What is compound interest? Compound interest refers to the continuous addition of interest to a principal sum. In other words, when reoccurring interest payments are reinvested into an initial sum it results in exponential growth. This is because each reinvested interest payment will be larger than the last. To clarify, compound interest simply occurs when
What is the stock market? The stock market is a collection of markets and exchanges where people buy and sell shares of publicly-held companies. A trade will occur when someone has shares they want to sell for cash and another person has cash they want to use to buy shares. The trade will be executed
What is a 401(k)? A 401(k) is a retirement account that is sponsored by the employer. This account allows employees to prepare for their retirement by dedicating a percentage of their pre-taxed income to a separate account. In other words, every pay period a percentage of the income you earn from your employer will be
What is a CD? (Certificate of Deposit) A Certificate of Deposit is a savings account that has a fixed interest rate and a fixed withdrawal date. In addition, CDs require a specific initial deposit that will be held until the maturity date. Another important feature to understand is that typically the longer the time deposit,
What does it mean to invest? The goal when financially investing is to utilize potential assets in order to receive further profits. This concept often compounds meaning the larger the number of assets owned the more profits that can be earned and reinvested. Money for example has the ability to be converted into a cash-flowing
What is an index fund? An index fund is comprised of a specific selection of stocks designed to track the performance of a financial market sector. There are 11 market sectors that every publicly traded stock falls into; Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, Utilities, and Real
