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# A
B C D
E F G
H I J
K L M N
O P Q R
S T U V
W X Y Z
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8-K |
A current report required to be filed with the SEC if a certain specified
event occurs, such as: a change in control of the registrant, acquisition
or disposition of assets, bankruptcy or receivership, or other material
event. Form 8-K is required to be filed within 15 days of the event. |
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10-K |
The designation of the official audited financial report and narrative
which publicly owned companies must file with the SEC. It shows assets,
liabilities, equity revenues, expenses, and so forth. It is a reflection
of the corporation's condition at the close of the business year, and the
results of operations for that year. |
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10-Q |
Quarterly reports containing interim information that is "material"--important
for investors to know. These must be filed with the SEC. |
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A |
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Accredited
Investor |
An investor who has: a net worth of at least $1,000,000, or
annual income of at least $200,000 for each of the last
two years, or a couple with a joint income of $300,000 and a reasonable
expectation that this income level will be maintained, or an officer or director of the issuer, or
a financial institution with assets over $5,000,000, or a non-profit institutional investor
with assets over $5,000,000.
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Active
Participation |
For tax purposes, active participation, or "an active investment"
is one in which the investor materially participates, or has some level
of decision-making authority. A person who is making or receiving contributions
in an employer-sponsored retirement plan. |
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Aggressive
Growth |
Agressive growth funds are focused on an objective of capital appreciation,
with little or no regard for generating current income. Aggressive growth
funds invest almost exclusively in US stocks. Portfolio appreciation in
an aggressive growth fund will usually supercede the performance of the
market as a whole, however, they will also suffer greater losses than the
overall market in a downturn. |
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All
Weather Fund |
A type of mutual fund that manages its portfolio in an attempt to keep
up with the high returns associated with a bull market, yet manage to minimize
losses when the market turns. |
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All
or None |
All or none is a stock order stipulating that the entire order is filled
or the order is not to be executed. The trader may make numerous attempts
at filling that order until the order is canceled. |
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All
or None Underwriting |
A form of IPO underwriting typically used with start-up companies,
the all or none underwriting is a variation on the "best efforts"
transaction. The deal is contingent upon the entire issue being sold. If
any portion of the issue is left unsold, the deal is canceled and prospective
investors receive their money back. |
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Allocation |
The amount of stock attributed to syndicate members and selling group
members at the time of an IPO. These brokerage firms then allocate the
shares to their respective customers. |
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Alpha |
A measure of the vertical distance of a portfolio's performance above
or below the security market line at that individual security's (or mutual
fund's) respective level of risk. Portfolios with positive alphas as said
to have provided returns greater than their risk levels would have predicted.
Negative alphas imply the converse.
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Alternative
Order |
An order that instructs the floor broker to do one of two different
executions. It is possible that only one of the alternatives will be completely
filled, or that both options may be partially filled. |
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American
Exchange (AMEX) |
Started in 1973, the AMEX reflects the aggregate market values of stocks
and warrants traded on the American exchange. The AMEX also includes ADRs.
Changes in the AMEX reflects the weighted average of price changes of each
of the underlying issues weighted by the original number of shares outstanding;
therefore, the AMEX is not affected by stock splits or dividends.
Unlike other indicators, the AMEX allows for cash dividends paid on
the stocks giving measure to total return reflecting a change in market
price and current income. There is a greater concentration of large blue
chips in the AMEX than will be found in the S&P; however, a significant
inclusion of small, speculative stocks make the AMEX more volatile.
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Ask |
The lowest price a broker asks customers to pay for a security. |
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Asset Classes |
Groupings of investments that reflect varying degrees of risk tolerance. |
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Asset Mix |
The allocation of your investment dollars between different classes
of assets (i.e., stocks, bonds, treasury bills). |
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Average
Cost Method |
This method of calculating capital gains on a mutual fund sale blends
the cost of all the shares owned by simply calculating the total cost of
purchasing the shares and dividing by the number of shares purchased. This
eliminates the need for the investor to specifically identify specific
shares being sold and the dates they were acquired along with price.
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Close
(At the Close) |
The trade is executed as close to market close as possible. "At
the close" does not guarantee closing price, only a price close to
closing.
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Open
(At the Open) |
This stock order is to be filled at the opening of the market. If the
order cannot be filled, then the order is canceled. |
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B |
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Balanced
Fund |
Sometimes referred to as "total return funds," a balanced
fund seeks a blend of growth and income by investing in stocks, bonds and
convertible securities.
In terms of performance, a balanced fund is generally considered a more
conservative approach to investing, and is not known to achieve the highest
highs, or suffer from the lowest lows of the market.
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Banker's
Acceptance |
A draft or bill of exchange accepted by a bank or trust company. If
an American business needed an amount of short-term financing to import
a quantity of furniture from Japan, the American business may give the
Japanese exporter a "bill of exchange" as a promissory note for
payment. The Japanese exporter may require that the American business have
the note "guaranteed" by a bank to ensure payment. A bill of
exchange that is "accepted" by a bank is unconditionally guaranteed
by that institution and is then known as a banker's acceptance. Banker's
acceptances are negotiable securities that are traded in the secondary
market. Maturities range from 30 to 270 days, with most maturing in fewer
than 180 days. |
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Best
Efforts Underwriting |
The IPO underwriter agrees to act only as "agent" in the
transaction. The underwriter will use its best efforts to sell the issue,
however, will not accept any financial liability related to placement of
the issue. Any unsold portion remains with the issuer.
