Personal Finance Chapter 11

1. knowledge
2. skill
tools: knowledge (credit score)
and value of time.

If he lost everything he can regain it and more within 5 years

An asset that generates value or a return. may come in form of income return.

Investment return received directly from the company or organization in which you've invested usually in the form of dividends or interest payments

1. capital gains or losses (value of investement)
2. income return

An asset whose value depends solely on supply and demand, as opposed to being based on the return that it generates. I.e speculate that gold will rise or collectible items will profit in the future

A security that gives its owner the right to buy or sell an asset generally common stock--at a specified price over a specified period.

Make sure you are financially sound before investing.

1. pay yourself first
2. automate savings
3. tax favored or company match programs for IRA or roth IRAs
4. save all inheiritances, bonues or extra money laying around
5. pick 2 months a year to cut back on spending reevaluate your investments

•Compare investment returns on an after-tax basis •Marginal tax rate •Tax-free investment alternatives •Investments on a tax-deferred basis •With taxes, capital gains and dividend income are better than ordinary income

1. lending investments: savings accounts and bonds
2. Ownership investments: preferred stock and common stock (i.e real estate and stock)

Actual interest the bond pays

A fractional ownership in a corporation

What is being paid to shareholders of a company (paid out quartlery)

Rate of return earned on an investment, unadjusted for lost purchasing power (inflation)

Real rate is nominal - inflation

When interest rates increase, investors demand a higher return on all other investments (higher risk)

when interest rates go down, the return investors demand on other investments go down

Main reason why ppl don't save or invest