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Glossary of Terms

Select the first letter of the word from the list below to jump to appropriate section of the glossary. If the term you are looking for starts with a digit or symbol, choose the '#' link.


O P Q R S T U V W X Y Z #

- A -

Accrued Interest
The interest due on a bond or other fixed-income security that is paid by a borrower to a lender for the use of funds.
Accumulation Plan
An arrangement in which an investor may make regular purchases of investment company shares in large or small amounts. Automatic reinvestment of dividends and distributions is usually provided.
Accumulation Unit
The basic valuation unit of the deferred variable annuity. Such units are valued daily to reflect investment performance and the prorated daily deduction for expenses, including management fee.
The act of one corporation acquiring control of another corporation. In "unfriendly" take-over attempts, the potential buying company may offer a price well above current market values, new securities and other inducements to stock-holders. The management of the subject company may ask for a better price or try to join up with a third company.
Affiliated Company
A company in which there is any direct or indirect ownership of 5 percent or more of the outstanding voting securities.
A mathematical measure of price volatility that attempts to isolate price movements of a stock from those of the market. When a stock is said to have a high alpha, it is expected to perform well regardless of what happens to the market as a whole.
Alternative Minimum Tax
Federal tax aimed at ensuring that wealthy individuals, trusts, estates, and corporations pay at least some income tax.
American Depository Receipt (ADR)
A certificate traded on U.S. stock exchanges or over the counter, representing ownership of a specific number of shares of a foreign stock. ADRs trade in U.S. dollars and settle just like other U.S. securities.
American Stock Exchange (AMEX)
An auction market where all buyers and sellers meet in free and open competition of a centralized marketplace.
Annual Exclusion
Tax rule that allows a taxpayer to exclude certain kinds of income from taxation.
The person on whose life annuity payments are based.
A series of regular payments that provide an income for a specified period of time (a number of years or for life). Annuities are generally issued by insurance companies.
An increase of the value of an asset.
A technique employed to profit from buying or selling the same security in different market places, thus making money from the disparity in market prices.
Asked Price
Also referred to as the offering price or quote. The lowest price at which a stock is offered for sale in the public market.
An economic resource that is owned or controlled by an entity. Some examples include cash and real estate.
Asset Allocation
The act of investing in a combination of various types of investments in order to diversify and reduce the risk for optimal return.
Asset Coverage, Over-All
The ratio of total assets to the sum of all prior obligations, including the liquidation value of the specific issue under consideration.
Asset Value, Per Common Share
A company’s net resources at market value (after the deduction of all liabilities, preferred stocks’ liquidation value and accrued dividends), divided by the number of common shares outstanding.
Asset Value, Per Preferred Share
A company’s net resources at market value (after the deduction of all liabilities, preferred stocks’ liquidation value and accrued dividends), divided by the number of preferred shares outstanding.
When a security is sold or purchased "at-the-market," the broker will execute your trade at the next available price.
Automatic Reinvestment
The program of purchasing additional shares using cash distributions and capital gain distributions at no or a reduced cost, thus allowing the shareholder to accumulate capital over time using dollar cost averaging. Automatic reinvestment is available for mutual funds and some individual securities.
Average Annual Compound Return
The simple rate of return, including reinvestment of distributions, averaged over a specified period of time.
Various ways of measuring the trend of securities prices, including the most popular Dow Jones Industrial Average of 30 stocks listed on the New York Stock Exchange. The average is computed by totaling the prices of the 30 stocks and then dividing by a divisor that is intended to compensate for past stock splits and stock dividends. As a result, point changes in the average have only a vague relationship to dollar price changes in stocks which are included in the average.
Also known as dollar cost averaging. A system of buying securities at regular intervals with a fixed dollar amount at the dollar’s worth rather than by the number of shares. In the long run, more shares end up being purchased when prices are low rather than high.
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- B -

