| A | B |
|---|
| Investing | the purchase of assets with the goal of increasing future income |
| rate of return | the total return on an investment expressed as a percentage of the amount of money invested |
| risk | the uncertainty regarding the outcome of a situation or event |
| investment risk | the possibility that an investment will fail to pay the expected return or fail to pay a return at all |
| Inflation | the rise in the general level of prices |
| inflation risk | the danger that money won't be worth as much in the future as it is today |
| stock | a share of ownership in a company |
| stockholder or shareholder | the owner of the stock |
| dividend | the share of profits distributed in cash |
| market price | the current price that a buyer is willing to pay for stock |
| bond | a form of lending to a company or the government (city, state, or federal) |
| maturity date | the specified time in the future when the principal (or initial investment) amount of the bond is repaid to the bondholder |
| mutual fund | a fund that is created when a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds |
| index fund | a mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index |
| index | a group of similar stocks and bonds |
| speculative investment | has the potential for significant fluctuations in return over a short period of time |
| Portfolio diversification | a method to assist with investment risk reduction. This method reduces risk by spreading investment money among a wide array of investment tools. |
| financial risk pyramid | illustrates the trade-offs between risk and return for the number of saving and investing tools. |
| saving tools | are on the first level of the financial risk pyramid, because they are free of the risk of losing the amount of principal invested |
| potential for financial gain | is what motivates people to accept higher amounts of risk |
| an investment philosophy, or an individual's general approach to investment risk | an individual's own tolerance level for the amount of risk he/she is willing to take on |
| Tax-sheltered investmensts | eliminate, reduce, defer, or adjust the current year tax liability |
| Rule of 72 | allows a person to easily calcuate when the future value of an investment will double the principal amount |
| stock market | a general term used to describe all transactions involving the buying and selling of stock shares issued by a company |