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Beta |
A statistically derived measure of risk---or price volatility---relative
to the overall market. The beta or "beta coefficient" of individual
securities are derived from past price behavior relative to past market
movements. Beta measures the volatility of a stock or mutual fund portfolio
in relation to the overall equity market, which is usually defined as the
S&P 500 composite index.
Betas are scaled such that the overall market is defined to have a beta
of 1.0. Stocks with lower exposure to market risk would have betas below
1.0, and stocks with greater market risk would have betas above 1.0. For
most common stocks, betas usually range between 0.5 and 1.5.
A well diversified portfolio with a beta of 1.3, for example, would
tend to be up or down 30% more in a given period than the market (S&P
500). Likewise, a well diversified portfolio with a beta of 0.8 would tend
to be up or down 20% less than the market.
While beta has limited predictive reliability for any one security over
short time periods, it has been found by experience to be highly useful
as a forecasting tool over longer periods for well diversified portfolios,
like most mutual funds.
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Bid |
The highest price a broker is willing to pay for a security. |
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Bond |
Government or business debt that pays a set rate of interest and returns
the face value on maturity. |
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Bond
Fund |
Bond funds, as the name implies, invest primarily in bonds, with an
investment objective of current income. Unless otherwise stated, a bond
fund is defined as one investing in taxable corporate bonds. Those income
funds investing in other types of debt instruments usually indicate so
in their name, such as tax-free municipal bond fund, GNMA fund, government
securities fund, etc. |
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Breakpoint |
In mutual fund investing, the breakpoint is a reduced sales charge
in consideration for a large investment in the fund. For example, Fund
ABC may charge a 5% front-end charge for investments up to $50,000, however,
an investment made of $50,000 - $100,000 would only be charged perhaps
4.5%. Breakpoints are volume discounts designed to entice the larger investor.
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Brokerage |
A company that brokers (deals directly with financial markets to buy
and sell) stocks and bonds for investors. A full-service brokerage offers
specialized consulting services. A discount brokerage buys and sells with
all decision making up to the investor; it assesses reduced fees and commissions
for each investor transaction. |
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Business
Risk |
Also known as credit risk, business risk is the investor's risk of
losing money because of business reverses experienced by the company or
industry invested in. Some of the causes of this could include: poor management,
competition, over-supply, bad pricing or economic downturns. |
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Buy
Minus |
An order to buy a stock just after a "down tick." (a price
decrease from the last trade). |
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Buy and Hold
Strategy |
A buy-and-hold strategy employs a philosophy of long term investment,
in contrast to an investment strategy relying on market timing for short
term profits. Once an investment is selected and purchased, it is "held"
for the long term, ignoring short term market movement. Some strategists
argue that this is the most reliable method for long term success in the
market.
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C |
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Call |
The right in options contracts to buy underlying securities at a specified
price at a specified time. Also refers to provisions in bond contracts
that allows issuers to buy back bonds prior to their stated maturity. |
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Capital Appreciation |
An increase in the price of an investment. |
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Capital Gain
(or Loss) |
The difference between an investment's purchase price and selling price.
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Capital Gains Distribution
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Payments to mutual fund shareholders of gains from the sale of securities
within the fund; generally made at least once a year. |
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Cash Account |
A type of account with a broker-dealer in which the customer agrees
to pay the full amount due for the purchase of securities within a short
period of time, usually five business days. |
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Certificate of Deposit
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A certificate issued by a depository institution representing a fixed
dollar amount that has been deposited for a fixed period at an established
interest rate. |
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Closed End Fund
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A type of fund company that is capitalized with a fixed number of shares
and whose securities are traded on the open market (rather than being redeemed
by the issuing company). |
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Commercial
Paper |
Commercial paper is a short term promissory note issued by a corporation
and backed by the faith and credit of that company. Because the financial
backing of the issuing company is the only thing standing behind it, only
the largest and most sound corporations are in a position to become viable
issuers of commercial paper. Maturities on commercial paper normally last
from 3 to 270 days.
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Commission |
The fee charged by a broker-dealer for services performed in buying
or selling securities on behalf of a customer. |
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Common
Stock |
Common stock is the residual ownership in a corporation that is entitled
to the assets and earnings of the company after all other claims against
the company have been made. Common stock ownership also grants basic voting
control within the company. The more shares of common stock owned, the
greater the shareholder's voting power and control over decisions directing
the company.
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Compound Returns
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By re-investing investment profits and earning an additional return,
you will experience the benefits of compounding. Over the long-term, compounding
can generate significant capital growth. |
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Constant
Dollar Investing |
Considered a defensive investment strategy, "constant dollar averaging"
maintains a constant dollar amount in the portfolio. If the value of the
portfolio increases, investments are sold, if it decreases, then additional
investments are made. Constant dollar averaging is best employed in a fluctuating
market. A long term upward trend in the market could precipitate excessive
selling, and eliminate some potential investment opportunities.
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Constant
Ratio Investing |
A defensive portfolio management strategy that requires the investor
to maintain the portfolio's ratio of aggressive to defensive holdings in
a constant position.
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Contingent Deferred Sales
Charge |
Sales charge taken if and when the investor redeems shares with the
fund. Usually stated as a percentage of the amount withdrawn, and charged
on a declining scale over a number of years, typically five to seven. Also
known as a "back-load."
