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Savings & Investing
| Term | Definition |
|---|---|
| savings | the portion of income not spent on current expenditures |
| investment | a specific business that is involved in the investment of combined capital into financial securities |
| return on investment | simple measure of an investment's profitability, calculated by comparing the gain or loss from the investment to its cost |
| compound interest | simple measure of an investment's profitability, calculated by comparing the gain or loss from the investment to its cost |
| stock | unit of ownership in a company, meaning you become a partial owner or "shareholder" |
| bond | a loan you make to an entity like a company or government for a set period, and in return, they promise to pay you back the principal plus regular interest payments. |
| diversification | strategy of introducing new products, services, markets, or industries to strengthen a company's overall portfolio and reduce risk |
| retirement account | tax-advantaged investment accounts that help individuals save money for when they stop working. |
| stock market | where people buy and sell shares of ownership in publicly traded comapnies |
| dividend | a portion of a company's profits that is paid to its shareholders as a reward for their investment |
| mutual fund | a portion of a company's profits that is paid to its shareholders as a reward for their investment |
| common stock | basic form of ownership in a company that allows holders to have a claim on assets and earnings |
| preferred stock | type of ownership in a company that pays a fixed dividend and has priority over common stock for dividends and in the event of liquidation. |
| corporate bond | a loan that a company takes from investors to raise money, like for expanding its business. |
| government bond | a loan to the government that works like an IOU. The government borrows money by selling bonds to investors. |
| beneficiary | person or entity that is legally designated to receive assets or benefits from another, such as from a will, trust, or insurance policy. |
| executor | individual that is legally responsible for carrying out the wishes outlined in a deceased person’s will. |
| trust | the belief in a company’s reliability and integrity or a legal structure known as a business trust |
| estate | company that deals with buying, selling, leasing, or managing properties like land and buildings. |
| will | legal document outlining a business owner’s wishes for their company after their death. |
| power of attorney | legal document that grants an individual or entity the authority to act on behalf of another in business, financial, and other legal matters. |
| investment liquidity | how quickly an asset can be converted to cash without a significant loss in value. |
| probate | process and associated services involved in the legal administration of a deceased person’s estate. |
| personal financial planning | helps individuals and families to manage their money to achieve financial goals. |
| estate planning | helps individuals and businesses plan for the transfer of assets following a death. |
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