financial studies topic 2- unit 2

why do people save for the long term?
to finance a future medium term or long term need, want or aspiration
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what is meant by the term "capital growth"
teh market value of investment is greater when sold than the amount they paid for it
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what is a main way people use a long term savings or investment product when it matures?
they can use it to fund their income- the investment will pay out a regular amount that they can use as part of their monthly income
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what is the trade-off between risk and reward?
the higher the risk, the greater the reward they're likely to get
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why do savings accounts not pay a very high interest rate?
the capital sum isn't at risk
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what is teh main aim of an investor?
they hope that the capital value of the investment will grow overtime
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what is a portfolio?
it's made up of many different types of savings and investments
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what is a volatile investment?
one thats value varies often and widely
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what are two disadvantages of investments on the stock market?
investing in shares can be unpredictable and it is high risk
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what is an advantage of investing in shares on the stock market?
you can get a higher rate of return than a savings account
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who are providers of long term savings and investment products?
every financial institution except credit unions
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how is an annuity different from a pension fund?
a pension is the money you save to provide an income later in life and an annuity is a financial product you can buy with taht pension pot of money to guarantee you income for as long as you live
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what is the role of a growth fund manager?
they normally invest in companies taht they believe will give them above average returns
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what must an investment company take into account when managing an indiviual's investment?
they need to choose a product depending on whether they want growth, income or some combination of both
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what is the role of a stock broker?
they carry out deals for people who want to buy and sell shares, bonds and other instruments
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what is a maturity period?
a period over which a time bound item is completed, becomes due, or is paid up
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what are 2 long term savinsg products offered by NS&I?
NS&I children's bonds and income bonds
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what is a benefit of NS&I products?
they are less riky than those offered by other providers because they're 100% backed by the government
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what is a drawback of NS&I products?
their returns aren't as high and they don't offer the potential for big rewards that some investors seek
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what is investment?
investment is a process by which people with surplus moeny lend it to companies and governments that want to borrow it over a long period of time
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what are the main investment products available?
stocks and shares ISAs, stocks and shares, corporate and government bonds and property
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why would people choose to hand their moeny over to a specialist investor?
they are unlikely to have the knowledge or time to select suitable properties and shares etc, and to track their performance on a day to day basis
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what is a share and how can tehy be boughT?
a share is a part ownership in a company. shares can be bought directly from the company (if it's a new issue of shares) or on the stock market
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what is the risk of buying shares on the stock market?
the price of the shares will subsequently rise and fall
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what is a benefit of buying shares?
they offer the potential of both capital growth and income and offer the possibility of a high reward
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what is the ISA tax allowance for this year?
£11,300 for 2017/18
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why should investors be willing to allow their money to be tied up for at least 5 years?
to smooth out any ups and downs
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Other cards in this set

Card 2

Front

what is meant by the term "capital growth"

Back

teh market value of investment is greater when sold than the amount they paid for it

Card 3

Front

what is a main way people use a long term savings or investment product when it matures?

Back

Preview of the front of card 3

Card 4

Front

what is the trade-off between risk and reward?

Back

Preview of the front of card 4

Card 5

Front

why do savings accounts not pay a very high interest rate?

Back

Preview of the front of card 5
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