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.
Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It's a key metric for income-focused investors to understand the return on their investment from dividends.
Dollar-Cost Averaging (DCA) is an investment strategy where an investor divides the total amount to be invested across periodic purchases of a target asset, aiming to reduce the impact of market volatility on the overall purchase price.
Earnings Per Share (EPS) is a financial metric that indicates how much profit a company makes for each outstanding share of its common stock. It's a key indicator of a company's profitability, widely used by investors to assess financial health.
A readily accessible pool of money set aside to cover unexpected financial challenges, crucial for both personal and real estate investment stability.
Equity in real estate is the portion of a property's value that an owner truly owns, free and clear of any outstanding debts or liens. It is calculated as the property's current market value minus the total amount owed on any mortgages or loans.
An Exchange-Traded Fund (ETF) is an investment fund that holds a diversified basket of assets like stocks or bonds and trades on stock exchanges throughout the day, offering flexibility and often lower costs.
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.
Financial discipline is the practice of managing your money responsibly and consistently adhering to a financial plan to achieve your investment and personal financial goals.
Financial education is the process of learning how to understand and effectively manage personal finance concepts like budgeting, saving, investing, and debt to make informed financial decisions.
Financial freedom is the state where your passive income consistently covers all your living expenses, allowing you to live without needing a traditional job.
Financial planning is the comprehensive process of managing your money to achieve personal and investment goals, involving budgeting, saving, investing, and risk management.
A financial profile is a comprehensive summary of an individual's or entity's financial health, encompassing income, expenses, assets, liabilities, and credit history, crucial for assessing creditworthiness and investment capacity.
Explore complementary areas that build on investment fundamentals concepts
Personal budgeting, expense tracking, cash flow management, emergency funds, and savings strategies.
Credit scores, debt consolidation, loan management, credit repair, and debt payoff strategies.
Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
Wills, trusts, estate taxes, succession planning, beneficiary planning, and wealth preservation.