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Investing

Common Stocks
ownership shares in a publicly held corporation. Shareholders have voting rights and may receive dividends; high risk
401K
a retirement savings plan funded by *employee contributions* and often matching funds from your employer; contributions are deducted from *pre-taxed* salary and funds grow *tax free* until withdrawn
Bonds
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate; lowest risk
Real Estate
A type of investment that includes land and the buildings on it; high risk because of stability of real estate market
Dividends
Company’s share profits to the shareholders based on the corporation’s performance
Return on Investment
(ROI) the ratio of money gained or lost on an investment relative to the amount of money invested. (usually stated in percentage form)
Mutual Fund
An investment in which investors pool their money to buy stocks, bonds, and other securities selected by professional managers who work for an investment company; moderate-low risk
return
the money an investor receives above and beyond the sum of money initially invested
Investing
Money used to purchase assets that will potentially grow in value; less liquid; higher risk; higher returns (8-12%)
risk
Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit.
Rate of Return Calculation
total return divided by the amount of money invested; turn whol nuber into a percent
Speculative Investments
A highest-risk investment made in the hope of earning a relatively large profit in a short time; buying and selling assets such as futures (gold, silver, agriculture products), collectibles, and options
index fund
Mutual fund that has a portfolio matching that of a broad-based portfolio. This may include the Standard & Poor’s 500 Index, indexes of mid- and small-capitalization stocks, foreign stock indexes, or bond indexes.
Index
group of similar stocks and bonds
Brokerage Firm
facilitates the buying and selling of investments from a stock exchange for a fee; itermediary between the stock exchange and the investor
Portfolio Diversification
reduces risk by spreading investment money among a wide array of investments
Individual Retirement Account
Tax deferred account to which wage earners can contribute an amount up to a yearly maximum.
Rule of 72
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.
Maturity Date
Specified time in the future when the principal amount of the bond is repaid to the bondholder
Market Price
The amount a willing buyer will pay a willing seller for a stock.
Bull Market
Stock market value goes up
Bear Market
Stock market value goes down

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