Term
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Definition
| A time deposit kept at a financial institution that pays interest |
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Term
| Regular Savings Account advantages |
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Definition
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Term
| Regular Savings Account disadvantages |
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Definition
Low interest rate that does not keep up with inflation
Bank fees
Interest rate is usually about .5%; inflation is about 2% |
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Term
| NOW and Super-NOW Accounts |
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Definition
| Negotiable Order of Withdrawal; savings and a checking account |
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Term
| NOW and Super-NOW Accounts advantages |
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Definition
Higher interest rate than savings acct
Liquidity
FDIC |
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Term
| NOW and Super-NOW Accounts disadvantages |
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Definition
Higher minimum--if you fall below, you lose the interest rate
Bank fees |
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Term
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Definition
| bank acct that pays you interest and allows you to withdraw |
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Term
| Money Market Accounts advantages |
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Definition
Highest interest rate
Liquid
FDIC |
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Term
| Money Market Accts Disadvantages |
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Definition
| Much higher minimum--usually 1,000, sometimes 500-- limited to 3 checks per month |
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Term
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Definition
| Bank deposit in which $ is left for a certain period of time (3 mo to 5 yr) |
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Term
| Certificates of Deposit advantages |
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Definition
Interest rate is best
Semi-liquid
FDIC |
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Term
| Certificates of Deposit disadvantages |
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Definition
Heavy penalty for early withdrawal
No access to your $
$500 minimum |
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Term
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Definition
| Special non-marketable instruments issued for a specific purpose |
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Term
| US Savings Bonds advantages |
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Definition
Backed by govt
Purchase in small quantities |
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Term
| US Savings Bonds disadvantages |
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Definition
Can't market it
Limited to $30,000/yr
Federal taxes are deferred
Length of maturity: 13-17yrs |
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Term
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Definition
| Short-term IOUs: 30-60 days |
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Term
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Definition
| medium-term IOUs - up to a year |
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Term
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Definition
| long-term IOUs - 10 to 30 years |
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Term
| Bills, notes, and bonds advantages |
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Definition
Marketable
No state or local taxes |
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Term
| Bills and bonds disadvantages |
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Definition
have to buy $10,000 at a time
Fed taxes |
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Term
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Definition
have to buy $1,000
Fed taxes |
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Term
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Definition
| Having ownership in a company |
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Term
| Corporate Stocks advantages |
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Definition
limited risk--only lose what you put in
Potential for profit |
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Term
| Corporate Stocks disadvantages |
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Definition
Outside factors that you can't control
Institutional investors take priority |
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Term
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Definition
| collection of stocks, bonds, and other securities that is professionally managed |
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Term
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Definition
Less of a risk to you b/c professionals make the decisions
Best place to put retirement money |
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Term
| Mutual funds disadvantages |
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Definition
Investor has no say in the decision making
Mutual fund fees |
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Term
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Definition
| IOUs issued by companies to borrow $ |
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Term
| Corporate bonds advantages |
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Definition
Interest rates are fixed
Paid before stockholders |
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Term
| Corporate bonds disadvantages |
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Definition
Company can go bankrupt
Interest rates are fixed |
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Term
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Definition
| commodities market--your promise to buy or sell a commodity in the future |
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Term
| Futures markets advantages |
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Definition
| potential for HUGE profits |
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Term
| Futures markets disadvantages |
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Definition
potential for HUGE losses
Your account gets settled every day |
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Term
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Definition
| IOUs issued by levels of govt for a specific purpose |
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Term
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Definition
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Term
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Definition
Have to pay state and local taxes
Legislation is required |
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Term
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Definition
| investment in land or real property, either commercial or residential |
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Term
| Real estate investments advantages |
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Definition
Appreciation
Possible rental income
Tax advantages |
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Term
| Real estate investments disadvantages |
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Definition
Not very liquid
Usually involves borrowing money |
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Term
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Definition
| Guarantees you a specific amount of money when you retire--based on salary and length of service |
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Term
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Definition
| your employer and you contribute, but you don't know how much you're going to get b/c your employer manages the money |
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Term
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Definition
| Funded by the company and based on annual profits/ not every company has profit-sharing / usually get it as a lump sum at end of year: only goes to vested employees |
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Term
| Employee stock-ownership plan (ESOP) |
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Definition
| When you can buy stock in the company below market price--goes to vested employees - limit to how long you have to hold your stock |
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Term
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Definition
| Simplified employee pension, 401k, keogh plan, 403b |
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Term
| Simplified employee pension (SEP) |
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Definition
| For small companies but you must have a matching contribution |
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Term
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Definition
| Self-directed: you decide how much (limit $15,000/yr) and where no taxes until withdrawal |
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Term
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Definition
| Self-employed people and their workers can put $40,000 or 30% of income - usually has a matching plan - tax-free until withdrawal |
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Term
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Definition
| For non-profit org and public employees - $15/yr max contribution don't pay into soc security |
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Term
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Definition
Individual Retirement Account - a personal retirement plan that gives you tax incentives
Limit is $5,000 yr and you must have earned income |
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Term
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Definition
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Term
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Definition
| Can put $ in that is already taxed |
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Term
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Definition
| A contract between you and an insurance company - fixed rate of return when you retire: a guarantee except that the fixed rate is low compared to an IRA, 401k, etc |
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Term
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Definition
| NOT a retirement plan - elderly people use it as a retirement plan |
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Term
| How many months of living expenses do financial professions think you should keep in an emergency fund? |
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Definition
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Term
| What is the minimum % of your income you should put away each year for your retirement? |
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Definition
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Term
| About what percentage of pre-retirement income to professionals think most ppl will need after they are retired in order to maintain their standard of living? |
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Definition
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Term
| How much retirement $ should ppl in their 30s have put into stocks or stock mutual funds? |
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Definition
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Term
| All else being equal, the lower a bond fund's average credit quality... |
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Definition
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Term
| How long must you hold a stock or stock fund to receive the lowest capital gains tax rate? |
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Definition
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Term
| A diversified mutual fund cannot invest more than ___ percent of its assets in any one stock |
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Definition
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Term
| A mutual fund is considered diversified once it owns ___ stocks |
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Definition
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Term
| How much of a fund's portfolio must be invested in its own industry? |
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Definition
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Term
| What percentage of the fund's assets can be concentrated in any one sector or specialty? |
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Definition
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Term
| T/F: all mutual funds must hold annual share-holders meetings |
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Definition
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Term
| Which types of investments are typically found in a money market fund? |
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Definition
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Term
What is the least risky investment?
a. Diversified domestic stock fund
b. global stock fund
c. your company stock |
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Definition
| Diversified domestic stock fund |
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Term
| Which index best reflects the entire US stock market? |
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Definition
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Term
| What is a life cycle fund? |
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Definition
| A mutual fund that automatically rebalanced its investment mix according to a person's age |
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Term
| If you own stock, how do you make $ on your investment? |
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Definition
| Dividends, share price appreciation, capital gains |
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Term
| What fraction of 401k plan balances are invested in equities? |
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Definition
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Term
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Definition
| A bond which the issuer has the right to redeem prior to its maturity date |
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Term
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Definition
| Put more $ in and it grows |
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Term
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Definition
| only fixed # of units available |
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Term
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Definition
| buy through broker: pay commission |
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Term
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Definition
| buy through mutual fund company - pay "fees" |
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Term
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Definition
| pay when you make purchase (buy) |
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Term
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Definition
| pay when you redeem (sell) |
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Term
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Definition
| Net asset value: the price of each "unit." computed once at the end of the day |
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