FINPLN 2183: Exam 3
22 Cards in this Set
| Front | Back |
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short-term goals
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- < 5 years
- don't want to put your money into risk assets
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short-term savings options
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- checking account
- money market account
- savings account
- certificate of deposit (CD)
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CDs
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- they're insured; virtually risk-free
- insured by FDIC
- have specific, fixed term and fixed interest rate
- CD is held until term ends
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FDIC's protection if your bank goes bankrupt
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- $250,000 for an individual account
- $500,000 for a joint account
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TIP
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*Treasury Inflation-protected securities
- provides protection against inflation
- giving your money to fed gov, and they pay you interest every 6 months; after length of time you get the money back + interest.
- low correlation w/ stocks, REITS, commoditites
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savings videos
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- write down your expenses for 2 weeks and see what you're spending that you didn't realize
- when planning vacation: look at deals and THEN PICK DESTINATION
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stocks
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- signifies ownership in a corporation
- represents a claim on part of the corp's assets and earnings
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bonds
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- investor loans money to an entity that borrows the funds for a defined period of time at fixed interest rate
- you give them money, they pay you interest, and at the end of defined time you get your money back
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fund
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- for several different companies (instead of buying individual shares for each)
- you want funds that include other countries
- come in stocks and bonds
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risk and return tradeoff
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low risk; low return
high risk; high return
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non- U.S. bonds
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- higher risk, but on average, higher payments
- less volatility
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non- U.S. stocks
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- high correlation with U.S. stocks
- still provides diversification
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commodities
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*investing in agriculture things
- invest < 10% in these because they're always changing.
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ETNs
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provide a diversifying way to invest in commodities
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rebalancing a portfolio
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- when allocations get too far out of the bounds you're comfortable with
- DOESN'T mean jumping in and out of stock and bond funds
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retirement planning
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- start saving early & regularly
- us tax-sheltered accounts
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3 parts of retirement income
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- Social Security
- Working income
- Personal savings
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401(k)
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- thru employer
- pre-tax
- pay taxes AFTER; you're saving money on taxes NOW
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IRA
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- anyone can open one as long as you have income to put into it
- save money on your taxes NOW
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Roth 401(k)
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- post tax
- popular for young people
- pay taxes now; when distribution comes out, no taxes
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Roth IRA
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- put contribution in now with taxes paid
- when take out, tax free
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matchin contributions
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- employer fully or partially matches employee contributions
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FINPLN 2183: Exam 3