Investing Terms Flashcards

Commodity: Economic goods or materials produced through agriculture or mining.
Diversification: Strategy of spreading investments across different types to reduce risk.
Liquidity: Measure of how quickly an asset can be converted into cash without losing value.
Retirement: Life stage following the end of one’s working career, requiring financial planning.
Return: Financial gain earned from an investment over a specific period, often expressed as a percentage.
Risk: Possibility of financial loss associated with an investment choice.

Savings accounts are ideal for clients needing to access funds relatively soon but not immediately.
Long-term investments primarily focus on building a retirement fund.
Choosing a savings account is recommended for individuals who may require cash in the near future.

Diversifying investments, as shown through Alex's example, can lead to improved financial outcomes.
Stocks and mutual funds represent investments in a company's growth and profitability.
Gale's case illustrates that lacking diversification can significantly limit profit potential from investments.

Belief in the performance of stocks or mutual funds is essential for an investor's decision to purchase them—merely observing the actions of a small number of investors is insufficient.
In investing, there is generally a direct relationship between risk and return; increased risk often equates to greater potential returns.
Diversification helps investors mitigate losses by balancing out adverse performance with gains in other areas.