Back-End Load
A fee charged to investors who sell or withdraw their mutual fund shares before owning them for a specified time.
Balance Sheet
A financial statement that shows the assets, liabilities, and owners' equity of an entity at a particular date.
Balanced Fund
An investment company that holds bonds and/or preferred stocks in varying ratios to its holding of common stocks, in order to maintain greater stability of capital and income.
Balanced Investments
The buying of an investment in order to obtain the highest return consistent with a low-risk strategy.
Bank Rate
The minimum rate at which short term advances are made by the treasury to chartered banks and other deposit taking institutions. Also known as the discount rate.
Basis Point
One one-hundredth of one percent. The smallest unit of measure used in quoting yields. Often called a 'beep,' it is used to describe the differences in bond yields.
Bear Market
A term used to suggest that securities are likely to decline.
Bearer Bonds
Also called a coupon bond. A bond that is not registered in anyone’s name. A bearer bond is payable to the person who holds it. Bearer bonds are no longer being issued.
A person who is designated in a will, life insurance policy, letter of credit, annuity or trust, to receive an inheritance.
The giving of assets, such as stocks, bonds, mutual funds, real estate, and personal property, to beneficiaries through the provisions of a will.
Best Bid
Highest price at which a security is offered for purchase.
Measures the volatility of a stock or mutual fund to the market as a whole. When a stock or fund is said to have a beta higher than 1, it is expected to move up or down more than the market. When beta is below 1, the stock or fund is expected to move less than the market.
Also referred to as the asked price, a quotation or quote. The price at which a buyer is willing to purchase a security.
A statement of money owed.
Blue Chip
A company known nationally for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.
Blue-Sky Laws
A name given to laws enacted by various states to protect the public against securities fraud.
A contract between a borrower and a lender in which the borrower promises to pay, at maturity, the face value plus a specified amount of interest for the period of time that the bond is outstanding. Also called a "debt security," bonds are usually issued by government agencies, municipalities, and corporations.
Book Value
The net-asset value of a company as determined by subtracting its liabilities from its assets.
Book Value Per Share
A measure of a company’s net worth calculated by dividing the book value by the number of shares of common stock.
Bowie Bonds
Name given to bonds floated against future music royalties on songs recorded by "glitter rocker" David Bowie.
A firm or individual who acts as a principal and an agent. A broker acts on behalf of the client in searching for the best deal in the marketplace. A dealer acts on behalf of itself in buying, selling, and maintaining inventories of securities.
Brokered CD
A large-denomination certificate of deposit bought by a brokerage from a bank. The brokerage slices up the certificate into smaller pieces and then sells the pieces to its customers.
Bull Market
A term to describe a rising stock market.
A strategy in which the stock portion of your portfolio is fully invested in the stock market at all times.
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- C -

