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Savings & Investing
| Term | Definition |
|---|---|
| savings | The excess of income over consumption expenditures |
| investment | The outlay of money usually for income or profit |
| return on investment | Expressed as a percentage and helps an individual or company assess the efficiency of a specific investment compared to others. ROI= (Net profit/ cost of investment) X 100 |
| compound interest | Interest calculated on the initial principal amount plus the accumulated interest from previous periods; "interest on your interest” |
| stock | A stock is a security that represents ownership in a corporation, also called equity or a share. If you own stock you become a part-owner of the company |
| bond | An interest-bearing certificate of public or private indebtedness |
| diversification | A risk management strategy in finance that involves spreading investment across various assets, like stocks, bonds, and real estate, to reduce overall profile volatility |
| retirement account | A tax-advantaged investment account designed to help individuals save and grow wealth for their retirement |
| stock market | A collection of exchanges where investors buy and sell shares of public companies |
| dividend | A distribution of a portion of a company’s earnings, as decided by its board of directors to a class of its shareholders |
| mutual fund | An investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities |
| common stock | Represents a unit of ownership in a corporation and gives shareholders a claim on the company’s assets and earnings |
| preferred stock | Stock guaranteed priority by a corporation’s charter over common stock in the payment of dividends and usually in the distribution of assets |
| corporate bond | A debt security issued by a company to raise capital, which functions like a loan from investors to the corporation |
| government bond | A debt security issued by a government to borrow money from investors; the investors receive regular interest payments and the principal amount back at a specified maturity date |
| beneficiary | A person, entity, or trust legally designated to receive assets, benefits, or proceeds from an account, policy, or will upon the owner’s death |
| executor | An individual or institution nominated in a will and appointed by a court to manage a deceased person’s estate after their death |
| trust | A legally binding arrangement where one party gives assets to a second party to hold and manage for the benefit of a third party |
| estate | total value of a person’s assets and liabilities at a specific point in time, most commonly upon death |
| will | A legal document that outlines how a person’s assets should be distributed after their death |
| power of attorney | A legal document that designates an agent to act on another person's behalf in financial matters |
| investment liquidity | the ease and speed with which an asset can be converted into cash without a significant loss in value |
| probate | The legal process of validating a will and administering the estate of a deceased person, which includes paying debts and distributing assets to beneficiaries |
| personal financial planning | Process of managing your money to achieve your financial goals by evaluating your current financial status and creating a strategy for income, expenses, savings, and investments |
| estate planning | The legal and financial process of arranging for the management and distribution of a person’s assets after their death or incapacitation |
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