Saving & Investing Vocabulary

Stock Broker Is a person who buys and

sells securities on a stock exchange on behalf of clients.

My grandmother gave me $500 to invest and I called Janice, my stock broker, to ask her to buy me stock in Starbucks!

Diversification You don’t want all your money invested

in one investment type. Because the market goes up and down across all types of investments. Basically spread your money around when you are investing

Instead of investing all my money in Starbucks, I am going to diversify my investments and buy some Nike stock and Michael Kors stock. This diversification should help me to not lose money if a hurricanewipes out the coffee crop in Colombia and people stop going to Starbucks!

 Is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories. It aims to maximize return by investing in different areas that would each react differently to the same event.

Principle The original amount borrowed

or the amount still owed on a loan, separate from interest.

My principle investment was $500 and now after three years I’ve doubled this by keeping my investments diversified!

My loan principle was $1000 to buy my car, but because of interest I will have to pay back nearly $1350.

Investment Portfolio

I am a big risk taker, so I will have my stock broker create an aggressive investment portfolio, so most of my money will be in stocks!

A portfolio is a combination of different investments mixed and matched for the purpose of achieving an investor's goal(s). Items that are considered a part of your portfolio can include any asset you own - from real items such as art and real estate, to stocks, bonds, and cash.

Risk The chance that an investment's

actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment.

My financial adviser could tell I was nervous about investing, so she advised lower risk investments.

My friend and I went to Las Vegas to play roulette, she put all her money on the red 22- that was a high risk, because if she lost she was broke, but if it landed on red 22 she would’ve won $2000!

Dividends Money paid to stockholders, normally out of the corporation's current earnings or accumulated profits.

I bought Starbucks stock and it pays me a yearly dividend, it is a great company, always making money!

Twitter is about to go under, which means the company isn’t making money, which means there won’t be any dividends paid this year.

Discretionary Income

Money paid to stockholders, normally out of the corporation's current earnings or accumulated profits.

After paying all my bills I am going to use my discretionary income to have some fun and invest in the stock market….or maybe go shopping.

Mutual Funds

A mutual fund pools money from hundreds and thousands of investors to construct a portfolio of stocks, bonds, real estate, or other securities, according to its charter. Each investor in the fund gets a slice of the total pie. The money is then invested by a team of professionals, who research stocks, bonds or other assets and then place the money as wisely as they can.

I put $50 each month into a mutual fund and then reinvest the money I earn. I like that there is a professional financial adviser choosing the the things my money is invested!

Compound Interest

Calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

I earn much more money on my principle investment because my bank compounds the interest quarterly.

SimpleInterest

Simple interest is easy to calculate, but you don’t earn as much money as when you compound it.

Simple Interest• When you first deposit

money in a savings account, your deposit is called PRINCIPLE.

• The bank takes the money and invests it.

• In return, the bank pays you INTEREST based on the interest rate.

• Simple interest is paid only on the PRINCIPLE.

Liquidity

My car is paid off and is probably more liquid than trying to sell my haunted house.

Solvent Solvency directly relates to the ability of an individual or business to pay their long-term debts including any associated interest. To be considered solvent, the value of an entity’s assets, whether in reference to a company or an individual, must be greater than the sum of its debt obligations.

To be considered solvent, you can’t owe more in debt more than you have access.

Insolvent Defined as the inability to pay one’s debts, lack of means to pay ones debts.

After James lost his job he was completely insolvent, he literally had no savings or anything to pay his debts.

Stock  stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings.

Companies will sell stock in order to help pay for expansion or growth. Then when they start making, they will pay the people who bought stock dividends, because these investors are now part owners of the company.