Call Feature
States the conditions under which an issuer may retire a bond prior to maturity.
Call Option
The right to purchase shares at a predetermined price within a limited period of time.
Callable Bond
A bond that may be redeemed by the issuer prior to maturity.
Capital Gain
An increase in the value of a capital asset, calculated by the difference in price at which an investment was purchased and the price at which it was sold.
Capital Growth
The amount that a security’s market value increases over the original purchase price, or the amount that a mutual fund increases as reflected in the net asset value of the shares.
Capital Loss
A decrease in the value of a capital asset, calculated by the difference in price at which an investment was purchased and the price at which it was sold.
Cash Equivalents
Short-term, highly liquid investments.
Cash Flow Per Share
A measure of a firm’s financial strength. Earnings after taxes plus depreciation, on a per share basis.
Certificate of Deposit (CD)
A money market instrument issued by banks, in which principal and interest are paid at maturity.
Chapter 7
A form of bankruptcy in which an entity is in a state of insolvency and must liquidate assets.
Chapter 11
A form of bankruptcy in which a court approved reorganization of outstanding debt takes place while the business continues to operate.
Charitable Remainder Trust
Irrevocable trust in which one or more individuals are paid income until the grantor’s death, at which time the balance becomes tax free and is passed on to a designated charity.
Another name for technical analysis.
Excessive trading in an investor's account, usually to benefit the broker in the form of commissions. Churning is illegal.
Class of Shares
Shares of varying rights or powers that are issued by the same company (ex. Class A, Class B).
Closed-End Investment Company
A pooled investment fund that issues a set number of shares for purchase. Once these initial shares have been sold, no additional shares are issued. Also known as a closed-end fund.
Collaterized Mortgage Obligations (CMOs)
Mortgage-backed bonds that separate mortgage pools into different maturity classes.
Commercial Paper
Short term debt obligations (IOUs) issued by corporations and bought by money market funds in large quantities. Maturities range from several days to 9 months.
A broker’s fee for buying or selling securities.
An article of commerce or a product that can be used for commerce (ex. metals, financial instruments, agricultural products).
Common Stock
A share of ownership in a corporation.
The ability of an asset to generate interest that is then added to previous principal plus interest.
A court-appointed individual who manages the property of a person lacking the capacity to manage his own property.
Consumer Price Index (CPI)
Used to measure inflation, the CPI monitors the price of a basket of goods to establish the general direction of prices in an economy.
Convertible Bond
A bond that is exchangeable, usually for a predetermined number of common stock shares in the same company.
Corporate Bond
A bond issued by a private corporation.
A sudden temporary decline in stock or bond prices following a period of market strength; a 10% reduction in the market from the previous value.
A detachable piece of paper that the owner of a security clips from the security and sends to the issuer for payment of periodic interest.
Current Income
Dividends, interest, rent, and other income sources being received on an ongoing basis from investments.
Current Ratio
A measure of the liquidity of a business. Current assets divided by current liabilities.
Current Yield
Annual dividend or interest rate divided by the current price of the security.
A bank or financial institution that holds securities and assets for a client or fund.
Cyclical Companies
A name given to companies that tend to follow overall economic cycles. When the overall economy is strong, cyclical companies report strong earnings and vice versa.
Cyclical Industry
An industry whose performance is closely tied to the condition of the general economy. Steel, cement, machine tools and automobile industries are examples cyclical industries.
Cyclical Stocks
Stocks of companies whose earnings are tied to the business cycle. When business conditions are good the company is profitable and the price of common stock increases, and vice versa.
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- D -

Day Order
An order to buy or sell which expires at the end of the trading day on which it was entered if it is not executed.
A corporate IOU that is not backed by the company’s assets and is therefore somewhat riskier than a bond.
Debt-Equity Ratio
Total liabilities divided by total shareholder equity. The higher the ratio, the higher the debt level.
Deep Discount Bond
A bond selling at a discount of more than about 20 percent from its par value.
Default Risk
The risk that a company will be unable to pay the principal or contractual interest on its debt obligations.
A term used to describe a situation in which the general price level of goods and services is declining.
Cost allocation that assigns the original cost of plant and equipment to the period over which it was held.
Financial instruments whose value is based on the market value of an underlying asset such as stocks, bonds or a commodity.
The amount charged by a financial institution when a note receivable is discounted. The discount is equal to maturity value times discount rate times discount period.
Discount Bond
A bond that is valued at less than its face value.
Discount Broker
A brokerage house that executes orders at a cut-rate, but provides little or no research or investment aids.
Discount Rate
The interest rate charged by the Federal Reserve for loans to member banks.
The process of accumulating securities in different types of investments, industries, risk categories, and companies in an effort to reduce the potential risk of loss from any one investment.
A cash payment distributed to shareholders. Dividends are financed by profits, and are announced before they are paid.
Dividend Payout Ratio
The percentage of earnings paid to shareholders.
Dividend Yield
Annual dividends per share divided by price per share. The dividend yield is the percentage of return earned by an investor on common or preferred stock.
Dollar Cost Averaging
A system of buying securities at regular intervals with a fixed dollar amount at the dollar’s worth rather than by the number of shares. In the long run, more shares end up being purchased when prices are low rather than high.
Individual who donates property to another through a trust. Also called a grantor.
Dow Jones Industrial Average (DJIA)
Price-weighted average of 30 actively traded blue-chip stocks traded on the New York Stock Exchange.
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- E -

