FINL 041 Unit 6 - Savings and Investments
individual retirement (Account)
A savings account set up by an institution with tax breaks because the government wants you to save.
Money Market (Account)
A savings account that offers higher interest rates because a higher minimum balance is required and there are limitations on how much you can withdraw.
Certificate of Deposit (CD)
A savings account where you commit to a lender that you will not withdraw your money for a specified period of time so you can earn a higher interest rate./ Beware of penalty fees for early withdrawals.
FDIC (guarantees your savings up to $250,000 per account)
Always make sure you use ________-insured deposit saving accounts.
managers
Any company worth investing in will have a website that lists the senior ___________, how long they have been with the company, their backgrounds, and the company's history.
profitable
Before investing in a company's stocks, research if that company is ______________. - Look at the quarterly earnings and determine who is buying their product.
liability
Bonds usually do not have as much __________ as shares do.
low (federally insured by the FDIC)
Certificate of Deposits and Savings Accounts are ______-risk investment options. They have very low interest rates attached to them.
hard (think of Antiques Roadshow)
Coins, stamps, comic books, and artwork are all examples of _______ asset investments.
war bonds
During WWI and WWII, Americans were asked to show their patriotism by purchasing _____ ______ which helped the government pay for the wars.
high (there is much more uncertainty about the success of these investments, but if they are successful, there is a great deal of profit involved)
Growth Funds and Penny Stocks are _____-risk investments.
stable (there is a higher risk involved)
Growth mutual funds involve start-up or newer companies and are less ________, but they have the possibility of making more money in the long run.
high
High-Yield Bonds are _____-risk investments because the company may or may not make a profit.
increase
Homes usually _________ in value because of inflation.
income
If I am retired and on a fixed income, I would move the majority of my mutual funds to _________ funds to make sure I can always get an amount to pay my bills each month.
no (only invest in companies with economic growth)
If a company does not have financial or economic growth, are you going to make money from your investments in that company?
red
If a company is in debt, it is in the _______.
black
If a company is making more money than it spends, it is in the ________ .
bull (good)
If the majority of stocks in the market are rising, it is considered a _____ market.
bear (bad)
If the majority of stocks in the market show a decrease on a particular day, it is considered to be a bad day or a _______ market.
short (or long)
If you have ______-term goals, then you need ______-term investments.
growth (if a company cannot sustain its growth, you will lose money just about as quickly as you made it)
If you want a get-rich-quick stock, _________ stocks will be more likely to make that happen.
inflationary (or 3%)
If your salary does not increase at an __________ rate, then you are making less money than you did the year before.
low
Income Mutual Funds are ____-risk investments because of the diversification of stocks and the validity of the companies involved.
steady (these are a better choice for people with less financial flexibility, such as retired individuals)
Income mutual funds involve companies who have been in business for a long time/ are more stable, and they can provide a ________ stream of income.
stocks (and bonds)
Inflation has the most severe negative effect on ________.
3
Inflation usually increases approximately ___% a year.
growth
Investors just starting out in the market who are young and who have a lot of years of working and making money ahead of them, should invest in __________ funds.
6 (you want some of your savings to be in investment areas where you have constant and easy access)
It is strongly suggested that each household have enough liquidity in their personal finances to be able to live for ____ months on their savings before they have to sell their assets to make ends meet.
joint stock
Jamestown, America's first successful English colony, was started as a ______ ______ company in 1607.
liquidity
Jill finds out that her daughter, Susan, borrowed money from a friend to purchase a pair of boots. Jill is upset and tells her daughter to pay back the friend right away. Susan goes to her bank and withdraws money from her savings account and immediately pays back the friend. - This scenario is an example of ___________.
all of the above
Keeping a good budget and saving money is a good example of which of the following? - investing in your future - wise ways to spend money - good financial planning - all of the above
low
Long-Term Investments are ____-risk investments. The longer you are able to leave your money in an investment, usually the more you earn on that investment.
low
Low-Yield Bonds are _____-risk investments because you eventually get your money back.
bundle
Most providers of services like internet and television have major discounts if you __________ all your services with them.
low
On an investment, if the liquidity is high, the risk is usually _______.
high
On an investment, if the liquidity is low, the risk is usually _______.
low/ high
On the stock market, you should buy when the cost of the stock is _____, and sell when the price of the stock is ______.
one
Only _____ in ten companies usually make money.
