Personal Finance Unit 6 Mid-Unit Assessment Review

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Mutual Fund

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A professionally managed investment fund that pools money from many investors to purchase securities.

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Exchange-Traded Fund (ETF)

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A type of investment fund that tracks a market index and is traded like a stock on an exchange.

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Diversification

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A risk management strategy that involves spreading investments across various assets to reduce risk.

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Risk Tolerance

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An investor's ability and willingness to endure market fluctuations and potential losses.

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Index Mutual Fund

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A type of mutual fund designed to track the performance of a specific market index, such as the S&P 500.

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Expense Ratio

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The annual fee expressed as a percentage of assets that investors pay for fund management and operational expenses.

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Market Capitalization (Market Cap)

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The total value of a company's outstanding shares, calculated as stock price times the number of shares.

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Asset Allocation

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The process of dividing investments among different asset categories, such as stocks, bonds, and cash.

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Speculative Investment

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A high-risk investment with the potential for significant returns, often involving uncertain or volatile assets like cryptocurrency.

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Liquidity

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The ease with which an asset can be quickly bought or sold without affecting its price.