10 Essential Retirement Terms And Why They Matter

Satisfaction with your retirement is determined by the financial planning done beforehand. Successful investors spend years accumulating the funds necessary to cover both the expenses and unforeseen circumstances that come along with a retirement.

Financial planning in your working years allows for the stress-free retirement years you deserve.

Watch these videos below for 10 retirement terms you will encounter while investing.

What are Assets?

Assets are items that have value in the market. Resources controlled by a company from which future economic benefits are expected to be generated. In a business, an asset is something the business owns that has a dollar value. (An asset in general, is anything of value that can be traded.)

An intangible asset is an asset that has a dollar value but may not be worth anything unless the business is successful. Typically this is an asset that was acquired through buying another business. The price paid in excess of that business’s net worth is often called “goodwill” and is treated as an asset for GAAP purposes.

What is Margin of Safety?

Margin of Safety is the discount to the true value of a company.

The difference between the sticker price and margin of safety price. This reduction in the sticker price helps to insulate investors from possible valuation mistakes.

For example, in Rule #1 Investing we use a 50% margin. This means that whatever a business is worth, we want to buy it for half of that price.

Never make purchases at the sticker price. Instead, wait for the market to sell the company at your margin.

What is Sticker Price?

The sticker price is the intrinsic value of a business. The value of a business, despite the selling price on the market. Rule #1 investors seek to buy businesses at 50 percent of their Sticker Price, when they are undervalued. Sticker Price is determined by performing calculations on the Four Growth Rates (see definition).