Investing

Diversification

A financial strategy where you invest in different companies instead of fixating on one to reduce risk

Inflation

A general increase in prices and fall in the purchasing value of money

Index Fund

A group of stocks that you can buy together as a bundle

Bonds

A loan to a company or government that pays back a fixed rate of return

Bull Market

A period of increased stock trading and rising stock prices

Broker

A person who buys and sells goods or assets for others

bear market

A steady drop in the stock market over a period of time

Stocks

All of the shares into which ownership of the company is divided

Brokerage Account

An investment account that allows you to buy and sell a variety of investments, such as stocks, bonds, and index funds

FDIC

Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $250,000

IPO

Initial public offering: the first sale of stock issued by a company to the public

Compound Interest

Interest earned on both the principal amount and any interest already earned

Simple Interest

The amount of money you earn on your savings account balance

principal

The original amount of money borrowed or invested

Rate Of Return

The profit of an investment

Investing

To put out money in order to gain profit

Stock Market

Where you can buy, sell, and trade stocks

diversified

Which of the following is a characteristic of an index fund

Purchasing individual stocks has a high amount of risk and little diversification

Why is investing in all stocks a BAD investment strategy

You should create an investment portfolio that includes an amount of risk you are comfortable with

Why is it important for you to understand YOUR risk tolerance before you start investing?

high

buy low and sell _______________________

Saving guarantees you the money you put away while investing has no guarantee

difference between saving and investing

S&P 500

index that shows the price changes of 500 different stocks

Through interest collected on your original investment

one way you can earn money by investing in bonds

Bonds have a low to moderate amount of risk and are less risky than stocks

risk level of bonds

interest

the price paid for the use of borrowed money or saved money