Treasury
Only the U.S. Department of the ___________ can redeem a savings bond.
liquidation
Rachel's car is totaled. Although her car insurance company gives her money for the car, she needs another $4,000 to purchase a new car. She withdraws $4,000 from her savings account to do so. This is an example of ________. - certification - liquidation - valuation - diversification
circumstances
Savings and investments are dependent on life's _______________. - If you are young, you might choose a more aggressive savings plan. If you are getting ready to retire, you might choose a more conservative approach to saving and investing.
high
Short-Term Investments are _____-risk investments. These investments usually last just a year or two to increase in value.
expand
Sometimes when a company wants to ________, it will sell you a bond. -You let the company use your money for a set period of time, and the company will guarantee you a certain interest rate on your investment.
true
T/F - Although you can make money flipping homes, this type of investment has a very high risk.
true
T/F - Hard asset collections and real estate investments usually can withstand inflation attacks.
false (they increase when inflation increases)
T/F - Interest rates on credit don't increase when inflation increases.
true
T/F - Most wealthy Americans have a lot of assets, but they do not have a lot of liquidity.
true
T/F - Only the person whose name is on the savings bond can have it redeemed.
true (liquid assets can be quickly converted into cash)
T/F - The ease with which a stock can be bought or sold and converted to cash determines its liquidity.
mutual
Tax-deferred investments are relatively safe, but are attached to _________ funds, so the stock market's decline will affect their worth.
investment markets
The Federal Trade Commission and the Securities Trade Commission are responsible for protecting the integrity of the __________ __________.
risk (an established company's stocks will obviously cost more money than a company just starting out)
The cost of a stock has a direct correlation on the amount of _____ the investor is taking.
credit score
The simplest way to save money without realizing it is earning and maintaining a high _______ ________.
increases
Today, companies sell stocks (shares) of their companies to investors. - If that company makes money, the price of those shares __________.
do not
Today, companies sell stocks (shares) of their companies to investors. - If the company does not make money, the shareholders (investors) ____ _______ see a positive return on their investment.
10
Try to save at least _____% of your monthly income.
low
US Savings Bonds do not provide liquidity, but double in value when mature and are _____-risk investments.
higher
Usually, the _______ the risk, the higher the return on an investment.
all of the above
When considering whether to invest in a particular company, what is something you should ask? - Does the company have a solid earnings history? - What are the company's competitors? - Who runs the company? - all of the above
increase
When inflation increases, interest rates on your credit cards, adjustable-rate mortgages, or car loans usually ___________.
low
When inflation threatens your investments, usually ____-risk investment strategies should be employed.
stocks
Which investment is LEAST likely to withstand the effects of inflation? - stocks - money market funds - hard asset collections - all of the above
stocks
Which investment is most affected by inflation? - stocks - money market funds - hard asset collections - none of the above
all of the above
Which of these are considered to be wise investment choices? - mutual funds - hard assets - stocks and bonds - all of the above
savings bonds
Which option is not a high-risk investment? - savings bonds - real estate - stock in a startup company - growth funds
mature (if you redeem your savings bond after the maturity date, you still only get the value of the bond as of the date it matured)
You can redeem savings bonds any time you want to, but if you wait for several years until they become _________, their value will be much higher than if you had cashed them in earlier.
3 (or 4)
You should utilize at least _____ different investment options to protect your investments. A variety of ultraconservative, conservative, and moderate investments is probably the best option.
health
You will save thousands of dollars on insurance over your lifetime if you start now to maintain your ________.
