Basic investment concepts, portfolio theory, asset allocation, stocks, bonds, mutual funds, and ETFs.
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Foundation terms you need to know first (65 terms)
A lump sum investment in real estate involves committing a single, large amount of capital upfront to acquire a property or fund a project, rather than making smaller, periodic contributions. It's a direct approach often used for full property purchases or significant down payments.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Liabilities are financial obligations or debts that an individual or business owes to others, representing money that must be paid back in the future.
The percentage of your disposable income that you save rather than spend, a key metric for personal finance and crucial for building capital for real estate investments.
The fundamental resources—land, labor, capital, and entrepreneurship—used to produce goods and services, including real estate, and are crucial for understanding economic activity and investment potential.
Complex strategies and professional concepts (5 terms)
A Personal Financial Stress Test is a systematic evaluation of an individual's or household's financial resilience against adverse economic scenarios, crucial for real estate investors to safeguard their portfolios.
Indexed Universal Life (IUL) is a type of permanent life insurance that offers a death benefit and a cash value component, where the cash value growth is linked to the performance of a market index, such as the S&P 500, typically with a floor and a cap on returns.
The Sharpe Ratio is a measure of risk-adjusted return, indicating the average return earned in excess of the risk-free rate per unit of total risk (volatility or standard deviation). It helps investors understand the return of an investment compared to its risk.
The Securities and Exchange Commission (SEC) is an independent agency of the U.S. federal government responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. It regulates publicly traded securities, including those related to real estate.
Modern Portfolio Theory (MPT) is an investment framework that aims to maximize portfolio expected return for a given level of market risk, or equivalently, minimize risk for a given level of expected return, through diversification.
A 401(k) plan is an employer-sponsored retirement savings account that allows employees to contribute a portion of their salary on a tax-advantaged basis, often with employer matching contributions, to invest for their future.
Actionable steps are small, specific, and measurable tasks that break down a larger real estate investment goal into manageable parts, making it easier to plan and execute your strategy.
An Adjustable-Rate Mortgage (ARM) is a home loan where the interest rate can change periodically based on an index, leading to fluctuating monthly payments after an initial fixed-rate period.
An alternative investment is a financial asset that does not fall into conventional investment categories like stocks, bonds, or cash. For real estate investors, these often include assets like real estate itself, private equity, or commodities.
Annuity is a financial contract from an insurance company providing a fixed or variable income stream over time, often used for retirement planning or structured settlements.
An asset class is a group of investments that share similar characteristics and behave similarly in the market. In real estate, it categorizes properties like residential, commercial, or industrial, each with distinct risk and return profiles.
Automated savings is a financial strategy that involves regularly transferring a set amount of money from one account to another without manual intervention, helping investors consistently build capital for real estate goals.
A beginner investor is an individual new to real estate investing, typically with limited experience, focused on learning fundamental concepts and starting with lower-risk strategies.
Business credit is a credit profile established for a business entity, separate from its owner's personal credit, used to secure financing and establish credibility for commercial activities.
A cash reserve is a dedicated fund for real estate investors to cover unexpected property expenses, vacancies, and major repairs, ensuring financial stability and protecting investment cash flow.
Common stock represents ownership in a company, granting shareholders voting rights and the potential to earn returns through dividends and capital appreciation.
The amount of money an individual or household has left to spend or save after paying income taxes. It's a key indicator of financial health and purchasing power.
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