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Contrarian
Investing |
An investment strategy employed by some money managers, "contrarian"
investing involves a strategy of selecting those securities currently "out
of favor" with the market as a whole. The strategy is supported by
the thinking that securities or industries whose prices are currently depressed
offer valuable opportunities for those willing to buy now, and wait until
the securities or industries move back into favor with the general market.
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Contributions
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>Dollars deposited into a retirement plan. |
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Cooling
Off Period |
After registration for a new issue is filed with the Securities Exchange
Commission (SEC), the issue falls into a 20-day cooling off period. Sales
of the issue are prohibited during this period until the final prospectus
is filed. Indications of interest may be accepted during this period under
the preliminary prospectus.
During this period, the underwriting syndicate meets periodically to
evaluate interest in the issue and to make changes to the public offering
price based on the demand, prior to the effective date.
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Corporate
Account |
A corporate account is established in the name of the corporation for
the investment of the assets of the corporation. A corporate resolution
is required to open the account in order to document the individual(s)
within the corporation having trading authority on the account, and to
set investment policy limits for those individuals. |
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Corporate
Bond Fund |
A mutual fund investing primarily in taxable corporate bonds, most
commonly with an investment objective of current income. Risk and return
associated with corporate bond funds is in direct relation to the quality
of the corporate securities within the fund.
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Credit
Risk |
Also known as business risk, credit risk is the investor's risk of
losing money because of business reverses experienced by the company or
industry invested in. Some of the causes of this could include: poor management,
competition, over-supply, bad pricing or economic downturns.
If expected earnings don't materialize, or if those earnings don't perform
to projected levels, the value of the investment will decline. Equities,
corporate bonds and some municipal bonds are subject to business risk.
Credit risk becomes most apparent when an independent rating companies
like Standard & Poor's or Moody's downgrade their ratings on a particular
security giving it less value in the market.
For corporations issuing stocks and bonds the downgrade is usually due
to a business set-back. For municipalities and state governments, it is
generally related to fiscal trouble.
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Currency
Risk |
In addition to the political risk an investor faces when investing
abroad, currency risk is also a significant factor for the overseas investor.
Instruments held in the currency of the foreign country are at the mercy
of the value of that currency against the dollar. Currency risk is independent
of political risk and will occur regardless of the relative political stability
of the foreign country.
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Custodial
Account |
A custodial account is one in which an individual acts on behalf of
another individual. Custodial accounts are most commonly used with accounts
for the benefit of minor children. An adult may establish an account for
a minor child, such as Bob Jones, Custodian for the benefit of Jimmy Jones,
a minor child. This allows Mr. Jones the opportunity to manage the money
in the account for his son, however, the assets in the account remain the
property of the child and will pass to him at age of majority (18-21 years
of age varying by state). |
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Custodian |
A custodian holds the physical assets of a mutual fund, mainly in the
form of investment securities and guards them against physical loss.
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Correlation Coefficient
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Correlation refers to the extent to which the market price behavior
of one asset, or class of assets, corresponds to the market price behavior
of another asset or class of assets. Two assets are said to be perfectly
correlated if their prices move up and down in perfect tandem. Two assets
are said to be "perfectly negatively correlated" if they move
in opposite directions and to the same extent.
Correlation Coefficient is a numerical value anywhere between, and including,
-2.0 and +1.0. This value indicates the degree to which the two assets
are correlated. A -2.0 correlation coefficient is perfectly negatively
correlated, +1.0 is perfectly correlated, and 0.0 indicates there is no
correlation between the assets.
Many investors use correlation coefficients as a means to manage portfolio
risk. If a portfolio is perfectly correlated, then the portfolio as a whole
will move up or down in tandem; however, a portfolio built with a degree
of negative correlation will afford the investor a degree of protection
since, when one security goes down in value, its negatively correlated
partner goes up.
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D |
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Day
Order |
Day orders are good for the day the trade is placed and are canceled
at the close of the trading day if left unfilled.
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Deductibility
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Refers to whether or not a contribution is deductible on an individual's
income tax return. |
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Depressed
Industry Investing |
An investment strategy seeking select "comeback" stocks in
depressed, or recessed industries. Depressed industry investing generally
focuses on purchasing the highest grade stocks within a depressed industry.
Successful selection is dependent upon the investor's ability to choose
an industry that is both viable and has the ability to rebound out of its
current recession.
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Discretionary Account
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A type of account with a broker-dealer in which the investor authorizes
the broker to buy and sell securities, selected by the broker, at a price,
amount, and time the broker believes to be best. |
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Distribution |
A withdrawal from a retirement plan; also a payment to mutual fund
shareholders reflecting net investment income of dividends and capital
gains. |
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Diversification
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Spreading investment dollars across several asset classes or among
many securities within an asset class to reduce risk. |
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Diversified
Fund |
As defined by the SEC, a diversified fund must keep 75% of its assets
invested so that no more than 5% of the total holdings in the fund are
in the securities of any one company. |
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Dividend |
A share of profits distributed to stockholders.
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Dividend
Distribution Rate |
Dividend distribution rate is the amount that has been paid in dividends
by a mutual fund. This number is usually historical, and can be quoted
one of two ways. The dividend distribution rate may be quoted as an annual
percentage, which would be the last dividend payout annualized; or it may
be quoted as a per share pay out, such as .0456 per share.
