax upon with drawal |
| Social Security | a United States government program established in 1935 that includes a retirement benefit for citizens; it is funded by payroll tax. |
| Bear market | a time with generally falling stock prices |
| Blue chip | stock: Stocks issued by solid and reliable companies with long records of growth and stability, these stocks usually pay small but reliable dividends and maintain a steady stock price |
| Bonds | Money loaned to the government, corporations, or municipalities that pays the investor interest. Different types of bonds can be more or less risky, and bonds can have high yields or low yields (interest rates) |
| Bull Market | A time with generally rising stock prices |
| Defensive stock | Stocks of companies that produce such staples as food, beverages, and pharmaceuticals, and insurance companies. These businesses, may not grow enormously fast, but they should keep the value relatively constant |
| Diversification | owning a collection of investment such as stocks from different industries and small and large companies, bonds,and money market funds for cash, in order to spread risk and have a safer investment overall, |
| Growth stock | stocks of companies that generally do not pay dividends or play only very small dividends, these companies plow their profits back into growing the business, they can be new and entrepreneurial companies, and can experience high growth or financial failu |
| Large- Cap stock | Stocks of very large companies such as WalMart, General Electric, and IBM, that have a market capitalization of between $10 billion and $200 billion |
| Small-cap stock | stocks of largely unknown companies with smaller market capitalization, that is, dollar value of total stock ownership, small-cap generally have a market capitalization of between $300 million and $2 billion |
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