Earnings Per Share (EPS)
A company’s profits after taxes, bond interest and preferred stock payments, divided by the number of common stock outstanding.
Earnings Yield
Earnings per share for the most recent 12 months divided by the market price per share.
Economic Growth
The increase in value of the economy's production of goods and services. Economic growth is expressed as Gross National Product (GNP) or Gross Domestic Product (GDP).
Employee Retirement Income Security Act (ERISA)
The 1974 law that created the Pension Benefit Guaranty Corporation and established guidelines for managing pension funds and eased eligibility regulations.
Employee Stock Ownership Plan (ESOP)
A program in which employees have the opportunity to buy stock in their own company, thereby giving the employees a voice in the firm's management.
Another word for stock or similar securities in which there is ownership interest.
Equivalent Taxable Yield
A comparison of the tax free yield on a municipal bond to that of a corporate bond.
All the assets a person possesses at the time of death, including securities, real estate, interest in business, physical possessions, and cash.
Estate Tax
A tax imposed by a state or the federal government on assets left to heirs in a will.
U.S. dollars deposited in foreign banks or foreign branches of U.S. banks.
The date when the right of dividend no longer exists with the new buyer of the security. The ex-dividend date is four business days prior to holder-of-record date.
Exchange Privilege
The right of a shareholder to switch from one mutual fund to another in the same family of funds, usually at no additional charge.
Expected Rate of Return
The average possible return.
Expense Ratio
An amount (expressed as a percentage of total investment) that shareholders pay annually for mutual fund operating expenses and management fees.
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- F -

Face Value
The value principal amount as stated on the bond certificate.
Federal Funds Rate
The interest rate charged by banks who lend their excess reserves to other banks who need overnight loans.
Federal Home Loan Mortgage Corporation (FHLMC)
A publicly chartered agency that buys qualifying residential mortgages from lenders, packages them, provides guarantees, and then resells the securities on the open market.
Federal National Mortgage Association (FNMA)
Chartered in 1938, the FNMA is a publicly owned, government-sponsored corporation that purchases mortgages from lenders and resells them to investors.
A person, company or association who is responsible for investing the assets of the beneficiary in a prudent manner (ex. a trustee).
Financial Planner
A professional who helps individuals delineate financial plans with specific objectives and prepares a program to meet the needs and objectives.
Fixed Income Investment
A description for investments in bonds, certificates of deposit and other debt-based instruments that pay a fixed amount of interest.
A debt security with a variable interest rate tied to another interest rate.
Free Cash Flow Per Share
Net income plus all non-cash expenses, less dividends and capital expenditures, on a per share basis. A measure of a firm’s financial flexibility.
Front-End Load
The sales commission applied to an investment at the time of initial purchase.
Full-Service Broker
A brokerage firm with a research department and other services designed to supply its clients with investment advice.
Fundamental Analysis
The valuation of stocks based on the balance sheet and income statements of companies, in order to determine a company’s worth and potential for growth.
Futures Contract
An agreement to buy or sell a certain amount of a commodity or a financial instrument at a stipulated price, at a future date.
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- G -

