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Flashcards in Personal Financial Management - ch 2 Deck (44)
0

Which record do you check when investing?

5-10 year track record

1

Diversification (2)

To spread around one's investment dollars among several different classes of financial assets

Results in lowering the risk

2

Share (2)

Piece of ownership in a company or a mutual fund

NOT an annuity

3

Portfolio

List of your investments

4

Rental real estate (3)

Buying real estate to rent out as an investment

Least liquid of all investments

Should have lots of cash before using real estate as an investment

5

Risk (2)

degree of uncertainty of the return on an investment

In business, the likelihood of loss or reduced profit

6

Small-cap fund (3)

Mutual fund that invests in companies whose market value is less than $1 billion

Largely consists of smaller, more volatile companies

Also called aggressive growth stock mutual fund

7

Annuity (2)

Contract sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement --> its a savings account with an insurance company

Holder is taxed at the time of distribution or withdrawal --> tax-deferred agreement

8

Risk return ratio (2)

Relationship of substantial reward in comparison to the amount of risk taken

As risk goes up, return goes up

9

Best place for emergency fund

Money market account

10

Commodities and futures are

Extremely speculative and carry a high risk

11

What % of any 10 year period in the stock market has made money?

100%

12

Long term investments properly diversified include what mutual funds? (4)

Growth

Growth and income

International

Aggressive growth

13

Liquidity (4)

Quality of an asset that permits it to be converted quickly into cash without loss of value

Availability of money

More liquidity = less return

With investments, liquidity = availability

14

What are the types of annuities? (2)

Variable

Fixed

15

What is a C.D.? (2)

Certificate of deposit - usually at a bank

Savings account with a slightly higher interest rate because of a longer savings commitment (i.e. 6 months, 1 year)

16

Why do you look at the long term track record with a mutual fund?

To make sure it's safe and reliable

17

What are some investments that don't give you a high rate of return? (3)

Single stocks

C.D.s

Bonds

18

List four types of investments that you should always avoid: (4)

Day trading

Commodities

Goals

Futures

19

What type of annuity should you invest in?

A variable annuity

20

KISS

Keep it simple stupid

21

Never invest purely for

Tax savings

22

Never invest using

Borrowed money

23

Money market (4)

Mutual fund that seeks to maintain a stable share price and to earn current income by investing in interest-bearing instruments with short-term (usually 90 days or less) maturities

Carries a low-risk

Great for emergency fund

Has check writing privileges

24

Single stock (3)

High risk

Buying stock = Ownership of company

Return comes as company increases in value or pays you dividends (profits)

25

Bonds (3)

Debt instrument where an issuer such as a corporation municipality or government agency owes you money

Form of I.O.U.

Issuer makes regular interest payments on the bond and promises to pay back the money at a specified point in the future (maturity date)

26

Mutual funds (5)

Pool of money managed by an investment company and invested in multiple companies, bonds, etc.

Offers investors a variety of goals depending on the fund and its investment charter

Often used to guarantee income on a regular basis or to preserve an investor's money

Sometimes used to invest in companies that are growing at a rapid pace

Good long-term investments

27

Pie chart

25% small cap, large cap, mild cap, and international

28

5 years or more

Investment

29

Less than 5 years

Savings

30

Aggressive growth stock mutual fund (4)

Mutual fund that seeks to provide a maximum long-term capital growth from stocks of primarily smaller companies or narrow market segments

Dividend income = incidental

Most volatile fund

Small-cap fund

31

Dividend (2)

Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders

Generally distributed in the form of cash or stock

32

Fixed annuity (4)

Type of annuity that guarantees a certain rate of return

Low interest rate of around 5%

Not really fixed

Bad investment

33

Futures

Term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery of a commodity exchange

34

Investments (2)

Account or arrangement in which one would put their money for a long-term growth

Also called a portfolio manager or a money manager

35

Growth stock mutual fund (2)

Fund that buys stock in medium-sized companies that have experienced some growth and are still expanding

Called mid-cap funds

36

Large-cap fund (2)

Funds comprised of large, well-established companies

Growth and income funds

37

Mid-cap fund

Mutual fund containing a groups of medium-sized companies that are growing

38

International stock mutual fund

Mutual fund that contains international or overseas companies

39

Savings account (2)

Accounts at financial institutions that allow regular deposits and withdrawals

Minimum required deposit, fees charged, and the interest rate paid varies among providers

40

Speculative

️purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss

41

Track record (2)

The past history of something

Look at 5-10 year track record for investments

42

Variable annuity (2)

Annuity that has a varying rate of return based on the mutual funds in which one has invested

Grows tax-deferred

43

Commodity

What's an example? (2)

A food, metal, or fixed physical substance that investors buy or sell, usually via future contracts

Oil and gold