Money Matters chapter 6 (investing)

bond

a certificate of debt issued by a corporation or government

dividend reinvestment plan (DRIP)

allows investors to reinvest cash dividends by purchasing additional shares of stock

Securities

are financial assets issued by corporations, governments, and other organizations

Treasury bonds (T-bonds)

are long-term investments with maturities of 30 years

Treasury bills (T-bills)

are short-term debts with maturities ranging from a few days to 52 weeks

over-the-counter(OTC) markets

are virtual markets where stockbrokers conduct business through a network of computers and telephones

Spreading risk by putting money in different types of investments allows an investor______.

diversify

Series EE Bond

earns a fixed rate of interest for up to 30 years

Series 1 bond

earns interest based on combining a fixed interest rate and the inflation rate

primary market

exists when a company first sells stock to the public

Secondary market

exists when investors purchase securities from other investors rather than from the issuing company

brokerage firm

facilitates the purchase and sale of financial securities

Business cycles

fluctuations between periods of growth and slowdown

Common stock

has voting rights and receives dividends when declared by the company

_______ reduces the value of money and the return on investments

inflation

Purchasing a financial product or valuable item with the goal of increasing wealth over time in spite of possible loss is _______.

investing

investment portfolio

is a collection of the investments a person has made

real-estate investment trust (REIT)

is a company that owns income-earning real estate, such as apartments, shopping malls, office buildings, or hotels

Initial public offering (IPO)

is a company's first sale of stock to the public

investment club

is a group of people who work together to learn about securities and invest their pooled funds

prospectus

is a legal document that gives a detailed description of a security

capital loss

is a loss of money that occurs when selling price of an investment is less than the purchase price

Risk

is a measure of the likelihood that something will be lost

dividend

is a portion of a company's earnings that is paid to stockholders

securities exchange

is a secondary market where securities are bought and sold through stockbrokers

stock

is a share in the ownership of a corporation

proxy

is a stockholder's written authorization to have someone else cast a vote on his or her behalf

money market mutual fund

is a type of mutual fund that deals only in interest-paying, short-term investments

Preferred stock

is a type of stock that pays a regular dividend at a fixed rate

Bear market

is an extended period of falling stock prices

Bull market

is an extended period of rising stock prices

Appreciation

is an increase in the value of an investment (growth)

mutual fund

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

capital gain

is income that results from selling an asset for more than the purchase price

Investing

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

Volatility

is quick and unexpected changes in value or price

Diversification

is spreading risk by putting money in different types of investments

rate of return

is the amount earned on an investment for a given period of time

Yield

is the amount of money earned on the investment, usually expressed as an annual percentage

Risk tolerance

is the amount of uncertainty a person is willing to handle

level of risk

is the degree to which an investment may deviate from its rate of return

Inflation

is the overall rise in prices that reduces the value of money and the return on investments

stock trade

is the purchase or sale of shares of stock

Dollar-cost averaging

is the strategy of investing a fixed dollar amount at regular intervals, such as monthly, without regard to the price of the investment

Net asset value(NAV)

is the total of the funds assets minus its liabilities divided by the number of the shares the find has outstanding

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

market order

________ is the price at which an investment can be bought or sold at a given point in time.

market value

Also known as the new-issues market, the ________ exists when a company first sells stock to the public.

primary market

A legal document that gives a detailed description of a security is a __________.

prospectus

________is a measure of the like likelihood that something will be lost.

risk

Instructing your broker to buy or sell stock when and if it reaches a specific price requires a ___________.

stop order

Market value

the price at which it can be bought or sold at a given point in time

_______ is quick and unexpected changes in value or price

volatility

A company's first sale of stock to the public is its _____________.

Initial Public Offering (IPO)

Neither a _________ nor _________ are insured by the FDIC, but both are backed by the US goveernment.

Series EE bond, Series 1 bond

tax-deferred investment

A tax-deferred investment is one where no taxes are paid as the investment earns income and grows in value.

Purchasing shares in a __________is a way to invest in real estate without the complications and financial commitment of owning property.

Real Estate Investment trust