General Obligation Bond (GO)
A municipal bond backed by the full faith, credit, and taxing power of the issuing unit rather than the revenue from a given project.
Ginnie Mae Pass-Through Certificate
Fixed-income securities that represent an undivided interest in a pool of federally insured mortgages put together and guaranteed by the Government National Mortgage Association (a.k.a. Ginnie Mae).
Going Public
Selling privately held shares to new investors on the over-the-counter market for the first time.
An options trader who sells a call option or a put option and collects a premium for doing so.
Gross Domestic Product (GDP)
The total value of goods and services produced in the national economy in a given year. The GDP does not include products made by U.S. companies in foreign markets, but does include products made in the U.S. by foreign companies. It is the primary indicator of economic growth in the U.S.
Growth Stocks
Stocks that are expected to experience substantial growth in earnings per share and price while retaining a high proportion of earnings.
Guaranteed Investment Contract (GIC)
A debt instrument sold in large denominations for retirement plans.
An individual who has the legal right to care for another person as a parent or to act as an administrator of the assets of a person declared incompetent for mental or physical reasons.
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- H -

A term to describe protective maneuvering by an investment manager to reduce the risk of a loss from a specified event.
A person who inherits some or all of the estate of a deceased person by virtue of being in the direct line, or being designated in a will or by a legal authority.
Holding Period
The length of time an asset is held by its owner.
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- I -

Income Statement
Also referred to as a profit and loss statement (P&L). The financial statement that summarizes the revenues and expenses of a company over a specified period of time.
Income Stock
A stock that pays high and regular dividends to shareholders.
A statistical measure of the changes in a particular market by monitoring a certain group of securities over time.
Individual Retirement Account
A tax-sheltered account ideal for retirement savings because it permits investment earnings to accumulate untaxed until they are withdrawn. The yearly contribution limit is $2,000, and penalties usually apply for withdrawals before age 59 �. In the event that a taxpayer’s yearly income is below a certain amount, all or part of their IRA contributions can be deducted, making the contributions a double tax shelter.
Increases in the general price level of goods and services. Inflation is commonly reported using the Consumer Price Index (CPI) as a measure, and is one of the major risks to investors over the long term.
Inflation Risk
Uncertainty over the future value of your investment (after inflation).
Initial Public Offering
A corporation’s first public offering of an issue of stock.
Directors, officers, and others in a corporation who know of or have access to confidential information which has not been released to the general public. Under the SEC rules, an insider is not permitted to trade the stock on the basis of such information.
Institutional Investors
Mutual funds, banks, insurance companies, pension plans and others that buy and sell stocks and bonds in large volumes.
Insured Municipal Bonds
Bonds that are insured against default by a municipal bond insurance company.
Inter Vivos Trust
Also referred to as a Living Trust. A trust established between living persons (ex. between a father and child).
Inverted Yield Curve
A situation where short term interest rates are higher than long term rates. An inverted yield curve is usually a sign of increased inflation accompanied by low levels of confidence in the economy.
Investment Adviser
A person who manages another person’s assets for a fee, usually a percentage of the assets invested.
Investment Adviser Act
Legislation passed by Congress in 1940 to protect the public against misrepresentation and fraud. The Investment Adviser Act requires all investment advisers to register with the SEC.
Investment Company
A trust or corporation whose assets are held for investment and are readily marketable. The two most common types are open-end mutual funds and closed-end management companies.
Irrevocable Trust
A trust that cannot be changed or terminated by the person who created it without the agreement of the beneficiary.
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- J -

Junk Bonds
A high-risk, high-yield bond with a credit rating of BB or lower according to Standard & Poor's or Moody's rating systems. Junk bonds are issued by relatively unknown or financially weak companies, or they have limited backing from reasonably solvent companies.
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- K -

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- L -

Lagging Indicator
Economic indicator that changes directions after business conditions have turned around.
Leading Indicator
Economic indicator that changes directions in advance of general business conditions.
Investing with borrowed money in the hope of multiplying gains. The disadvantage of leveraging is that it also multiplies losses.
Leveraged Buyout (LBO)
The use of borrowed money to finance the purchase of a firm. An LBO is often financed by raising money through the issuance and sale of junk bonds.
Limit Order
An order to buy or sell a security if it reaches a specified price.
The ability to quickly convert an investment portfolio to cash without suffering a noticeable loss in value.
A term used in the mutual fund industry to identify the sales charge or commission on a particular fund. Common types of loads are front-end loads and back-end loads (deferred sales charges).
Long Term Bond
A bond maturing in ten or more years.
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- M -

The difference between the current market value of the collateral and the amount of the loan.
Market Capitalization
The number of common stock shares outstanding times share price.
Market Order
An order placed with a broker to buy or sell a security at whatever the price may be when an order is executed.
Market Risk
The volatility of a stock price relative to the overall market as indicated by beta.
Market Timing
A term to describe a decision to leave the market entirely during downturns and reinvest when it heads back up.
The date at which a debt instrument is due and payable.
Maturity Date
Date on which the principal amount of a note, draft, acceptance bond, or other debt instrument becomes due and payable.
Monetary Policy
A federal government policy pursued by the Federal Reserve to control interest rates and the money supply.
Money Market Fund
A mutual fund that invests in short-term corporate and government debt. Interest payments are passed on to shareholders.
Money Market Instruments
Debt instruments such as treasury bills or corporate paper with a maturity of less than one year and are easily converted to cash.
Municipal Bond
A debt instrument issued by a state or local government in which the interest is exempt from federal income taxation, and also exempt from federal and local tax in the issuing state.
Mutual Fund
A professionally managed portfolio of stocks, bonds, and other investments that are divided up into shares. The market price of the fund’s shares fluctuates daily with the market price of the securities in its portfolio.
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- N -

National Association of Securities Dealers Automated Quotations System (Nasdaq)
A computerized system that provides brokers and dealers with price quotations for about 5,000 of the more actively traded over-the-counter stocks.
National Association of Securities Dealers, Inc. (NASD)
A self regulatory organization (SRO) operating under the supervision of the SEC. Its purpose is to standardize practices, establish high ethical standards, and enforce fair and equitable rules.
Net Asset Value (NAV)
In mutual funds, the NAV is the per share market value of a mutual fund. Also known as the bid price.
Net Asset Value Per Share (NAVPS)
Total assets less intangible assets and all liabilities, divided by the number of shares outstanding.
Net Change
The difference between the last trading price on a stock, bond, commodity, or mutual fund from one day to the next.
New York Stock Exchange (NYSE)
An auction market, where stocks are bought and sold at prices determined by bids and offers of investors. Investors are represented on the trading floor by floor professionals, who use their experience, skill and judgment to obtain the best possible prices for customers.
New York Stock Exchange Index
A market-weighted measure of stock market changes for all stocks listed on the NYSE.
No Load Fund
A mutual fund operated by an open-end investment company that does not assess a sales charge.
A written promise to pay a specified amount to a certain entity on demand or on a specific date.
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- O -

Open Order
Buy or sell order for securities that has not yet been executed or canceled.
Operating Expense
The amount paid for asset maintenance or the cost of doing business.
The right to buy or sell a security at a stated price within a given time
Over-The-Counter (OTC)
A computerized network (Nasdaq) through which trades of bonds, non-listed stocks, and other securities take place.
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- P -

Par Value
The face value of a security.
Payout Ratio
Percentage of a firm's profits that is paid out to shareholders in the form of dividends. Dividends per share divided by earnings per share.
Penny Stock
A recently issued stock selling for less than $5 per share and traded in the over-the-counter market. Penny stocks are usually issued by small, relatively unknown companies and are lightly traded.
Combining resources for a common purpose.
A collection of investments owned by an investor, an institution or a mutual fund.
Preferred Stock
A class of stock that pays a fixed dividend rate in which the company is obliged to pay before it distributes dividends to common shareholders.
Premium Bond
A bond with the selling price above face or redemption value.
Present Value
The value today of a future payment, or stream of payments, discounted at some appropriate interest rate.
Price-Earnings Current (P/E Current)
The current price of a security divided by earnings per share.
Price-Earnings Projected (P/E Projected)
The projected price of a security divided by projected earnings per share.
Price-Earnings Ratio (P/E)
Market price per share divided by a firm’s earnings per share. The price-earnings ratio is a measure of how the market currently values the firm’s earnings growth and risk prospects.
Primary Market
The market in which new issues (IPOs) are sold. A market is primary if the proceeds of the sale go to the issuer.
Prime Rate
The interest rate charged by a chartered bank to its most credit worthy borrowers.
The initial investment or the face amount of a bond.
Profit Sharing Plans
Agreement between a corporation and its employees that allows the employees to share in company profits.
Program Trading
Computer driven buying or selling of baskets of fifteen or more stocks by index arbitrage specialists or institutional traders.
A written statement disclosing the terms of a securities offering or mutual fund.
The formal authorization by a stockholder that permits someone else to vote in his or her place at shareholder meetings.
Put Bonds
A bond that allows its holder to redeem the issue at specified intervals before maturity and receive full face value.
Put Option
An investment product that gives you the right to sell shares at a predetermined price for a limited period of time.
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Real Rate of Return
Return on an investment adjusted for inflation.
Real Yield
The nominal yield received minus the percentage change in the Consumer Price Index (i.e., the rate of inflation).
Two consecutive quarters with a decrease in economic output.
Registered Bond
A bond that is recorded in the name of the holder on the books of the issuer or the issuer's registrar, and can be transferred to another owner only when endorsed by the registered owner.
Reinvestment Privilege
The option to have all dividends and capital gains automatically reinvested to purchase more shares.
Relative Strength
Price performance of a stock divided by the price performance of an appropriate index over the same time period. The relative strength is a measure of price trend that indicates how a stock is performing relative to other stocks.
Required Rate of Return
The rate of return demanded to induce investors to invest in a security.
Retained Earnings
The net profits reinvested in the business after dividends are paid.
Profit on a securities or capital investment, usually expressed as an annual percentage rate.
Return on Equity (ROE)
The ratio of net income to equity.
Revocable Trust
An agreement whereby income-producing property is deeded to heirs.
The possibility that an investment will not perform as anticipated.
Risk/Return Trade-Off
A concept that risk equals return; in other words, the higher the return the greater the risk and vice versa.
Round Lot
The basic trading block for stocks – usually 100 shares.
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Sales Charge
Also known as sales load. It is the fee charged on an investment. The sales charge is added to the net asset value when determining the offering price of mutual fund shares.
SEC Filing Terms
Secondary Market
The exchange or over-the-counter market where shares are traded after the initial offering.
Secondary Offering
The redistribution of a block of stock sometime after it has been sold by the issuing company.
A term used to describe a broad range of investment instruments, including stocks and bonds, mutual funds, options, and municipal bonds.
Securities Investor Protection Corporation (SIPC)
A nonprofit corporation, established by Congress under the Securities Investor Protection Act of 1970. The SIPC insures securities and cash in customer accounts of member brokerage firms against the failure of those firms.
Securities and Exchange Commission (SEC)
A federal agency created by the Securities Exchange Act of 1934 to administer that act and the Securities Act of 1933.
Selling Short
A technique used to take advantage of an anticipated decline in the price of stock or other security by reversing the usual order of buying and selling. An investor who borrows stock from a broker and immediately sells it is selling short. The investor profits by buying back the stock at the lower price.
Shareholders' Equity
Total assets less total liabilities. Also called net worth.
Short Term Investment Horizon
An investment period of one year or less.
Simple Rates of Return
The percentage change in the net asset value of a fund over a certain period of time, usually in terms of one month to one year periods.
Simplified Employee Pension Plan (SEP)
A pension plan in which both the employee and the employer contribute to an individual retirement account.
Sinking Fund
Money accumulated on a regular basis in a separate custodial account that is used to redeem debt securities or preferred stock issues.
Soft Dollar
Refers to paying a higher commission than could be negotiated for additional services such as research and technology.
The difference between the bid and offer prices.
Standard & Poor's 500 (S&P 500)
A benchmark of U.S. common stock performance. The S&P 500 includes 500 of the largest stocks (by market value) listed in the U.S.
Standard & Poor's Corporation
One of the two foremost financial rating agencies. Standard & Poor’s rates most of the publicly held corporate and municipal bonds and many of the government issues.
Standard Deviation
A statistical measure of a probability distribution measuring the degree to which a specific value in a probability distribution varies from the expected return or value.
Ownership of a corporation represented by shares that are a claim on the corporation's earnings and assets.
Stock Dividend
A dividend paid in additional shares of stock rather than cash.
Stock Symbol
Also referred to as a ticker symbol. The letters used to identify listed companies on the securities exchanges on which they trade.
Stop Order
An order to buy or sell at the market price once the security has traded at a specified price.
Stop-Limit Order
Order to a securities broker with instructions to buy or sell at a specified price or better after a given stop price has been reached or passed.
Stop-Loss Order
A customer order to a broker that sets the sell price of a stock below the current market price.
Strategic Planning
Planning which focuses on long range objectives and goals.
The amount on hand, or available for use.
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Tax Deferred
A term describing an investment whose accumulated earnings are free from taxation until the investor takes possession.
Technical Analysis
Research into the demand and supply for securities, options, mutual funds, and commodities based on trading volume and price trend studies.
Tender Offer
Public offering by a corporation to purchase shares from the investors at a specified price.
Time Value of Money
The concept that money available today is worth more than that same amount in the future.
Total Market Value
The price of common stock times the total shares outstanding.
Total Return
A measure of investment performance that starts with price changes, then adds in the results of reinvesting all earnings, such as interest or dividends, generated by the investment during the period being measured.
Treasury Bill
Short term government debt, issued in large denominations ($10,000) by the Federal Reserve usually to institutional investors.
Treasury Bonds
Long term debt issued by the U.S. government with maturity of over ten years. Treasury bonds usually pay interest semi-annually and may be callable in later years.
Treasury Notes
Intermediate term interest bearing debt issued by the U.S. government with maturity of one to ten years. Notes do pay interest and are not callable.
The number of times that assets, such as inventory or accounts receivable, are replaced on average during the period.
Two-Sided Market
A market in which the bid and ask sides are firm.
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- U -

Unit Investment Trust
A registered investment company that purchases a fixed portfolio of income producing securities, such as corporate, municipal, or government bonds.
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Process of determining the current worth of an asset.
Characteristic of a security, commodity, or market to rise or fall sharply in price within a short term period.
The total number of stock shares, bonds, or commodities futures contracts traded in a particular period.
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Withdrawal Plan
A program in which shareholders may receive periodic payments from an investment.
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- Y -

The return on an investor's capital investment.
Yield Curve
A curve on a graph that plots the interest rate (yield) of a bond on the vertical axis and the length of time until maturity on the horizontal axis.
Yield to Maturity
The rate of return anticipated on a bond if it is held to maturity.
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Zero Coupon Bond
A bond that pays all of its interest at maturity but none prior to maturity.
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401(k) Plan
A plan in which employees may elect, as an alternative to receiving taxable cash in the form of compensation or a bonus, to contribute pretax dollars to a qualified tax-deferred retirement plan. Elective deferrals are limited to about $9,000 a year, and withdrawals prior to age 59 � are subject to a 10 percent penalty tax except for death, disability, termination of employment, or qualifying hardship.
403(b) Plan
A type of Individual Retirement Account (IRA) covered in Section 403 (b) of the Internal Revenue Code, permitting employees of qualifying nonprofit organizations to set aside tax-deferred funds.
A type of Individual Retirement Account (IRA) covered in Section 403 (b) of the Internal Revenue Code, permitting employees of qualifying nonprofit organizations to set aside tax-deferred funds.
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