Stock Markets and stuff Flashcards
(36 cards)
What does compound interest tell us about when you should start sving and investing
Early
Why is it important to invest versus just save?
Investing will give you a lot more money than just saving
Explain how making regular payments to an investment account is a good way to save.
Factor in a certain amount of money from each paycheck that you want to save. Put away a certain amount each paycheck. So it is like you never had the money. If it comes out automatically, psychological factor. Compound interest.
Traditional savings account
- Low interest/no interest
- No fees
Certificates of deposits
- High interest
- Fixed interest rate
- Earn it year after year
- Locked in time
Money market accounts
- Similar to sacings account
- Higher interest rate
- 1-2% interest
- Higher minimum balance
- Limited number of withdrawls
What is the difference between simple and compound interest and which generates higher yield
Simple: original amount x years
Compound: original amount x (1+ (rate/number))^rate x time
Compound generates higher yield
What is diversification
Not putting all your eggs in one basket. Split what you want to invest into multiple stocks instead of just one, so if one goes down, you aren’t in trouble. Mixture of stocks, commodities, bonds.
What is insider trading?
Trading on the stock exchange using non-public/classified information.
What does the term liquid mean relative to investments?
Any investment that can be easily converted into cash without having a significant impact on its value. Examples of liquid investments are cash, money market funds, and shares of publicly held companies that actively trade on an established stock exchange.
Which level of the pyramid offers the most potential
reward?
Summit
If you are nearing the age of retirement you investments
should mostly be in which level of the pyramid?
Base
. When you are younger it can be a good idea to allocate
a larger percentage of your assets as higher risk, but a
good rule of thumb is that the majority of your assets
should be located in which part of the pyramid?
Base
e. P/E Ratio
Is calculated by dividing the current market price of the stock by its earning per share (EPS). It shows the sum of money you are ready to pay for each rupee worth of the earnings of the company
. EPS
Earnings per share. the portion of a company’s profit allocated to each share of common stock
f. EPS
Earnings per share. the portion of a company’s profit allocated to each share of common stock
. Dividend and Yield
Forward dividend and yield: an estimation of a year’s dividend expressed as a percentage of the current stock price. …
-The forward dividend yield is calculated by dividing a year’s worth of future dividend payments by a stock’s current share price.
h. Volume and Average Volume
Volume:commonly reported as the number of shares that changed hands during a given daY
Average volume:the total amount traded in that period, divided by the length of the period.
i. Market Capitalization
Referer to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.
- What is the difference between a 401(k) and a 403(b)? How are they similar?
401(k)- offered by for-profit organizations. Non government. Employee contribution. Employer matching
401(b)- nonprofit, religious, school, government organizations, voluntary. Both are saving for retirement
What is an IRA? What is the difference between traditional and Roth IRA?
Individual retirement account.Traditional IRA contributions are tax-deductible on both state and federal tax returns for the year you make the contribution; withdrawals in retirement are taxed at ordinary income tax rates.
- Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free.
What is the rule of 72? What would it be for 6% interest? 8% interest? 10% interest?
Rough estimate of how long it would take to double an
investment
• FIXED ANNUAL INTEREST RATE
Divide 72 by the rate. Equals number of YEARS.
What is a bond? What are different bond options available?
A fixed income instrument that represents a loan made by an investor to a borrower
(typically corporate or governmental)
What is a brokerage firm?
Connect buyers and sellers, facilitating the transaction due to their reach.
- Facilitate the transactions.
• Facilitate transactions
