Module 5- Investment Flashcards
(36 cards)
is the accumulation of excess funds by intentionally spending less than
you earn.
savings
is taking some of the money you are saving and
putting it to work so that it makes you even more money. Your goals and the time it will
take to reach those goals dictate the investment strategies you follow and the investment
alternatives you choose.
investing
are shares of
ownership in a corporation, and bonds represent loans to companies and governments.
stocks
the collection of multiple
investments in different assets chosen to meet your investment goals.
portfolio
People invest for four reasons:
To achieve financial goals, such as taking a vacation, purchasing a new car,
making a down payment on a home, financing a child’s education, or starting a
business
To gain wealth and a feeling of financial security
To increase current income
To meet retirement income needs
refers to the amount of the money that an organization or an individual
can afford to keep in some forms of investment for a definite length of period w/o
hampering his day-to- day operations.
investible cash
refers to the amount of cash that an entity or an individual must have
taken care of unexpected cash requirements. (Extra funds)
liquidity buffer
is an opinion on the financial soundness of an enterprise and its
capability to pay its debts & the corresponding Interest.
credit rating
may refer to non- realization of expected earnings or less of capital
risk
refers to the degree of risk that a person can afford to be exposed to and
still sleep soundly.
risk tolerance
refers to spreading Investable funds to different investment Items, to
minimize risk from over exposure to only one kind of asset
diversification
refers to the extreme of spreading the investable funds to so many
items of investment.
over diversification
is money received while you own an investment. It is usually received
on aregular basis as interest, rent, or dividends.
current income
occurs only when you actually sell the investment; it results from an
increase in the value of the initial investment. It is calculated by subtracting the total
amount paid for the investment (including purchase transaction costs) from the
higher price at which it is sold (minus any sales transaction costs).
capital gain
can occur as well. For most investments, a tradeoff arises between capital
gains and current income. Investments with potential for high capital gains often pay little
current income, and investments that pay substantial current income generally have little
or no potential for capital gains. Long-term investors are usually willing to forgo current
income in favor of possibly earning substantial future capital gains.
capital losses
is one’s general approach to tolerance for risk in
investments, whether it is conservative, moderate, or aggressive, given the financial goals
to be achieved. The more risk you take, within reason, the more you can expect to earn
and accumulate over the long term. Smart investors follow their investment philosophy
without wavering; they do not change course unless their basic objectives change.
investment philosophy
you accept very little risk and are generally
rewarded with relatively low rates of return for seeking the twin goals of a moderate
amount of current income and preservation of capital.
conservative investment philosophy
means that you do not want to lose any of the money you
have invested. In short, you could be characterized as risk averse. Conservative
investors focus on protecting themselves. They do so by carefully avoiding losses and
trying to stay with investments that demonstrate gains, often for long time periods
(perhaps for five or ten years). Tactically, they rarely sell their investments.
preservation of capital
y seeks capital gains through slow and steady growth
in the value of their investments along with some current income. People seeking
moderate returns consider investing in dividend paying common stocks, growth and
income mutual funds, high-quality corporate bonds, government bonds, and real estate.
moderate investment philosophy
chooses to strive for a very high return by accepting
a high level of risk. As such, you could be characterized as a risk seeker. Aggressive
investors primarily seek capital gains. People seeking exceptionally high returns consider
investing in common stocks of new or fast-growing companies, high-yielding junk bonds,
and aggressive-growth mutual funds.
aggressive investment philosophy
carefully studies the economy, market
trends, and investment alternatives; regularly monitors these factors; and makes
decisions to buy and sell, perhaps three or four or more times a year, with or without the
advice of a professional.
active investor
does not actively engage in trading of
securities or spend large amounts of time monitoring his or her investments.
passive investor
Alternatives that have the potential for significant fluctuations in
return over short time periods, perhaps only days or weeks.
high-risk investments
Property consisting of land; all structures permanently attached to that
land; and accompanying rights and privileges, such as crop and mineral rights. Examples:
residential housing units, commercial properties, residential lots, raw land.
real estate
