Congratulations, you are through the first chapter! This is a glossary review and some extra resources for more information before we continue on to the chapter exam.
Bank accounts – a depository account at a bank that acts as a secure way to store your money and withdraw it later.
Checking Accounts – a type of bank account you would use for regular purchases. It usually does not pay interest.
Savings Accounts – a type of bank account you would use for medium- to long-term savings. This type of account pays interest.
Liquidity – how fast you can convert your investment into cash if you need to spend it.
Risk – The probability that an investment will lose some, or all, of its value.
CD – “Certificate of Deposit”, a type of investment bank account that “locks in” your savings for a certain period of time, in exchange for a higher interest rate than a savings account.
MMA – “Money Market Account”, a type of bank account that offers a higher interest rate than a typical savings account, but has a minimum balance limit and a restriction on the number of transactions you can make per month.
Stocks – An “Equity investment”, signifying a percentage ownership of a company.
Dividend – A payment stockholders receive out of the total profits of the business
DRIP – a “Dividend Re-Investment Plan”, where dividends you receive from a company automatically are used to buy more shares of that company.
Mutual Funds – A type of investment where a money manager takes your cash and invests it as he sees fit, usually following some rough guidelines.
NAV – “Net Asset Value”, or the total value of the assets held by a mutual fund, divided by the total number of shares. NAV is calculated nightly.
ETF – A collection of stocks, bonds or other investments that trades like a stock on a stock exchange.
Bonds – A “Debt Instrument”, signifying a loan made to a company or government. Bond issuers pay interest to bond holders, and when the bond expires the original loan amount must be repaid (usually $1000 per bond)
Coupon Rate – The interest amount paid on a bond.
Yield – the value of the interest payments received on a bond, divided by the amount paid for the bond.
Treasuries – a bond issued by the US federal government
Corporate Bonds – Bonds that are issued by a company
Commodity – Raw materials that form the basis of the economy, which can be interchangeably bought and sold as an investment.
Precious Metals – Gold, silver, and platinum. While they are used as commodities, investors also place special value on precious metals in and of themselves, and can act as longer-term investments.
Hedge – To purchase an asset as “insurance” against a loss of one of your other assets
Foreign Exchange – the market for buying and selling currencies
Real Estate – Land and buildings, particularly when used as an investment.
REIT – a “Real Estate Investment Trust”, an investment vehicle for real estate that trades on a stock exchange.
Mortgage – a loan issued to someone who is purchasing a house or property. Mortgages are usually long-term loans paid in equal installments over the life of the loan.
Browse through major business news websites and look for stories about the different types of investments: CD’s, Bonds, Stocks, Mutual Funds, ETFs, Precious Metals, and Real Estate.
- The Street
- Bonds on Finance.yahoo.com
- Funds on Finance.yahoo.com
Can you recognize the different types of investments just by looking at the headlines? If not, don’t worry, we’ll go into detail about these investments in greater detail in the chapters that follow.