#1
What is compound interest?
Interest calculated on both the principal amount and the accumulated interest
ExplanationCompound interest involves the growth of both the initial investment and the earned interest over time.
#2
What is a stock?
Ownership share in a company
ExplanationA stock represents ownership in a company, entitling the holder to a portion of its assets and earnings.
#3
What is diversification in investment?
Investing in multiple asset classes
ExplanationDiversification involves spreading investments across different asset classes to reduce risk and enhance overall portfolio stability.
#4
What does ROI stand for in finance?
Return on Investment
ExplanationROI is a financial metric indicating the profitability of an investment, calculated as the ratio of gained or lost money relative to the initial investment.
#5
What is the 'Rule of 72' used for in investing?
To estimate the number of years for an investment to double in value
ExplanationThe Rule of 72 is a quick formula to estimate the time it takes for an investment to double based on a fixed annual rate of return.
#6
What is dollar-cost averaging?
Investing a fixed amount of money regularly
ExplanationDollar-cost averaging involves regularly investing a fixed amount, helping to mitigate the impact of market volatility by buying more shares when prices are low and fewer when prices are high.
#7
What is a 'bear market'?
A market with declining stock prices
ExplanationA bear market is characterized by a sustained decline in stock prices, often accompanied by pessimism and a negative economic outlook.
#8
What is a 401(k) retirement plan?
A retirement savings plan sponsored by employers
ExplanationA 401(k) is a retirement savings plan provided by employers, allowing employees to contribute a portion of their salary on a tax-deferred basis.
#9
What is the concept of 'time value of money'?
The idea that money has different values depending on when it is received or paid
ExplanationThe time value of money recognizes that the value of money changes over time, with a dollar today being worth more than a dollar in the future.