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Dividend
Yield |
The annual dividends paid by a stock or mutual fund represented as
an annual yield (or return). Some dividend yields are calculated using
just past performance actual returns, providing the investor with a "rear
view" of yield performance, while others use dividend yield as a projection
by using the most recent dividend payout and projecting it forward as an
assumed annual yield. |
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Documented
Discount Notes |
Also known as bank guaranteed letters of credit, and are used by businesses
as a means to raise short-term capital through the sale of promissory notes
guaranteed by a bank. Documented discount notes generally carry a highter
yield than other traditional bank issued investments.
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Dollar
Cost Averaging |
A defensive investment strategy that simply dictates the same amount
of money be invested at regular intervals without regard to the market
price of the security. Many small investors employ a monthly dollar cost
averaging strategy through systematic investing. When prices increase,
a fewer number of shares are purchased for that period. Likewise, when
prices fall, a greater number of shares is purchased.
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Dollar
Value Averaging |
Dollar value averaging is a variation on dollar cost averaging. Instead
of investing the same dollar amount at different intervals, in dollar value
averaging, the investor invests different dollar amounts to achieve the
same increase in portfolio value for each time period. |
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Dow Jones Industrial Average
(DJIA) |
The Dow Jones Industrial Average (DJIA) is regarded as the most widely
known and popularly used market measure. The Dow consists of 30 highly
capitalized, blue chip issues, all of which are well known by name. All
the stocks in the Dow tend to center around heavy industry. Dow Jones also
publishes transportation, utility and composite indexes.
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Due
Diligence |
The process of fully researching the background and finances of the
company issuing stock. Due diligence in an IPO is the responsibility of
the syndicate manager, and is required by the SEC Act of 1933, requiring
full and fair disclosure in order for investors to make informed investment
decisions.
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E |
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Earned Income
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Income that is eligible to be counted for an IRA contribution (wages,
tips, commissions, net business income, alimony or bonuses). |
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Effective
Date |
The date when the new issue is "effective" and available
for sale to the public. The effective date is typically one day after the
final price amendment is filed by the syndicate manager with the SEC.
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Equities |
Securities such as stocks that represent ownership in a
corporation. |
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Equity Fund |
A mutual fund that invests in stocks. |
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Equity
REIT |
A real estate investment trust primarily engaged in property ownership,
as opposed to mortgage lending. Equity REITs generally hold properties
in the portfolio for a period of time since they are not permitted to speculate
in property for quick profits. |
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Europe Asia Far East Index
(EAFE) |
The Europe, Asia, Far East Index, known as EAFE, includes 900 stocks
and is used as the benchmark for measurement of international portfolios.
The index is capitalization weighted and is computed as an arithmetic average
of the individual indexes of the component countries. |
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Exchange
Privileges |
Exchange privileges give the mutual fund or variable annuity investor
the ability to exchange one fund, or sub-account, for another within the
same family, without incurring a sales charge. This allows the investor
to make necessary portfolio changes at will without undue expense. Because
each "exchange" involves the sale of one fund and the purchase
of another, it does create a taxable event for the investor in the year
the exchange is made.
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F |
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Fiduciary
Account |
A fiduciary account is established to define an individual's legally
defined position of trust in relation to the account. This includes accounts
established in the name of a trust, estate, court appointed guardian, etc.
The individual named as the responsible party on a fiduciary account is
bound to a higher level of care in relation to the investment policies
pursued by the trustee. Legal documentation, such as a trust document is
required to define the trustee's scope and limits of r esponsibility.
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Fill
or Kill Order (FOK) |
This type of order states fill the entire order on the first try or
cancel the entire order. No further attempts to fill this order may be
made (see also: All or Nothing Order).
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Financial Times-Stock Exchange
100 (FT-SE 100) |
The Financial Times-Stock Exchange 100 is based on the performance
of 100 of the largest and most liquid issues traded on the London stock
market. It is abbreviated as the FT-SE 100.
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Firm
Commitment Underwriting |
In an IPO the underwriter of the issue agrees to act as principal in
the deal, buying the issue outright and then reselling it to the public,
earning the underwriter's discount. The underwriter in a full commitmentunderwriting assumes full financial responsibility for the issue. If any
part of the issue is unsold, or if market conditions cause prices to drop,
the underwriter is committed to buying the entire issue.
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First
In-First Out |
This method of calculating capital gains on a mutual fund sale identifies
the fund shares sold as those that were purchased first. If the customer
has held the mutual fund for some time, this method will result in the
highest amount of capital gains payable, since the oldest shares are being
sold.
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Fixed Annuity
|
An insurance contract that allows interest to grow on a tax-deferred
basis. The flexible withdrawal options of the Fixed Annuity can help to
create a retirement income stream. |
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Fixed Income Orientation
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A conservative investment philosophy by which fund managers manage
bond funds to maximize returns and minimize risk to principal. The appropriate
fixed-income vehicle will depend on the investor's time horizon and risk
tolerance. |
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Fixed
Repurchase Agreement |
A fixed repurchase agreement includes a set maturity date for repurchase,
normally from two to seven days.