Full-service
_____-________ brokers, like Edward Jones, Morgan-Stanley, Charles Schwab, and Merrill Lynch, provide a wide variety of services, such as research and advice, assessing retirement plans, and providing tax tips. They cost a large sum, however, they are usually up to date on the latest trends and technological advancements.
Tax-deferred
_____-___________ investments are government programs that allow you to invest before your income is taxed. You put a set amount into the accounts each month and have it earn interest.
Ultra-conservative
______-____________ investment strategies involve investments with very low risk attached to them. They yield modest returns, but they are safe and you will have constant access to these funds..
Obesity
__________ has the potential to bankrupt the medical community in the United States as a result of the additional medical costs it carries.
Patience (if you can afford to wait until the market rebounds, the value of the home will probably eventually return or raise higher than the initial cost)
__________ is the key to investing in homes.
Discount
___________ brokers are individuals who invest your money in the stock market for you. They deal mostly in individual stocks and bonds and don't offer advice/research because their commissions are much smaller.
Online
___________ brokers just buy and sell what you tell them, charging a minimal price for each trade. This investment requires you to do the research and watch trends yourself.
Conservative
____________ investment strategies are low risk but you do not have immediate access to your money. If you need to access your money, there will usually be an early withdrawal penalty.
Moderate
____________ investment strategies involve investments associated with the stock market/ buying stocks in companies of your choice. This requires patience, but you can get a little higher return.
Aggressive
______________ investment strategies are high risk but often have high returns. You take the risk of losing money quickly if it is a bad investment, but you can make more money quickly if it is good.
Diversification
______________ is the key to any wise investment strategy.
bonds
a certificate issued by a government or a public company promising to repay borrowed money at a fixed rate of interest at a specified time
recession
a downturn in the economy
liquidity
a measure of the extent to which a person or organization has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this
inflation
a persistent, substantial rise in the general level of prices that causes money to lose its value
broker
a person whose job is to give you financial advice about your investments/ the people who handle customer orders to buy and sell securities
mutual funds (stocks)
a practical, cost-efficient way to help build a diversified portfolio of stocks, bonds, or short-term investments
dividends
a sum of money paid regularly by a company to its shareholders out of its profits
depression
an economic downturn more severe and long-term than a recession
asset
an item that you own and that has value
shareholders
another word for investors
capital
another word for money
flipping (homes)
buying homes to fix up to resell for a higher price
liquid asset
cash, or items that you can easily convert to cash
income (mutual funds)
investing in companies that are established and probably will grow/ these mutual funds, if invested properly, will provide a constant return/ they have much more liquidity
diversification
investing in several different companies so if one fails, you are not hit as hard - you still have investments in other companies
growth (mutual funds)
investing in start-up companies that could become extremely successful or fail completely/ these give you the ability to make some real money, but the risk is much greater/ these have less liquidity and require more patience
hard assets
items that you save over time that you hope will increase in price/ collectable investment tools
saving
money put by/ the excess of income over consumption expenditures
savings bonds
securities that can only be redeemed by the person named on the bond/ they cannot be sold or transferred to anyone else
preferred stock
stock bought from a company that is established, so the risk of not being successful is low/ these tend to cost more money initially
penny stocks
stocks for brand new companies that are attempting to sell something that has not yet been tested in the market
stock market
the business of buying or selling shares of stock
stocks
the capital raised by a business or corporation through the issue and subscription of shares
insider trading
the illegal trading of a company's stock by people using confidential company information ex. Martha Stewart
savings
the most viable alternative to credit
investing
the outlay of money usually for income or profit
negative return
when a risk results with you losing money
positive return
when a risk results with you making money
risk
when you are unsure if you will have a positive or negative return from an investment
economic growth
when you make money the previous year after adjusting for inflation
financial growth
when you or your company makes money
mortgage equity (home equity)
your share of the value of your home/ what you truly 'own' and have an interest in.
