Your Tax Situation

The return on any investment is influenced by your federal, state, and local tax situation. Investment earnings may be:

  • Taxable – Taxes paid yearly on interest, dividends and annual capital gain distributions from investments.
  • Tax-deferred – Taxes on earnings are deferred until withdrawal. Tax-deferred earnings include contributions and returns associated with IRAs, 401(k)s, and other retirement saving plans (see Unit 7 of Investing for Your Future Learning Lesson).
  • Tax-exempt – Earnings are wholly or partly free from taxes. Roth IRAs

Your Time Horizon

Your Time Horizon

Time is a very important resource to investors.

Young investors with a long time horizon may choose investments that exhibit wide price swings, knowing that time is available for fluctuations to average out. Families investing for a specific mid-life goal (e.g., funding a child’s education or purchasing a home) may choose a more moderate course which has opportunity for growth, but provides more safety for the principal. Individuals nearing retirement and those with the need to depend …


You can do several things to offset the impact of some types of risk. Diversifying your investment portfolio by selecting a variety of securities is one frequently used strategy. Done properly, diversification can reduce about 70 percent of the total risk of investing. Think about it. If you put all your money in one place, your return will depend solely on the performance of that one investment. Alternatively, if you invest in several assets, your return will depend on an …

Emergency Cash Reserve

Emergency Cash Reserve

Setting aside money to meet unexpected expenses provides a financial safety net and allows you to take advantage of financial opportunities as they arise. Most experts recommend an emergency fund equal to 3 to 6 months living expenses; however, you do not need to set aside this total amount in a low-yielding passbook, certificate of deposit, or money market account. The amount of your emergency fund depends upon your age, health, job outlook, and personal financial situation …

Investment Return

Total return is the profit (or loss) on an investment. It is a combination of current income (cash received from interest, dividends, etc.) and capital gains or losses (the change in value of the investment between the time you bought and sold it). The published rate of return for a selected investment is usually expressed as a percentage of the current price on an annual basis. However, the real rate of return is the rate of return earned after inflation, …


In finance: A certificate representing a share of ownership in a company. Stock is the ownership of a corporation represented by shares that are a claim on the corporation’s earnings and assets. There are many kinds of stocks, the most widely known being common stock, which usually entitles a stockholder to vote in the election of directors and other corporate matters.

In viticulture: Grape variety used as the underground portion of a grafted vine onto which the scion

Blue-Chip Stock

A term, derived from the most expensive chips in a poker game, used to indicate the stock of companies with long records of growth and profitability; i.e., the company has been growing and has been paying dividends for a long time.…

Annual Report

A report that public companies are required to file annually that describes the preceding year’s financial results and plans for the upcoming year. Annual reports include information about a company’s assets, liabilities, earnings, profits, and other year-end statistics. If the public can buy stock in a company, that company has to issue a report every year that explains how well it did in the past year and what its strategy is for next year. The report includes what the company …