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Flipping |
Buying shares of IPOs for the express purpose of "flipping"
them by immediately selling the position back into the market after the
issue begins trading. |
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Fractional
Discretion Order |
An order that gives the floor broker a limited amount of discretion
when trading the stock. A fractional discretion order gives the broker
a 1/4 or 1/2 point margin within which they may execute the trade. |
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Front
Load |
In reference to a mutual fund, it is a sales charge levied on the investor
at the time of investment. It is restricted by law to a maximum limit of
8.5%, however, most mutual funds with a front load charge less than 5%
to invest. |
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Fund
Family |
Fund family is the term used to describe a group of mutual funds operated
by the same investment company, but with differing investment objectives.
One fund family may have 70-200 individual funds, each with its own unique
investment objective and management style. The investor may exchange shares
of one fund for shares in another fund within the family without incurring
additional sales charges when making the exchange. |
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Mutual
Fund Dividends |
Dividends are the earnings of the fund. They result from the stocks
inside the fund paying dividends, and bonds inside the fund paying interest
to the fund. From this, expenses are deducted and the net amount of dividend
earnings is then distributed to the investor based on the number of shares
owned. |
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G |
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Going
Public |
When a corporation decides to issue stock through an initial public
offering, it is said to be "going public." This can also be done
through a reverse merger into an existing publicly traded shell, or through
a 504 (Regulation D) private placement offering, followed by the filing
of a registration statement for the market makers.
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Good Til Cancel
(GTC / GTW / GTM) |
If an order is entered Good Til Canceled (GTC) then the order will
remain open until it is canceled by the customer. Orders may also be entered
Good Thru the Week (GTW) and Good Thru the Month (GTM).
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Government
Bond Funds |
Government bond funds are generally considered to be extremely conservative
since they only invest in direct or indirect obligations of the United
States government. These funds buy in Treasury Bills, Notes, and Bonds
as well as GNMAs, and FNMAs. |
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Green
Fund |
Terminology commonly used in reference to socially conscious funds.
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Growth
Fund |
Growth funds are interested in capital appreciation with current income
as a secondary, usually distant, concern. Growth funds invest primarily
in US stocks, and assume a more conservative approach relative to their
"aggressive growth" counterparts. A growth fund will generally
not get involved in speculative issues or risky trading techniques to generate
returns. |
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Growth Investing Orientation
|
An investment philosophy that seeks stocks that will generate above-average
growth while maintaining risk at or below market levels. The emphasis is
on long-term (three to five year) results. |
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Growth
and Income Fund |
A growth and income fund attempts to achieve both capital appreciation
and current income. Growth and income funds are generally most interested
in the growth potential of the stock. These funds generally seek well established,
high dividend-paying stocks as a primary target.
Portfolios typically consist of US common and convertible preferred
stock. Utility stocks are known favorite investments of many growth and
income fund managers.
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H |
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High
Yield Fund |
Also known as "junk bond funds," high-yield funds invest
in lower-graded, higher-yielding corporate bonds, usually those with an
Standard and Poor's rating below BBB or below a Moody's Baa. Junk bond
funds generate significantly more income than their higher graded counterparts,
but also experience much greater price volatility in response to changing
market conditions.
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Hybrid
REIT |
A real estate investment trust that engages in a number of different
real estate investment activities, including both property ownership and
mortgage lending.
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I |
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Identifiable
Cost Method |
This method of calculating capital gains on a mutual fund sale allows
the investor to connect the sale of certain shares to specific purchases
on clearly identifiable dates. Obviously, this method requires the most
significant amount of record-keeping on the investors' part. The shares
being sold must be identified, in writing, at or prior to the date of sale.
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Immediate
or Cancel (IOC) |
IOC is a stock order indicating that the customer wants as much of
the order filled on the first try with the unfilled portion canceled. The
customer will accept whatever portion of the order that was able to be
filled on that first try, but no other attempts may be made to fill the
remainder of the order.
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Income
Fund |
An income fund is one seeking current income as its primary objective.
This may be achieved by investing in bonds, high dividend-paying stocks
or a combination of both. |
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Index |
To regulate through indexation, a system of regulatory control whereby
factors such as wages or interest are linked to the cost-of-living index
in an attempt to eliminate the effects of inflation. |
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Index
Fund |
Index funds invest only in the stocks that comprise a particular index,
such as the S&P 500, with the intention that the performance of the
fund will track with the performance of the index. These funds have been
very popular with investors, and as a result, more and more indexes are
being replicated as mutual fund investments to meet investor demand.
|
|
Indications
of Interest |
In an IPO, members of the syndicate, including the selling group of
the IPO, assemble a list of potential investors by taking "indications
of interest." Indications of interest are used to gauge market interest
in the issue prior to the effective date, and are not considered a firm
commitment on the part of the investor, the broker, or the underwriter
of the issue. |
|
Individual
Account |
An account established in the name of one individual. Sole Proprietorship
business accounts may be established as individual accounts and supplemented
with a sole proprietorship agreement.
|
|
Individual Retirement Account
(IRA) |
An account between an individual and a depository institution which
allows tax-advantaged saving for retirement. |
|
Inflation |
An increase in the cost of goods and services that decreases the purchasing
power of each dollar. |
|
Inflation Risk
|
Inflation robs you of your money’s purchasing power. As an investor,
you should be wary of inflation’s effect on your investment returns especially
over the long term. Your investment returns should always outperform inflation
(see rate of return). |
|
Initial
Public Offering (IPO) |
The first time a corporation offers stock to the public in order to
raise capital.
|
|
Institutional
Account |
An investment account established for an institution, such as a mutual
fund, pension fund or other institution.
|
|
International
Bond Fund |
Also known as "foreign" or "global" bond funds,
international bond funds purchase foreign securities in the currency of
the issuing country, such as the German Mark or Japanese Yen. Most international
funds seek to avoid countries that are known to be politically or economically
unstable, however, their objective is usually to seek greater income over
what is available in the domestic market.
