Depository institution
A financial institution that accepts deposits from the public
Compound interest
interest that is calculated on the balance rather than the principal
asset allocation
how assets are divided between stocks, bonds, real estate, and cash
Comercial bank
for-profit largest type of depository institution
Saving institution
for-profit or financial cooperative depository institution that specializes in consumer mortgage lending
Credit onion
not-for-profit depository institution that is owned and operated by members
Liquidity
how quickly you can turn your money into cash
Checking account
very liquid account that allows for numerous withdrawals and unlimited deposits
High-yield checking accounts
offers higher interest rates than savings accounts
Saving account
account that pays a higher interest rate than checking accounts and has limits on certain transactions and withdrawals
Money Market
pays higher interest rates than standard savings accounts and offers limited checking account services
CDs
have a fixed interest rate and a fixed date of withdrawal (maturity date)
Maturity date
the date on which the life of a transaction or financial instrument ends
Emergency founds
an amount equal to 3-6 months of expenses set aside in case of emergency
Diversification
having a wide variety of investments within a portfolio.
Diversity
holding different types of assets. "Don't put your eggs in one basket."
Return
Money made or lost on an investment
Stock
ownership in a company
Dividens
sum of money paid regularly to its shareholders
Bonds
a fixed income investment that provides regular interest payments and the principal upon maturity
Mutual fonds
drastically reduces unsystematic risk through one fund that is made up of potentially hundreds or more of individual securities