debt
funds lent in exchange for interest income and the promised repayment of the loan at a given future date.
derivative securities
securities that are structured to exhibit characteristics similar to those of an underlying security or asset and that derive their value from the underlying security or asset.
direct investment
investment in which an investor directly acquires a claim on a security or property.
domestic investments
debt, equity, and derivative securities of U.S-based companies.
equity
ongoing ownership in a business or property.
financial institutions
organizations that channel the savings of governments, businesses and individuals into loans or investments.
financial markets
forums in which suppliers and demanders of funds trade financial assets.
foreign investments
debt, equity, and derivative securities of foreign based companies.
indirect investments
investment made in a collection of securities or properties.
individual investors
investors who manage their own funds.
institutional investors
investment professionals whoa re paid to manage other people's money.
investment
any asset into which funds can be placed with the expectation that it will generate positive income and/or preserve or increase its value.
long-term investments
investments with maturities of longer than a year or with no maturity at all.
property
investments in real property or tangible personal property.
returns
the rewards from investing, received as current income and/or increased value.
risk
reflects the uncertainty surrounding the return that an investment will generate.
securities
investments issued by firms, governments, or other organizations that represent a financial claim on the issuer's resources.
short-term investments
investments that typically mature within one year.
speculation
the purchase of high-risk investment vehicles that offer highly uncertain returns and future value.
bonds
long-term debt instruments (IOUs), issued by corporations and governments, that offer a known interest return plus return of the bond's face value at maturity.
capital gains
the amount by which the sale price of an asset exceeds its original purchase price.
common stock
equity investment that represents ownership in a corporation; each share represents a fractional ownership interest in the firm.
convertible security
a fixed-income obligation with a feature permitting the investor to convert it into a specified number of shares of common stock.
dividends
periodic payments made by firms to their shareholders.
fixed-income securities
investments that offer fixed periodic cash payments.
futures
legally binding obligations stipulating that the seller of the contract will make delivery and the buyer of the contract will take delivery of an asset at some specific date, at a price agreed on at the time the contract is sold.
hedge funds
lightly regulated investment funds that pool resources from wealthy investors.
liquidity
the ability of an investment to be converted into cash quickly and with little or no loss in value.
money market mutual funds
mutual funds that invest solely in short-term investment vehicles.
mutual fund
a company that raises money from sale of its shares and invests in and professionally manages a diversified portfolio of securities.
options
a security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.
preferred stock
ownership interest in a corporation; has a stated dividend rate, payment of which is given preference over common stock dividends of the same firm.
real estate
entities such as residential homes, raw land, and income property.
tangibles
investment assets, other than real estate, that can be see or touched.
tax-advantaged investments
investment vehicles and strategies designed to produce higher after-tax returns by reducing the amount of taxes that investors must pay.
capital loss
the amount by which the proceeds form the sale of a capital asset are less than its original purchase price.
diversification
the inclusion of a number of different investment vehicles in a portfolio to increase returns or reduce risk.
investment goals
the financial objectives that one wishes to achieve by investing.
investment plan
a written document describing how funds will be invested and specifying the target date for achieving each investment goal and the amount of tolerable risk.
net losses
the amount by which capital losses exceed capital gains; up to $3000 of net losses can be applied against ordinary income in any year.
portfolio
collection of securities or other investments, typically constructed to meet one or more investment goals.
tax planning
the development of strategies that will defer and minimize an individual's level of taxes over the long run.
discount basis
a method of earning interest on a security by purchasing it at a price below its redemption value; the difference is the interest earned.