Saving and Investing for Students

 
Money Market Funds
—
An
investment fund that seeks to earn 
interest for shareholders while maintaining a stable net asset value 
(NAV) of $1 per share. Mutual funds, brokerage firms and banks 
offer these funds, which are not federally insured. 
Mutual Funds
—
These are pools of money managed by an in-
vestment company. They offer investors a way to hold stocks, 

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SAVING AND INVESTING
bonds or other assets. Funds are managed to meet certain objec-
tives. Some funds may seek to generate income on a regular basis, 
for instance, while others may seek to invest in companies that 
are growing at a rapid pace. Funds usually charge annual manage-
ment fees and may impose a sales charge, or load, on investors 
when they buy or sell shares in the fund. So-called “no load” 
funds impose no sales charge.
Principal
—
The total amount of money being borrowed or lent; 
the initial amount of money invested.
Profit
—
Revenue minus cost; money made on a transaction.
Purchasing Power
—
T
he amount of goods and services that can 
be purchased by a given unit of currency after taking into account 
the effect of inflation.
Real Return
—
The return that is earned over a given time period 
after subtracting taxes and accounting for inflation.
 
Risk
—
In finance, risk refers to the degree of uncertainty about 
the rate of return on an asset and the potential harm that could 
arise when financial returns are not what the investor expected. In 
general, as investment risks go up, investors seek higher returns to 
compensate them for taking on such risks.
Risk Tolerance
—
An investor’s ability to handle declines or 
swings in the value of his or her portfolio.