savings
income not used for consumption, not spent on immediate wants
invstment
the use of income today in a way that allows for a future benefit
economic investment
money lent to businesses
personal investment
the act of individuals putting their savings into financial assets
financial system
consists of institutions such as banks, insurance markets, bond markets, and stock markets, allows for this transfer of funds between savers and investors
financial asset
claim on the property of the borrower
financial market
a situation in which buyers and sellers exchange particular types of financial assets
financial intermediary
a financial institution that collects funds form savers and then invests these funds in loans and other financial assets
mutual fund
a pool of money managed by an investment company that gathers money from individual investors and purchases a range of financial assets
capital market
the market for buying and selling long-term financial assets
money market
the market for buying and selling short-term financial assets
primary market
market for buying newly created financial assets directly form the issuing entity
secondary market
the market where financial assets are resold
investment objective
a financial goal that an investor uses to determine if an investment is appropriate
risk
the possibility for loss on an investment
return
the profit or loss made on an investment
diversification
the practice of distributing investments among different financial assets to maximize return and limit risk
stock exchange
a secondary market where securities (stocks and bonds) are bought and sold
capital gains
gains made from the sale of securities (stocks and bonds)
common stock
share of ownership in a corporation giving holders voting rights and a share of the stock
preferred stock
share of ownership in a corporation giving holders a share of profits but no voting rights
stockbroker
an agent who is paid a commission for buying and selling securities on behalf of customers.
future
a contract to buy or sell a commodity at a specified future date and price
option
contract that gives the right, but no the obligation, to buy or sell
stock index
a measure of the change in prices for a specific set of stocks
bull market
when stock prices rise steadily
bear market
when stock prices is a steady decline