| Diversification | The practice of dividing the money a person invests between several different types of investments in order to lower risk |
| Investing | The process of setting money aside to increase wealth over time for long-term financial goals such as retirement |
| Investment | Account or arrangement in which a person puts his/her money for long-term growth; invested money should not be used for a suggested minimum of five years |
| Liquidity | Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money |
| Portfolio | A list of your investments |
| Risk | Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit |
| Risk-Return Ratio | Relationship of substantial reward compared to the amount of risk taken |
| Share | Piece of ownership in a company, mutual fund or other investment |
| Stocks | Securities that represent part ownership or equity in a corporation |
| Tax-favored Dollars | Money that is invested, either tax deferred or tax free, within a retirement plan |
| U.S. Securities and Exchange Commission (SEC) | The government agency responsible for regulating the stock market. It was created in 1934 to increase public trust after the 1929 stock market crash and the years of the Great Depression. |
| Federal Deposit Insurance Corporation (FDIC) | The U.S. federal agency that insures deposits in commercial banks. It was created to restore public trust in banks after the 1929 stock market crash. It replaced the former Federal Savings and Loan Insurance Corporation in 1989. |
| Federal Reserve | The central (federal) banking system of the United States. |
| Internal Revenue Service (IRS) | A U.S. federal agency responsible for collecting taxes and for the interpretation and enforcement of the Internal Revenue Code (laws). |
| Certificate of Deposit (CD) | Typically at a bank, it is a savings account with a slightly higher interest rate because of a longer savings commitment |
| Money Market | A low-risk bank savings account with check-writing privileges |
| Bond | A debt instrument by which the company owes you money; a form of IOU |
| Mutual fund | An investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. |
| War Bonds (a.k.a. Defense Bonds) | The purpose was to finance military operations during war time. The bonds yielded a mere 2.9% return after a 10-year maturity. |
| Dividend | Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders; generally distributed in the form of cash or stock. |
| 25% Growth Stock Mutual Fund (Mid-Cap) | Fund that buys stock in medium-sized companies that have experienced some growth and are still expanding |
| 25% Growth and Income Stock Mutual Fund (Large-Cap) | Fund compromised of large, well-established companies |
| 25% Aggressive Growth Stock Mutual Fund (Small- Cap) | Fund that seeks to provide maximum long-term capital growth from stocks of primarily smaller companies; the most volatile fund |
| 25% International Stock Mutual Fund | Fund that contains international or overseas companies |
| Roth IRA | Named for Senator William Roth of Delaware, who authored this section of the Taxpayer Relief Act of 1997 |
| annuity | A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement |
| Education Savings Plan (529 Plan) | A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code, which created these types of savings plans in 1996. |
| Gold | Has a 50-year track record of 4.1% returns |
| Commodities | Agricultural or mining products |
| Day Trading | The buying and selling of stock purchases each day through the practice of speculation |
| Viaticals | When someone with a terminal disease sells his life insurance policy for less than face value |
| security | A financial asset(such as stock or bond) that can be bought or sold; a tradable financial asset |
| Simplifies Employee Pension Plan (SEP) | A self- employed person may deduct up to 15% of their net profit on the business by investing in a SEP |
| 401(k) | A retirement saving plan offered by a corporation to its employees. |
| 403(b) | Found in nonprofit organizations such as churches, hospitals, and schools |
| 457 | Deferred compensation, which means you are deferring or putting off compensation. Usually this is available for government employees. |
| T/F: A single stock would be a good place to keep your emergency fund. | False |
| T/F: Diversification lowers risk with investing. | True |
| Long-term investments properly diversified include the following mutual funds: | growth, growth and income, international, aggressive growth |
| Which is a good investment option? | Mutual funds |
| Which statement is true about liquidity? | The more liquid an investment, the less return |
