Advisory Fee
Fees charged by brokers for investment transactions.
Aggressive Growth Fund
A mutual fund that invests primarily in stocks. This type of fund offers the highest potential for returns but it also has above average risk.
Annual Report
A corporation's annual financial report. The filing of this report is required by the Securities and Exchange Commission.
Annuity
A contract between a person and an insurance company where the person pays a specified amount known as the premium. In return, the person will receive payments in the future for the stated period of time in the annuity contract. Types of annuities fall into one of two categories: fixed annuities or variable annuities.
Appreciation
The increase in value of an investment over a period of time.
Asset Allocation Fund
A mutual fund that invests in a wide variety of investments including real estate stocks, government securities, bonds, and foreign and domestic stocks. These funds offer the small investor a wider range of investments opportunity within one fund.
Asset Allocation Funds have varying risks and growth potential depending on the investment mix.
Asset
Anything having commercial or exchange value owned by an individual, family, business or institution. There are three primary categories of assets: cash, bonds, and stocks
Back-end Load
Fee paid by investor when a mutual fund is sold within a certain time period.
Balanced Fund
A mutual fund that invests in a equal mix of stocks and bonds.
Bear Market
A prolonged period of falling stock prices. A downward trend.
Beneficiary
A beneficiary is a party who receives a benefit. This could be income from retirement plan, insurance, etc.
Bond Fund
A mutual fund that invests in bonds, corporate and/or government bonds.
Bond
A debt of obligation. The interest and principal, when due, are payable to the holder. Specified interest payments are paid at specified intervals to the bond holder.
Broker
A firm or a person who, by specific licensing, is legally allowed to carry out financial transactions such as buying and selling stocks, bonds, mutual funds and insurance.
Bull Market
A prolonged period of rising stock prices. An upward trend.
Capital Gain Tax
Federal and state income tax on the profit resulting from the sale or exchange of a capital asset such as stocks, bonds, and real estate.
Capital gain
The profit resulting from the sale or exchange of a capital asset such as stocks, bonds, and real estate.
Certificate of Deposit (CD)
A certificate of deposit, CD, is a deposit made with a bank, credit union, or savings and loan. The deposit is a specified amount for a certain period of time earning set interest rate. A penalty is charged for early withdrawal.
Closed-end Fund
A mutual fund that has a fixed number of shares. These types of funds are normally listed on a major stock exchange.
Commission
A fee charged by brokers for investment transactions.
Community Property
Property is obtained while being married and living in a community property state. The following states are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Puerto Rico also recognizes community property laws.
Defined Benefit Plan
An employer sponsored retirement plan where benefits are calculated using a formula that includes salary history, length of employment, etc. The investment portfolio is controlled by the company.
Defined Contribution Plan
A retirement plan where contributions are made by the employee and/or the employer. The fund's value is based on the amount of contributions made; and the return on investment. A 401k is an example of a defined contribution plan.
Discount bond
A bond that is valued at less than its face value. This type of bond is considered high risk and offers a low coupon rate.
Distributions
Payments made from a retirement plan to the account owner or, in the case of the account owner's death, the beneficiary.
Earned Income
Salary, wages, self-employment income, alimony, and farming income are examples of earned income. Interest, dividends, social security payments, and pension payments are examples of unearned income.
Education IRA
Parents or guardians of children under 18 can set up an education IRA to save for the child's college education. Deposits to an education IRA are not tax deductible. The deposits and any earnings can be withdrawn without paying taxes or penalties as long as the money is used for the child's higher education.
Emerging Markets Fund
A mutual fund that invests mainly in the economy of developing countries. This type of fund is a higher risk due to the political instability in some of the countries. It is structured to offer higher returns.
Employee Contribution
Deposits made by an employee to a company retirement plan through payroll deduction.
Equity
The dollar value of property owned by an individual less any mortgage on the property. It is also the difference between fair market value and current indebtedness.
ERISA
Employee Retirement Income Security Act of 1974. ERISA set up rules and regulations for qualified retirement plans. Goal is to protect the retirement assets of US citizens.
Estate Plan
A plan whereby an individual analyzes his/her assets and liabilities, manages them effectively, and arranges for their disposal at death to best serve the needs of the beneficiaries.
Estate Tax
A tax imposed on a specified amount of assets upon the death of an individual.
Fixed Income Fund
A mutual fund that invests in government and corporate bonds, CDs, and other fixed income investments.
Front-end Load
A commission or fee charged when shares of a mutual fund are purchased.
Global Fund
A mutual fund that invests in companies worldwide.
