Unit 4- Saving Methods and Investment Strategies Flashcards
(28 cards)
Explain the role of the federal reserve
they are the central banking system, they make all of our money, their goal is to create a stable economy
role of the Federal Deposit Insurance corporation(FDIC)
It provides deposit insurance guaranteeing the safety of a depositor’s accounts in member banks up to 250,000 for each deposit ownership category in each insured bank
bank services
checking, savings, certificate of deposits, credit cards, loans, safe deposit boxes, investment services
credit unions services
same as banks with lower rates
investment/Brokerage firm services
wealth management, retirement and collage savings, stocks, bonds, mutual funds, business owners insurance
loan agencies services
Person business loans with interest rates and repayment explained
Pay yourself first
Pay yourself before you begin paying your monthly living expenses and make discretionary purchases
Savings
Money Saved over a period of time. Funds not spent and set aside, often on a regular basis, for later use.
Certificate of deposit
A savings certificate entitling the bearer to receive interest. Bears a maturity date, a specified fixed interest rate, and can be issued in any denomination, Generally issued by commercial banks and are insured buy the FDIC. The term generally ranges from one month to five years
Risk/Reward
A ration used by many investors to compare the expected returns of an investment to the amount of risk undertaken to capture these returns.
Diversification
Risk management technique that mixes a wide variety of investments within a portfolio
IRA
An account in which an individual may set aside earned income in a tax-deferred savings plan for his or her retirement
Roth IRA
An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free.
401(k)
A qualified plan established by employers to which eligible employees may make salary deferral contributions on a post-tax and/ or pretax basis.
403(b)
A U.S. Tax advantaged retirement savings plan available for public education organizations, some non-profit employers, cooperative hospital service organizations, and self-employed ministers in the U.S.
Time Value of Money
The idea that money available at the present time is worth more that the same amount in the future due to ins potential earning capacity
Rule of 72
An investor who invest 1,000 at an interest rate of 4% per year, will double their money in approximately 18 years
Inflation
A rise in the general or average price level of all the goods and services produced in the economy.
Deflation
A sustained decrease in the average price level of all the goods and services produced in the economy
Recession
A decline in the rate of national economic activity. usually measured by a decline in real GDP for at least two consecutive quarters
Types of investments
Stocks, Bonds, Mutual Funds, Real estate, Savings/ certificate of deposit, collectibles
broker
a person who is licenses to buy and sell stocks , provide investment advice and collect a commission on each purchase or sale.
Bonds
A security representing a loan of money form a lender to a borrower for a set time period which pays a fixed rate of interest
mutual funds
investment that pools money from several investors to buy a particular type of investment such as stocks
