Unit 2 Pt. 1 Flashcards
(33 cards)
Investing
Purchasing a financial product or ther item of value w/ an expectation of favourable returns.
Return Investment
Rate of revenue received for every dollar invested in an item or activity. %
Investment Risk
Possibility that an investment will fail to pay the expected return or fail to pay return at all.
Stocks
An instrument that signifies ownership in a corporation + represents a claim on a share of a corporation’s assets + profits.
- Risky + long-term investments
Bonds
Interest-bearing certificates used as a way for gov./business to raise money.
- Low risk + short-term investments
GICs
Secure investments that guarantee to preserve your principal. Investment earns interest, at either a fixed or a variable rate, or based on a predetermined formula.
- Foundation of a well-balanced portfolio
Mutual Funds
Open-ended investments that are professionally managed and consist of a variety of investment instruments including stocks, bonds, commodities, money market securities, etc.
- Diversification = greater safety, long-term investments
Real Estate
A price of land + other buildings or structures on it.
- Long-term investment
Collectibles
Items which have value due to its rarity + desirability, such as antiques, coins, cars, etc.
- Long-term invesments
Precious Metals
Natural metals that have value, such as gold, silver, platinum, + palladium.
- Long-term investments
How are risk and return related?
The greater the risk an investment may lose money, the greater its potential to provide a positive substantial return.
Factors impacting investors degree of risk
- Age
- Risk tolerance
- Investment goals
Conservative Investment Profiles
Seeks relatively stable returns + accepts some risk through a diversified portfolio.
Aggressive Investor Profile
Seeks high, long-term returns + accepts the higher possibility of sustained negative returns over short periods.
Common Stock
One vote per share + dividends are not guaranteed.
Preferred Stock
Fixed dividend + may not include voting.
Initial Public Offering (IPD)
The 1st time a stock is sold to the public + sold in the Primary Market.
Secondary Markets
Investors trade previously issued stocks.
Primary Markets
Where stocks are created.
The Indices (Index)
A collection of stocks - representative of the stock market.
What causes stock prices to change?
- Supply + demand
- Economic indicators
- Earnings + expectations
- Follow the leader (volume)
- Sentiments + attitudes
- Anything…
Why invest?
The return on investments in the market are 3-4 times the annual return of inflation, savings, and treasury bonds = Make money…
How should I invest?
- Determine risk tolerance
- Determine whether you want to actively manage your profile
- Diversify!
Bull Market
The economy is great + stock prices are rising.
