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Chapter 1: Introduction To Investing

1-13 Resources

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Bond (Corporate, Treasury, or Municipal):
A debt obligation of a company, the U.S. Treasury Department, or a city where the borrower receives funds (usually in increments of $1,000), makes semi-annual interest payments based on the coupon rate, and eventually repays the borrowed amount ($1,000) to the lender at the maturity date of the bond.
Certificates of Deposit (CDs):
An investment choice at most banks where you agree to deposit a specific amount of money for a fixed period of time (this is called the maturity). By agreeing to keep your money at the bank for a certain length of time, the bank usually pays you an interest rate higher than savings and Money Market accounts.
ETFs:
Exchange Traded Funds are a cross between mutual funds and stocks. ETFs are simply a portfolio of stocks or bonds or other investments that trade on a stock exchange just like a regular stock does.
Money Market Account:
An account typically found at a bank that usually pays a higher interest rate than savings accounts, but limits the number of transactions you can make in a month.
NAV:
Net Asset Value of a mutual fund at the end of the business day. It is the equivalent of a share price of a stock.
Stocks:
Stocks are “equity investments” which means that individuals that own stock shares of a company actually own part of that company.
Yield Curve:
A graphical representation of the relationship between yield and maturity. Yield or return is on the vertical axis and the maturity on the horizontal axis. Generally the shorter maturity investments have lower yields and the longer maturity investments have higher yields.

Further Reading

Exercises

Browse through the business section of any major newspaper, (online is ok) and look for stories about the different types of investments: CD’s, Bonds, Stocks, Mutual Funds, ETFs, Precious Metals, and Real Estate.

Can you recognize the different types of investments just by looking at the headlines? If not, don’t worry, we’ll go into detail about these investments in greater detail in the chapters that follow.

Take the Chapter 1 Exam

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