Growth fund
A mutual fund that invests in a diversified group of stocks. The primary goal of this fund is capital appreciation.
Income Fund
A mutual fund that invests in securities that pay interest or dividends. The goal of an income fund is to provide income.
Index Fund
A mutual fund stock portfolio weighted the same as the stock exchange index. An index fund is set up to mirror the performance of the stock index.
Individual Retirement Account (IRA)
An individual retirement account is a retirement investing tool for employed individuals. Allows annual contributions up to a specified maximum amount. Restrictions on tax deductibility may apply.
Investment
Any asset or item with value that is purchased for the purpose of generating income or capital appreciation.
Keogh Plan
A tax-deferred retirement account that is available to the self-employed.
Lump-sum Distribution
A one time payment rather than small installment payments.
Management Fee
A set service fee charged by a fund administrator.
Maturity Date
The date that a bond or note becomes due. At that time the investor is paid back their principle and interest is no longer paid.
Money Market Fund
A mutual fund that pays money market interest rates. Money market funds invests in CDs and government securities.
Municipal Bond
A debt security issued by a state, county, or city to finance capital expenditures. These bonds pay interest and are usually tax exempt from federal taxes and often exempt from most state.
Mutual fund
An investment tool created for the smaller investor to participate in a diversified portfolio. Each investor shares in the gains and/or losses.
No-load Fund
A mutual fund that does not charge commissions.
Open-end Fund
A mutual fund that has an unlimited number of shares to be purchased.
Par Value
The face value as printed on the stock certificate or bond instrument and is assigned at the time of original issue. Par value for a bond is usually $1000. Many stocks are issued with no par value.
Pension plan
A retirement plan where the employer makes contributions for the employee. These contributions may be taxable but they are often tax exempt. Once an employee retires, eligibility begins for receipt of a monthly income payment from the plan.
Portfolio
A group of investments held by an investor (cash, stocks, bonds, mutual funds.)
Prospectus
A legal document which must be filed with the Securities and Exchange Commission describing the details of an investment and its financial history. The prospectus includes important facts about the company which a prospective investors needs to make a well educated investment decisions.
Qualified Domestic Order (QDRO)
Qualified Domestic Relations Order: a court ordered document regarding monetary settlements of a divorce.
Qualified Retirement Plan
A retirement plan that meets IRS code requirements and is created and maintained for the exclusive benefit of employees and their beneficiaries.
Roth IRA
A tax-deferred retirement account. Contributions are not tax deductible. No tax on withdrawals over the age of 59 1/2 and the account has been open for five years.
Sector Fund
A mutual fund whose investments are in a particular sector of industry or economy.
Simplified Employee Pension Plan (SEP)
A retirement plan for self-employed or small business owners. A SEP allows taxes to be deferred on investments.
Social Security
Social Security is a US federal benefits program that includes retirement benefits, disability income and veteran's pension. Both employees and employers contribute to this fund through taxes equally levied.
Stock Fund
A mutual fund that invests primarily in stocks.
Stocks
Instruments that signify an ownership or equity interest in a company. These are purchased as shares whose value can increase or decrease as the value of the company's assets increase or decrease.
Tax-deferred
Taxes postponed until a later date. Traditional IRAs, 401 (k) , and annuities are all examples of retirement plans that are tax-deferred.
Term Life Insurance
Considered to be the most inexpensive form of life insurance. Term life insurance provides protection for a specified period of time, or the term of the policy. A benefit is paid only if the insured dies during the term of the policy. If the insured is still living at the end of the term, the policy expires without value.
Traditional IRA
Individual Retirement Account grows tax-deferred until withdrawn. Your original contributions may or may not be tax deductible, depending upon holders specific circumstances.
Trust
A legal relationship where one person holds title to property or assets for the benefit of another person. Created by the owner of the property for the purpose of administering or distributing such property.
Vesting
The period of time an employee must work before having access to an employer-contributed pension fund. Vesting is structured in two ways: percentage of contributions and number of years of service.
Whole Life Insurance
Life insurance that insures you for your entire life.
Will
A legal document describing how a person wants his/her property distributed after death. This document also designates and executor and may include funeral and burial instructions.
401K
A defined contribution retirement plan that allows employees in private companies to make contributions of pre-tax dollars to a company pool that is then invested in stocks, bonds, or money markets.
403B
A retirement plan available to employees of public schools, non-profit organizations, and educational institutions. Employees are allowed to contribute pre-tax dollars to a company pool that is invested in stocks, bonds, or money markets.
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