Fundamentals of Investing

Investments

• When a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds

• Type of return depends on the investment

• Form of lending to a company or the government

• assets purchased with the goal of providing additional income from the asset itself but with the risk of loss

Bond

• Form of lending to a company or the government

• as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment.

• is the act of, or the result of, achieving variety. In finance and investment planning,

Brokerage Firm

• reduces risk by spreading money among a wide array of investments

• Money grows untaxed with help from compounding interest

• facilitate the buying and selling of investments on the stock exchange

Portfolio diversification – reduces risk by spreading money among a wide array of investments

• True

• False

Capital gain-trained professional that helps make investing decisions

• true

• false -unearned income received from the sale of an asset above its purchase price

Discount brokerage firm

• Will usually charge a fee for completing a buy/sell transaction

• Important to research the financial advisor and firm he/she works for

• except for real estate and some speculative investments

Dividend

• Stockholder may or may not receive dividends

• A share of ownership in a company

• Share of profits distributed in cash to stockholders

Index fund

• Generally divided into three categories:

  conservative, moderate, aggressive

• Increased potential for high returns

  Increased investment risk

• Stock

  Real Estate

  Speculative investments

• Type of mutual fund designed to reduce fees by investing in the stocks and bonds that make up the index

Inflation risk

• Rise in the general level of prices

• The danger that money won’t be worth as much in the future as it is today

• Organization pays interest to the lender (purchaser) until the maturity date is reached

Investment risk

• Profit or income generated by saving and investing

• Possibility that an investment will fail to pay the expected return

• Depends on the type of bond