Answers to Your Financial Questions

Capital Gain – The profits made when selling assets such as stocks, bonds, and real estate for more than you paid.

Rollover – A tax-free and penalty-free transfer of money from one retirement plan to an IRA.

Risk Tolerance – The capacity to accept investment risk.  This includes psychological factors relating to your willingness to “stomach” fluctuations of an investment.

Diversification –   Owning many different types of investments in order to reduce risk.  (Not having all of your eggs in one basket.)

Dollar Cost Averaging – A    systematic way of investing a set amount of money monthly or quarterly. With this strategy, an investor tries to reduce the risk of investing a large sum of cash all at once.
Net Worth –  The difference between the total value of what you own minus what you owe.

Compound Interest – Interest that is computed on the principal (balance) and on the interest accrued during the preceding period. Compound interest may be computed daily, monthly, quarterly, semi- annually, or annually.

Tax Deferred  – Tax treatment of some products and investments that result in income taxation only upon maturity or withdrawal of funds.

Vesting –  Refers to the right to receive workplace retirement benefits.  An employee often is not entitled to pension or employer contributions to a 401(k) plan until he or she has been at a company for a certain period of time. Most employees are 100% vested after 5 years of plan enrollment.

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