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401(k): An employer-sponsored salary reduction plan that allows participating employees to have part of their salary placed into a qualified, tax-deferred retirement plan.

529 plan: A tax-advantaged vehicle for setting aside funds earmarked for future education expenses. In most cases, any money that is withdrawn from a 529 Plan and used for qualified higher education costs is not federally taxed, and may not be taxed by your state. These accounts offer many other benefits; contact us for more information.



Accrued interest: All interest that accumulates in between regular interest payments on a bond or other interest-paying investment.

Alternative minimum tax (AMT): a tax system designed to assure that wealthy individuals and organizations pay at least a minimum amount of federal income taxes. Certain securities, used to fund private, for-profit activities are subject to the AMT.

American Stock Exchange (AMEX): AMEX is the second largest floor-based exchange in the United States, and conducts trading in common stocks, index shares and equity derivative securities through a unique specialist system.

Annualized return: The average return over a defined period of time, generally a year.

Annuity: A contract offered by an insurance company that provides the investor, or annuitant (can be different from the investor), with a guaranteed stream of income in the future in exchange for an investment or periodic investments today.

Appreciation: The increase in the value of an asset, such as a stock, bond, commodity or real estate.

Ask price: The price at which sellers are willing to sell a security.

Asset: Anything that is owned by a business, institution or individual and has commercial or exchange value.

Asset allocation: How money invested is distributed among various types of investments, such as stocks, bonds and cash.

Automated Clearing House (ACH): An electronic network linking financial institutions for the purpose of facilitating electronic transfers of funds.



Balanced fund: Balanced mutual funds are the middle ground between stock funds and bond funds. They invest in stocks and bonds, with the percentage mix, or “balance,” based on the manager’s view of current market conditions. The bonds in the portfolio may provide more income and less price volatility than a stock fund, while the stocks help increase growth potential.

Basis point: The smallest unit used when quoting security yields. One basis point is one one-hundredth of a percent. For example, 100 basis points equal 1%.

Bear market: A prolonged period where the market loses value. A bear market generally occurs during a perceived “weak” economy.

Beneficiary: The person designated to receive the proceeds of an account or annuity in the event of the account-holder’s death.

Beta: A statistical measure of the price volatility of a security in relation to the entire stock market's volatility. 

Bid price: The price a buyer is willing to pay for a security.

Blue chip: Common stock offered by well-known, often large companies, with proven earnings and profit growth and a history of dividend payments.

Bond: A debt security, generally offered by a corporation or government entity. Bonds are called debt securities because when you purchase a bond you “loan” the issuer those funds, receive set interest payments for a defined period of time, and receive your principal back when the bond matures.

Bond rating: The method of evaluating the possibility of default by a bond issuer. Ratings range from AAA (highly unlikely to default) to D (in default). Under most state laws, institutions that invest other people’s money may not buy bonds rated BB or lower.

Bridge loan: A short-term loan designed for either immediate or long-term financing contingent on the selling of one commodity in order to purchase another.

Bull market: A market that sustains upward movement over a prolonged time period, often with high trading volume. Bull markets are frequently associated with times of economic prosperity.

Bypass trust: A trust fund that transfers assets to the surviving spouse. The estate tax on this transfer is eliminated through the estate tax credit equivalency available to the first spouse. At the death of the surviving spouse the balance of the trust is distributed to children, grandchildren or other designated beneficiaries.



Call (bonds): A feature that allows the issuer to repurchase, or “call away” the bonds from the purchaser at a specified future date and principal value.

Capital gain/loss: The difference between an asset’s purchase price and its selling price.

Capital gains distribution: Payments made by mutual fund companies to their shareholders, distributing any net gains received during the year when the mutual fund sold securities at a profit.

Cash flow: An analysis of all the factors affecting the cash account of an individual or business over a given period. In investments, it represents earnings before depreciation, amortization and noncash charges.

Certificate of deposit: Commonly known as a CD, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been deposited. The certificate earns a specified rate of interest and can have a maturity ranging from a few weeks to several years.

Charitable remainder trust: A donor (grantor) transfers assets into a trust, designating a specific charity as the beneficiary. The trust principal becomes the property of the charitable organization upon the death of the donor or the termination of the trust. In the interim, the donor receives an annuity in the form of periodic payments from the trust for themselves, and possibly their heirs. The assets continue to provide current income to the donor even though they've been moved out of the donor's estate.

Closed-end mutual fund: A mutual fund that has a fixed number of shares available for purchase.

Collateral: An asset that is used to guarantee a loan until the loan is repaid. If the borrower defaults, the lender has the legal right to seize the collateral and sell it to pay off the loan.

Commercial paper: A short-term, unsecured financing vehicle used typically by corporations to cover immediate credit needs. It is also used by money markets as a short-term investment vehicle.

Commission: The amount paid to a financial advisor for executing a trade. The amount of the fee is generally based on the number of shares traded or dollar value of the trade.

Commodities: Rough goods, such as grain or livestock products, traded in bulk on a commodities exchange.

Common stock: Ownership shares of a corporation.

Compound interest: Interest that is earned both on principal and the earlier interest earned on that principal.

Conduit IRA: Also known as a rollover IRA, this account is a special IRA used to hold funds distributed from a qualified plan, such as a 401(k), in order to protect the special tax status of those assets.

