Question

Define the following terms:   

2 - 401 K

3 - S&P 500

4 - Dow Jones

5 - Mutual fund

6 - Exchange traded fund (ETF)

Answer 1

2.

401 K - A 401K is a tax-deferred, defined contribution retirement plan. The name comes from a section of the Internal Revenue Code that permits an employer to create a retirement plan to which employees may contribute a portion of their wages on a pretax basis. It allows eligible employees of a company to save and invest for their own retirement on a tax-deferred basis. Only an employer is allowed to sponsor a 401k for their employees.

3.

S & P 500 - It is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The index is widely regarded as the best gauge of large-cap U.S. equities. It comprises 505 common stocks issued by 500 large-cap companies and traded on American stock exchanges (including the 30 companies that compose the Dow Jones Industrial Average) and covers about 80 percent of the American equity market by capitalization.

4.

Dow Jones - The Dow Jones Industrial Average (DJIA), also known as the Dow 30, is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. The Dow Jones is named after Charles Dow, who created the index back in 1896 along with his business partner Edward Jones.

5.

Mutual fund - A  mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds, and other securities with an objective to produce capital gains or income for the fund's investors.

6.

Exchange-traded fund - It is an investment fund traded on stock exchanges, much like stocks. It trades just as a normal stock would on an exchange, but unlike a mutual fund, prices adjust throughout the day rather than at market close. These ETFs can track stocks in a single industry, such as energy, or an entire index of equities like the S&P 500.