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|
International
Equity Fund |
These funds are more commonly called "foreign" funds, and
only invest in the stocks of companies in foreign countries. Global stock
funds may invest in the stock of both US and foreign issuers. Some fund
families go to great lengths to let investors know that many foreign stocks
come from companies that manufacture well-known products, including Burger
King (UK), Fox Television (Australia) and Ragu Spaghetti Sauce (Netherlands).
|
|
Investment
Company |
As stated in the Investment Company Act of 1940, an investment company
is a corporation or trust in which a group of investors pool their money
in a single investment account in order to obtain diversification under
continuous professional management.
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J |
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K |
|
|
L |
|
|
Last
In-First Out |
This method of calculating capital gains on a mutual fund sale allows
the investor to calculate gains based on the last (most recent) shares
purchased in the fund. This will result in the lowest tax bill now, but
is simply putting off the tax bill that will ultimately confront the investor
later as the older shares are sold after longer holding periods.
|
|
Limit
Order |
A limit order specifies the price at which to buy or sell a stock.
Buy limit orders are entered below the current market price, and sell limit
orders are entered above the current market price. If the limit price is
"hit" then the trade is executed. If the limit price is never
reached, then the order cancels according to original instructions, either
at the end of the day, or "good til canceled."
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|
Liquidation
|
The process of converting an investment (asset) into cash.
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|
Liquidity |
A measure of the ease of converting an investment (asset) to cash.
|
|
Load |
A sales commission assessed by some mutual funds to compensate the
broker or financial planner who sells them; commissions typically range
from 2 to 6 percent. Front-end loads are assessed at time of purchase;
back-end loads are assessed at time of sale. |
|
M |
|
|
Management
Fee |
Fee paid by a mutual fund to the investment advisor for its services;
fees typically range from 0.50% to 1.00% of the fund's total assets. |
|
Margin Account
|
A type of account with a broker-dealer, in which the broker agrees
to lend the customer part of the amount due for the purchase of securities
|
|
Market
Order |
Market orders are filled immediately at prevailing market price, unless
marked "not held". Market orders do not carry over to the next
day.
|
|
Market
Risk |
Market risk is the risk of being involved in the market where prices
and performance fluctuates on a daily basis in response to many factors
including macro and micro economic forecasts and the overall optimism or
pessimism of those invested in the market. Many market shifts are due to
perception and speculation as to where the market is going. All of these
factors create the potential for loss or gain for those invested in the
securities traded there.
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|
Market
Timing |
An investment strategy based on the old adage of "buy low-sell
high." It is the art and science of knowing what and when to buy,
and what and when to sell, in order to maximize profits in the portfolio.
Although attempted by many, both professional and amateur, long term successful
market timing has eluded most investors and money managers.
|
|
Maturity |
The date on which a bond issuer must return the principal
amount. |
|
Money Market Fund
|
Mutual funds that trade in short-term, negotiable investment vehicles
such as certificates of deposit or U.S. Treasury securities. |
|
Morningstar Ratings
|
Proprietary ratings that reflect historical risk-adjusted performances
of mutual funds. Morningstar ratings are calculated from the funds' three-,
five-, and ten-year returns (with fee adjustments) in excess of 90-day
Treasury bill returns, and a risk factor that reflects fund performance
below 90-day T-bill returns. The one-year rating is calculated using the
same methodology, but is not a component of the overall rating. Ten percent
of the funds in a rating category receive 5 stars, the next 22.5% receive
4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars,
and the final 10% receive 1 star. |
|
Mortgage
REIT |
A real estate investment trust primarily engaged in mortgage lending
as opposed to outright property ownership. In addition to receiving interest
payments on the mortgage, most mortgage REITs maintain contingent rights
to obtain some ownership position in the underlying property. The interest
rate charged by the REIT on the mortgage is dependent on a number of factors,
including prevailing interest rates, risk of the underlying investment
and the type of mortgage loan granted.
|
|
Municipal
Bond Fund |
Municipal bond funds invest in bonds issued by municipalities, political
subdivisions and US territories, with a primary investment objective of
tax-free income. If properly managed, a "muni" bond fund will
enjoy federal tax-free status. Its income may also be free of state and
local income tax if the fund invests exclusive in the issues of a particular
state, and the investor is a resident of that state. These funds are said
to be "double tax free." |
|
Mutual Fund |
A professionally managed portfolio of stocks and/or bonds. Money is
pooled and then invested in various types of securities within the fund. |
|
Mutual
Fund Yield |
A mutual fund's yield is the income paid to the shareholders, generated
from dividends and interest paid on the underlying assets in the portfolio,
over a specified period of time. The yield is expressed as a percent of
the current public offering price per share.
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|
N |
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|
NAREIT |
NAREIT, the National Association of Real Estate Investment Trusts,
based in Washington, D.C., publishes performance and property data on all
publicly traded REITs in the United States. The data provided by NAREIT
includes a listing of all the properties owned by each REIT along with
a list of firms that follow that particular issue.
