Diversification Study Set

The government will add 8% per year to your benefits until the age of 70

If you choose to work beyond the age of 67:

A bull market followed by a bear market.

In the years before the stock market crash of 1929, the values of stock soared. Then, the value dropped and stagnated during and after the crash. What could the time before, up to and including the crash be described as?

Financial Planner

An investment advisor who can help you define and reach your financial goals.

Annuity

An investment contract made with an issuer (for example, an insurance company). Types include immediate, deferred, fixed, and variable.

Bonds

Interest-earning loans to the government, corporations, or municipalities. Different types of bonds can be more or less risky, and bonds can have high yields or low yields (interest rates).

Can be an opportunity for long term investors to buy stocks of well run companies at lower prices.

A bear market:

Of the tax law that authorizes them

401K plans are so named because:

Social Security

A United States government program established in 1935 that includes a retirement benefit for citizens; it is funded by payroll taxes.

Is the type of stock that holds a steady value, such as an insurance company.

A defensive stock:

Pension

A fixed sum paid regularly by an employer to an employee after retirement.

You may contribute more to a Keogh plan than to an IRA

A key difference between an IRA and Keogh plan is:

Bull market

A market with generally rising stock prices.

Bear Market

A market with generally stagnant or falling stock prices.

Is a good way to build toward a financial goal.

A personal investing plan:

Keogh Plan

A retirement savings plan for self-employed professionals or owners of small businesses; it affords the same tax benefits as a 401(k).

Employer-sponsored Retirement Plan

A savings plan for retirement that is offered through a company's benefits package; contributions are usually matched by the company.

Roth IRA

A type of IRA that is not tax deductible but may not be subject to income tax upon withdrawal.

401 (k) plan

A type of employer-sponsored retirement plan in which money is contributed on a pre-tax basis and all earnings are tax deferred.

Defined-contribution Plan

A type of retirement plan in which the amount invested in the plan is controlled by the employee, with no guarantee of benefits.

Defined-benefit Plan

A type of retirement plan, usually a pension, in which the payment amount is guaranteed.

IRA (Individual Retirement Account)

A type of retirement savings plan that is not usually done through an employer; traditional IRAs are tax deductible and earnings are tax deferred.

It spreads the risk of investment.

Diversification is good because:

Must be transparent about their rates and services.

Investment advisors at your local bank branch office:

annuities are:

Investments with life insurance companies, Offer an additional way to save for retirement aside from other retirement savings accounts that limit annual contributions, and offer both fixed and variable plans

Change from higher-risk to lower-risk investments.

Over about 40 years, your portfolio should probably:

Diversification

Owning a collection of investments (such as stocks from different industries, stocks from both small and large companies, bonds, and money market funds) in order to spread risk and have a safer overall investment.

Retirement

Permanent withdrawal from the workforce.

You can track stock value trends over time.

Researching investments online can be valuable because:

40%

Social Security replaces about what percent of most people's pre-retirement income?

Small-cap Stock

Stocks of largely unknown companies with smaller market capitalization, or dollar value of total stock ownership. Small-cap stocks generally have a market capitalization between $300 million and $2 billion.

Large-cap Stock

Stocks of very large companies, such as Walmart, General Electric, and IBM, that have a market capitalization of between $10 billion and $200 billion.

Vested Balance

The amount of money currently invested in a retirement plan.

Investment Horizon

The amount of time an investor holds on to a portfolio of investments before cashing them out.

Investment Portfolio

The collection of investments you personally hold, including stocks, bonds, money market accounts, and savings accounts.

$6,000

The maximum contribution to an IRA, if you are under the age of 50, is:

False

True or False: If you buy enough different stocks, you can diversify out all risk in the stock market.

True

True or False: Variable annuities have greater potential for higher returns, but also present. higher risk to the investor.

Your monthly benefit will be lower

What happens in your retirement if you have a lapse in your years of work history?

A debt collector can't take your money from this plan

What is one key advantage to an employer-sponsored retirement plan?

False

You may contribute as much of your earnings as you choose to your employer-sponsored retirement plan each year.

Rise and fall, but have less risk than a smaller number of stocks and a smaller number of sectors and asset classes.

Your return with a diversified portfolio will: