Finance Basics: Chapters 1-3 Overview

Investments where you own a portion of a company or asset.

Investments where you lend money and earn interest.

Companies enabling you to buy and sell investments.

Specific, Measurable, Achievable, Relevant, Time-bound financial objectives.

Accounts designed for retirement savings, often with tax advantages.

Emergency savings for unexpected expenses.

Borrowing money for personal use, like loans or credit cards.

Higher potential returns often come with greater risk, and vice versa.

A general increase in prices over time, reducing purchasing power.

The ability to buy goods and services with a given amount of money.

The ease with which an asset can be converted into cash.

Retirement accounts that offer tax advantages during saving and/or withdrawal.

Tax on profits from selling investments.

Tax on standard income from salaries and wages.

First-In, First-Out inventory accounting method.

Method of calculating the average cost of items.

Tax rate applied to the next dollar earned.

Tax rate applied to corporate profits.

Investment portfolios managed by professionals, pooling money from multiple investors to buy stocks, bonds, or other assets.

Savings accounts offer low risk, low return, while mutual funds offer potential for higher return with higher risk.

Common money fund holdings include short-term government securities, and high-quality corporate debt.

Mutual fund money can often be accessed through check, or by transferring to another account.

Money mutual funds provide liquidity and safety for short-term needs.

Finding good money mutual funds involves comparing expense ratios and track records, and evaluating the fund manager.

Related to a city or town.

Money market deposit accounts (MMDAs), and certain high-yield savings accounts can be alternatives.

MMDAs offer higher interest rates than standard savings accounts and greater liquidity than money funds.

Stocks represent ownership in a company, offering potential for profits but also risk.

Companies offer new shares of stock through various methods like initial public offerings (IPOs).

Stocks offer potential for high returns, but also entail significant risk and price volatility.

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

Profits or earnings are a company's revenue minus expenses.

A measurement that tracks the performance of a group of stocks

A major stock market index tracking 30 large companies' stock prices.

A ratio of a stock's price to its earnings per share; use as a measure of valuation.

Spreading investments across different assets to reduce risk.

Represents ownership in a corporation, granting voting rights and potential dividends.

Investment funds pooling money to buy various stocks, managed by professionals.

Exchange-traded funds that trade like stocks but track an index or a specific investment strategy

Investment funds that pursue alternative investment strategies, often with higher risk and returns.

Debt securities issued by companies or governments.

Taxation of bonds depend on bond types and investor's tax status.

Bonds can be invested through mutual funds, ETF's, or directly purchased as individual bonds.

A bond that tracks a market index or a specific investment strategy.

Assessment of a bond's creditworthiness affecting risk and interest rate.

Date an investment (bond) must be repaid. Bonds have different maturities.

The relationship between bond yields and their maturities.

Traded on exchanges like stocks, diversified investment funds that track an index or investment strategy.

Distribute investment across different asset classes (stocks, bonds, real estate, etc.).