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|
NASDAQ
|
National Association of Securities Dealers Automated Quotation. The
NASDAQ index was created by the NASD and is a market value weighted index
designed to reflect price movements in the OTC market. NASDAQ publishes
a composite index made up of 2400 common stocks and seven sub-indexes.
The NASDAQ does not include any issue listed on an exchange or one with
only one market maker. |
|
Net
Asset Value |
The dollar value of one share of a mutual fund at a given point in
time, which is calculated by adding up the value of all of the fund's holdings
and dividing by the number of outstanding shares.
|
|
Nikkei
225-share Average |
The Nikkei 225-Share Average is an unweighted arithmetic average of
225 Japanese stocks. It is the most commonly quoted Japanese market index.
The Nikkei is similar to the Dow in its calculation, and like the Dow,
is price-weighted.
|
|
No-Load |
Describes mutual funds that do not assess a sales
commission. |
|
Non-Diversified
Fund |
A non-diversified fund earns such distinction from the SEC. A non-diversified
fund is one that may keep 50% of its assets such that no more than 5% of
the fund's total holdings are invested in the securities of any one company;
and up to 25% of the net assets may be in a single company. |
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O |
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Odd
Lot |
An order for a number of shares that is not a round lot (100 shares
of stock).
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|
Open-end Fund
|
A type of investment company which continuously offers shares to the
public and stands ready to buy back such shares whenever an investor wishes
to sell.
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|
Open
Repurchase Agreement |
An open repurchase agreement is one in which the parties decide to
extend the transaction on an indefinite basis. Open "repos" are
only terminated when one of the parties chooses to do so.
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|
Option |
A contract providing the right to buy or sell something--often 100
shares of corporate stock--at a fixed price, within a specified period
of time.
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|
Over the Counter (OTC)
|
A market for buying and selling stock between broker-dealers over
the telephone rather than by going through a stock exchange.
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P |
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Passive
Investment |
For tax purposes, a passive investment is one in which the investor
does not materially participate. Direct ownership of real estate can be
deemed active income, however, share ownership of a REIT or other limited
partnership is generally regarded as a passive investment. |
|
Portfolio |
A combination of securities or investment funds.
|
|
Precious
Metals Fund |
Precious metals funds invest in metals either through the purchase
of gold bullion, South African gold stocks, and Non-South African mining
stocks. The main producers of precious metals outside of South Africa are
the United States, Canada, and Australia. These funds are known to be excellent
inflation hedges, but experience sometimes wild price fluctuation, placing
them in the category of higher risk. |
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Preferred
Stock |
After common stock has been issued in a corporation, the Board of Directors,
may choose to issue preferred stock as well. As the name implies, preferred
stockholders receive preferential treatment to common shareholders in a
number of ways. Corporate dividends are distributed to the preferred shareholders
before any remaining dividends are shared with the common shareholders.
In addition, the preferred shareholders would receive the return of the
investment before the common shareholders in the event of a corporate liquidation.
|
|
Primary
Market |
The "primary market" is the market in which new, previously
unissued securities are traded. After initial issue, existing securities
are then traded in the "secondary market."
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|
Principal |
The original investment dollar amount. |
|
Prospectus |
The document required to be furnished to purchasers of newly registered
securities, which provides detailed information about the company issuing
the securities and about that particular offering.
|
|
Proxy |
A written authorization given by shareholders for someone else to
cast their votes on such corporate issues as election of directors.
|
|
Proxy Statement |
A document which the SEC requires a company to send to its shareholders
(owners of record) that provides material facts concerning matters on which
the shareholders will vote.
|
|
Public
Offering Price |
In a mutual fund, the public offering price is the price at which new
investors may buy into the fund. The public offering price begins with
the net asset value and includes any sales charge applicable at time of
purchase. the public offering price is also commonly referred to as POP.
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Put |
The right, in an options contract, to sell underlying securities at
a specified price at a specified time.
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|
Q |
|
|
R |
|
|
Rate of Return
|
The rate at which your investment grows is called the rate of return.
Usually expressed as a percentage.
|
|
REIT
Mutual Fund |
A REIT mutual fund, as the name implies, is a mutual made up of REITs
or other real estate-related investments.
|
|
Real Estate Investment Trust
(REIT) |
A form of investment company created by Congress in 1960, that manages
a portfolio of real estate investments in order to earn profits for REIT
shareholders. REITs may invest in real estate through property ownership,
mortgage lending, or a combination of the two. |
|
Real Rate of Return
|
Inflation robs you of your money’s purchasing power, and you should
consider the effect of inflation on the rate of return you are earning.
By taking inflation into account, you can accurately calculate the real
growth of your investment.
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|
Redemption
Fees |
Redemption fees, also known as "surrender charges" or "withdrawal
fees" are charged on some mutual funds and annuities to make withdrawals
from the investment or contract. Most redemption fees are set up on a descending
scale, gradually reducing to zero over a period of time.
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|
Repurchase
Agreement |
A repurchase agreement, more commonly known as a "repo,"
is an agreement to sell a money market instrument with the understanding
that the instrument would be "bought back" at some agreed upon
future date. Repos can be established for any money market instrument,
however, are most commonly used in conjunction government and agency securities.
