retirement/ investment

what percentage of your last working years income will you need for retirement?

70%

How is a 403b program different from a 401k program

The primary difference between the two is the type of employer sponsoring the plans - 401(k) plans are offered by private, for-profit companies, whereas 403(b) plans are only available to nonprofit organizations and government employers.

Describe an IRA and its advantages for investors

(individual retirement agreement) type of savings account that is designed to help you save for retirement and offers many tax advantages.

What are two ways to make money in stocks?

1. Dividends: If you own a company's stock that pays dividends, you can make money when the company does well. 2.Capital Gains: Stocks are bought and sold each trading day with a stock price that is constantly changing. When a stock price is higher than the price you purchased it for, you can sell your shares to make a profit. Profits made this way are called capital gains.

Describe a 401k program and its advantages for investors

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren't paid until the money is withdrawn from the account.

Describe a growth stock

A growth stock is a share in a company whose earnings are expected to grow at an above-average rate relative to the market. A growth stock usually does not pay a dividend, as the company would prefer to reinvest retained earnings in capital projects. Growth investors choose stocks based on the potential for capital gains, not dividend income, so they can be risky.

Describe an income stock

An income stock is an equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns. (for the more conservative investor)

Define and give an example of diversification

Diversification is a method of portfolio management whereby an investor reduces the volatility (and thus risk) of his or her portfolio by holding a variety of different investments that have low correlations with each other. ex: If you invest all $1 million in Company XYZ stock, and the stock goes from $4 to $2 per share, your portfolio loses 50% of its value and you end up with $500,000. However if you invest in 500,000 in Company XYZ and the same thing happens but you also invest in Company ABC and the stock stays the same then you are not loosing as much money

IRA vs Roth IRA

Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free.

Which is riskier, growth or income stock?

growth stock is riskier because you are making your decision off of assumptions on how a company will do.

An investment where a professional manager uses pools money from investors and selects many securities (stocks and bonds) to invest the money in is called a _____

mutual fund

Compare buying a stock vs buying a bond

stock- If the company makes a lot of profits, then its shareholders (the people who own stock in the company) often stand to make a lot of money as well. Conversely, if the company loses money, then its shareholders generally expect to loose money on their investment as well. bond-As a bondholder you receive an interest payment at specified intervals, regardless of how the company is doing (as long as the company does not go bankrupt). While the price of a company's stock will be affected by any piece of positive or negative news from the company or the economy, as long as the company is earning enough money to pay its debt obligations, they are legally required to do so.

What is the relationship between risk and return

the higher the risk the higher the potential return or failure.