Fundamentals of Investing: Key Concepts and Investment Types 2nd Canadian Edition by Scott B. Smart

Investment Any asset into which you place funds with the expectation that it will generate positive income and/or increase its value. Portfolio A collection of different investments. Return Reward from investing, which includes income from investment and increase in value of investment. Securities Investments issued by firms, governments, or other organizations that represent a financial claim on the issuer's resources. Liquidity The ability to buy and sell quickly. Property Real assets that are typically less liquid than securities. Real property Land, buildings, and things permanently affixed to the land. Tangible personal property Assets such as gold, artwork, antiques, and collectibles. Direct Investment Investor directly acquires a claim/ownership. Indirect Investment Investor indirectly acquires a claim/ownership via a professional investment manager. Debt Investor lends funds in exchange for interest income and repayment of loan in future (bonds). Equity Ongoing ownership in a business or property (common stocks). Derivative Securities Neither debt nor equity; derive value from an underlying asset (options). Risk Uncertainty surrounding the return that a particular investment will generate. Low-risk Investments More predictable, lower average return. High-risk Investments Less predictable, higher average return. Diversification Holding different types of assets in an investment portfolio. Short-Term Investments Maturities of one year or less. Long-Term Investments Maturities of longer than one year. Domestic Securities Securities issued by domestic companies. Foreign Securities Securities issued by foreign companies. Suppliers of Funds Households that typically net suppliers of funds. Demanders of Funds Government and businesses that typically net demanders of funds. Financial Institutions Organizations, such as banks, mutual funds, and insurance companies, that pool the resources of households and other savers and use those funds to make loans and to invest in securities. Financial Markets Markets in which suppliers and demanders of funds trade financial assets, typically with the assistance of intermediaries such as securities brokers and dealers. Individual Investors Individuals that manage their own funds to achieve their financial goals. Institutional Investors Investment professionals who earn their living by managing other people's money. US Treasury Bills Provide high liquidity. Common Stock Represents an ownership share of a corporation; return comes through dividends and capital gains. Fixed-Income Securities Bonds are long-term debt instruments issued by corporations and governments. Convertible Securities Special fixed-income securities that can be converted into stock. Preferred Stock Represents an ownership claim, but has no maturity and pays a fixed dividend. Mutual Funds Portfolio of stocks, bonds, or other assets purchased with a pool of funds contributed by many different investors and managed by an investment company on behalf of its clients. Money Market Mutual Funds Mutual funds that invest solely in short-term investments. Exchange-Traded Funds (ETFs) Like mutual funds, except ETF shares trade on exchanges, so investors can buy and sell them at any time that exchanges are open for trading.