Maturities on repos are usually seven days or less.
|
|
Restricted Securities
|
Stocks or bonds which were issued in a private sale or other transaction
not registered with the SEC.
|
|
Rollover |
When a distribution is taken from a retirement plan and reinvested
by the account holder in another tax-qualified plan.
|
|
Round
Lot |
100 shares of stock or multiples of 100. |
|
S |
|
|
Salary Deferral Option or Salary Deferral SEP
(SARSEP) |
A Simplified Employee Pension (SEP) plan which also allows employers
to defer a pre-tax portion of their pay into a SEP-IRA and defer paying
taxes until the funds are withdrawn.
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|
Security |
An investment vehicle such as a stock, bond, annuity or other interest-bearing
contract.
|
|
Sell
Plus Order |
An order to sell a stock after an "up tick." (a price increase
from the last trade).
|
|
Settlement
Date |
The date on which a trade "settles." Settlement date is the
date when funds are due to pay for securities that have been purchased,
and also the date on which the securities must be delivered for transfer
in the event of a sale.
|
|
Share
Class |
In reference to mutual funds, different fund families offer different
"classes" of shares in the fund, reflecting different pricing
structures to suit different investor needs. For example, "Class A"
shares will typically carry a front-end sales charge, "Class B"
shares will charge a contingent deferred sales charge, etc. There are many
different classes of shares now available to investors, each individually
defined by the fund itself.
Each share class will also have its own expense structure and different
total returns as well. The investor should always read the prospectus carefully
before selecting a particular class of mutual fund shares to purchase.
|
|
Simplified Employee Pension
(SEP) Plan |
An employer-sponsored retirement program . Employers contribute to
employee IRAs and receive tax deductions on those contributions.
|
|
Sophisticated
Investor |
An individual wishing to invest in an IPO, private placement, or bridge
financing who does not meet the definition of "accredited investor",
must be deemed a "sophisticated investor" by the issuer in order to
participate in the private placement. |
|
Special
Block |
An order that is too large for execution as part of the normal trading
process. "Special blocks" must be approved by the NYSE prior
to trading.
|
|
Standard & Poor's 500 Index
(S&P 500) |
The S&P is generally regarded as the second best known indicator
behind the Dow Jones. It comprises 500 common stocks, including some not
listed on the NYSE. The S&P is value-weighted and is calculated by
aggregating the market values of the component stocks, dividing by a base
value and multiplying that result by 10. Stock splits do not need to be
adjusted for, however, changes in capitalization are accounted for in a
proportionate base value change.
|
|
Stated
Percentage |
An order to be executed after a certain number of shares (volume) has
already traded in a particular issue.
|
|
Stock |
An investment that represents ownership in a corporation. Investment
gains and/or losses are tied to the corporation's performance. Stocks are
issued in classes known as common or preferred.
|
|
Stop-Limit |
Stop-Limit orders, as the name implies, combine the features of stop
orders and limit orders. If a stop order is entered and the stop price
is hit, the order then becomes a market order and will be filled at current
market price. A stop limit tells the trader that once the "stop"
price is triggered, the trader is to fill the order at limit price or better.
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|
Stop
Order |
Stop orders are entered for investors interested in limiting losses.
For example, if a customer owns a stock and wants to limit losses, he/she
can enter a sell stop order that tells the trader to sell if the stock
falls to a certain price. Sell stop orders are always entered below the
current market price of the stock.
|
|
Swap |
An order that instruct the broker to buy or sell a stock after another
stock order to buy or sell is executed first. For example, sell 500 AT&T
at the market, then buy 500 Microsoft at the market.
|
|
T |
|
|
Tax-deferred |
Income that is sheltered from taxes until the time of
withdrawal. |
|
Total
Return |
A measure of a mutual fund's performance; share price appreciation
plus reinvestment of dividends and capital gains, if any.
|
|
Transfer |
When an Individual Retirement Account (IRA) or retirement plan is transferred
directly from one institution to another without passing to the individual.
|
|
Transfer
Agent |
The transfer agent handles the transfer of share ownership of securites.
It is responsible to make sure that the securities delivered for settlement
are genuine and in good condition. The transfer agent's certification appears
on the face of all securities.
|
|
Turnover
Ratio |
The Turnover Ratio indicates the percentage of the mutual fund's portfolio
holdings that are bought and sold in a given year.
|
|
U |
|
|
U.S. Treasury Obligations
|
Negotiable debt obligations issued and backed by the U.S. government.
Treasury bills mature in one year or less; treasury notes mature in one
to 10 years; treasury bonds mature in 10 years or more.
|
|
V |
|
|
Value
Investing |
Value investors seek stocks with low expectations and low valuations
that exhibit above-average growth potential over time. Value investing
is considered a lower risk strategy that has advantages under most market
conditions.
|
|
Variable Annuity
|
An insurance contract that allows tax-deferral on income from investments
in professionally managed investment portfolios. Returns are based on performance
of those investments. The flexible withdrawal options of the Variable Annuity
can help to create a retirement income stream. |
|
Variable
Ratio Investing |
A defensive portfolio management strategy that requires the investor
to make variable adjustments in the portfolio's ratio of aggressive to
defensive positions as market conditions dictate.
|
|
W |
|
|
Wilshire
5000 |
The Wilshire 5000 Equity Index, published by Wilshire Associates located
in Santa Monica, CA is by far the most comprehensive of all the indicators.
It comprises all the stocks on the NYSE and the AMEX as well as the most
actively traded OTC issues.
|
|
X |
|
|
Y |
|
|
Yield |
The rate of return (usually dividend or interest payments) on an investment,
expressed as a percentage of market price.
|
|
Z |
|
19.36