Chapter 6 and 7 Econ

Social Security Benefit

The amount of this a person receives is based on how much a person earned while working and how long he or she contributed

Initial Public Offering (IPO)

a company's first sale of stock to the public

Codicil

a document that explains, changes, or deletes provisions in a will

Prospectus

a legal document that gives a detailed description of a security

Power of the Attorney

a legal document that gives a person the power to act for another person regarding financial and legal matters

Will

a legal document that states a person's wishes for his/her estate after death

Beneficiary of a will

a person or group who receives the deceased person's assets

Living will

a statement of instructions for specific medical treatment if a person becomes unable to make medical decisions related to deathbed concerns

Real Estate Investment Trust

by purchasing, it is a way to invest in real estate without the complications and financial commitment of owning property

Investment portfolio

collection of the investments a person has made

Annuity

contract with an insurance company that provides regular income for a set period of time, usually life

Estate

everything you own or have a financial interest in when you die

Personal investment plan

example= planning to set aside $100 a month to invest

Primary market or New-issues market

exists when a company first sells stock to the public

Commodity Futures Trading Commission (CFTC)

financial market regulated by U.S. government (1 of 2)

Securities and Exchange Commission (SEC)

financial market regulated by U.S. government (2 of 2)

The business cycle

fluctuations between periods of economic growth and slowdown

Defined-benefit plan

in some of these payments will continue to a spouse of beneficiary after the death of the retiree

Examples of benefits of investing

increasing wealth, beating inflation, taking advantage of tax benefits NOT=assuming financial risk

Roth IRA

individual retirement arrangement in which individuals contribute after-tax income, but qualified withdrawals are not taxed

Stop order

instructing your broker to buy or sell a stock when and if it reaches a specific price

Market Order

instructs your broker to buy or sell a stock at the best price

Buy and Hold

investment strategy that involves buying securities and holding them for long-term gains as opposed to frequent trading

Probate

legal process of settling the affairs of an estate

Risk

measure of the likelihood that something will be lost

Investment club

members who research stocks for consideration, attend regular meetings, pay dues, elect officers, and vote on securities to buy or sell

Series EE bond and Series 1 bond

neither are insured by FDIC, but both are backed by US government

Trustee

person or institution named to manage assets on behalf of the beneficiaries

Individual Retirement Account (IRA)

personal account for setting money aside for retirement

Dividend

portion of a company's earnings paid to stockholders

Market Value

price at which an investment can be bought or sold at a given point in time

Rollover

process of moving retirement savings from one qualified account to another without incurring penalties and taxes

Investing

purchasing a financial product or valuable item with the goal of increasing wealth over time in spite of possible loss

Inflation

reduces the value of money and the return on investments

tax deferred

refers to when a person does not have to pay taxes on the money in a 401(k) account until it is withdrawn

Defined-contribution plan

retirement plan in which an employee and / or employer contributes to the employee's individual account under the defined plan

Capital loss

selling an investment for less than the price you paid

Living trust

set up during an individual's lifetime and provides for the management of assets before death and for the distribution of assets as directed after death

Diversify

spreading risk by putting in different types of investments

Minimum distributions

the minimum amount that must be withdrawn from a retirement plan each year

Vesting

the process of determining when money that has been set aside in a plan belongs to an employee

Annual percentage

the usual form that an investment's yield is expressed

Treasury Bond

type of governmental bond that is a long-term investment with a maturity of 30 years and sold in increments of $100

Common stock

when a corporation has only one class of stock

Bond

Certificate of debt issued by a corporation or government.

401(k) plan

Employer-sponsored retirement plan that allows an individual to deposit part of his or her earnings into a tax-deferred investment.

Bull Market

Extended period of rising stock prices

Securities

Financial assets issued by corporations, governments, and other organizations.

Money Market Mutual Fund

Fund that deals only in interest-paying, short-term investments, such as certificates of deposit and commercial paper.

Capital Gain

Income that results from selling an asset for more than the purchase price.

Traditional IRA

Individual retirement agreement in which contributions are tax-deductible but withdrawals are taxed

Stock

Share in the ownership of a corporation

Treasury bill

Short-term debt with maturity ranging from a few days to 52 weeks

Proxy

Stockholder's written authorization to have someone cast a vote on his or her behalf.

Dollar-cost averaging

Strategy of investing a fixed dollar amount at regular intervals.

Trust

Arrangement through which a person transfers assets to a person, who then oversees and manages the assets on behalf of beneficiaries

Dividend reinvestment plan (DRIP)

Allows investors to reinvest cash dividends by purchasing additional shares of stock.

Rate of Return

Amount earned on an investment for a given period of time

Yield

Amount of money earned on an investment, usually expressed as an annual percentage

Risk Tolerance

Amount of uncertainty a person is willing to handle

Appreciation

An increase in the value of an investment

Financial Industry Regulatory Authority (FINRA)

Organization by which stockbrokers are licensed

Retirement

Period of life after ending a working or professional career

Volatility

Quick and unexpected changes in value or price.

403(b) plan

Retirement plan available to employees of nonprofit organizations.

Solo 401(k) plan

Self-employed retirement plan that allows tax-deductible contributions for an employer and his or her employees.

Net Asset Value (NAV)

The total of a mutual fund's assets minus its liabilities and divided by the number of the shares the fund has outstanding

Mutual Fund

Type of investment that is created by pooling the money of many people and investing it in a collection of securities.

OTC Market

Virtual markets where stockbrokers conduct business through a electronic network of computers and telephones