Confirmation: A written notification sent to you confirming a transaction in your investment account, and providing details of that transaction, such as quantity of shares bought or sold, and price.

Consumer price index: The CPI measures change in our cost of living, based on the changing costs of consumer goods and services, such as food, utilities and housing.

Convertible securities: Corporate securities (usually preferred shares or bonds) that may be exchanged for another type of security (usually common shares) at a prestated price after a specific time frame has elapsed.

Cost basis: The original price at which you purchased an investment.

Coupon: The interest rate paid on a debt security, such as municipal bond. The issuer of the security agrees to pay this coupon rate to the bondholder until maturity.

Credit rating: A measure of the perceived ability of a company or entity issuing debt to repay their obligations. This public rating is based on evaluation of the entity’s financial records and credit history.

Current yield: The annual interest payment on a bond, divided by the current price of the bond.

CUSIP: A unique identification number given to each security traded in the United States.



Debit balance: Money a margin customer owes to his or her brokerage firm for loans to purchase securities.

Debt security: A security representing a fixed amount of money borrowed that must be repaid. The security usually has a fixed maturity and interest rate. If you purchase a debt security, the issuer is “borrowing” the face value from you.

Declaration date: The day on which a company announces the details of its next dividend payment.

Default: When a debt issuer does not pay either principal or interest when it’s due.

Defined benefit plans: A definite retirement income—usually paid as a monthly pension— and often a certain percentage of your salary before retirement.

Depreciation: A reduction in the value of your assets or investments.

Derivative: An investment tool whose value is based on, or derived from, the value of a traditional security.

Distribution: The payout of realized capital gains on securities in the portfolio of a mutual fund. Or, with regard to estates, the dissemination of assets to the beneficiaries as carried out by the estate’s executor under the guidance of a court.

Diversification: Spreading risk by putting assets in a variety of investment categories and investment sectors, including stocks, bonds, money market instruments or a mutual fund with a broad range of stocks in one portfolio.

Dividend: A distribution (usually quarterly) of earnings to shareholders that is usually paid out in the form of money or stock.

Dividend reinvestment: The process of automatically purchasing additional shares of a company’s stock or a mutual fund with any dividends distributed by that company or mutual fund.

Dividend yield: Stock dividend divided by the price of the stock.

Dollar cost averaging: A systematic investment process where you invest equal amounts of money at regular intervals. The value of this method is that you buy fewer shares when prices are high and more shares when prices are low, reducing your average cost per share.

Dow Jones Industrial Average (DJIA): One of many indicators used to measure and report value changes in various groupings of stocks. The DJIA is a price-weighted average of 30 actively traded blue chip stocks, representing between 15 percent and 20 percent of the market value of all NYSE stocks. Prepared and published by Dow Jones & Company, it is the oldest and most widely quoted of all the market indicators.



Earnings: A corporation’s revenue, after expenses and other costs have been paid.

Earnings per share: A company’s earnings, divided by the number of common stock shares outstanding.

Education Savings Account: Formerly known as the Education IRA, the Coverdell Education Savings Account allows you to make annual investments that grow tax-deferred, for the purpose of funding future education expenses.

Employee Retirement Income Security Act (ERISA): The law governing the operation of most private and pension benefit plans.

Employee Stock Ownership Program (ESOP): A qualified retirement plan where your investment is used to purchase shares of your employing company’s stock.

Equity: Ownership interest held by shareholders in any corporation, real estate, etc.

Estate: All your property and possessions, including cash and investments, insurance policies, real estate, valuables, etc. that may be passed to your heirs.

Estate Planning: The process of arranging your financial affairs so that your wealth will be distributed according to your wishes after your death and avoid undue taxation.

Estate tax: A federal or state tax on assets left to heirs in a will. There is no estate tax on transfers of property between spouses.



Fair market value: The price at which an asset or service passes from a willing seller to a willing buyer. It is assumed that both the seller and buyer are rational and informed of any factors material to the transaction.

Federal Deposit Insurance Corporation (FDIC): A federal agency that guarantees funds on deposit in its member banks and thrift institutions. The FDIC also performs other functions, such as making loans to or buying assets from member institutions to facilitate mergers or prevent failures.

Federal Funds: Funds deposited with the Federal Reserve and used by banks and financial institutions to cover short-term cash needs.

Federal Reserve System: The United States central banking system, which is responsible for regulating the US money supply, and monitoring bank operations throughout the nation.

Fiduciary: A person, company or association that holds assets in trust for a beneficiary and is responsible for investing the money to the benefit of the beneficiary.

Fixed annuity: In addition to guaranteeing your principal, a fixed-rate annuity earns a guaranteed rate of interest for a specified period of time. The financial strength of the company making the guarantee is very important in choosing a fixed annuity. As an investor in a fixed annuity, you do not have a personal account—instead, you are considered a general creditor of the insurance company. Therefore, the guarantee depends upon the strength of the insurance company.

Fixed income security: A security that pays a fixed rate of return, usually bonds or preferred stock.

Fractional share: A unit of stock that is less than one full share. Fractional shares may be issued, for instance, in a dividend reinvestment plan when the dividends being reinvested are not adequate to buy a full share at the stock’s current price.

Full faith and credit: A promise meaning that the full taxing and borrowing power of the issuer, plus revenue other than taxes, will be paid in interest and repayment of the principal of a bond issued by a government entity.

Futures contract: A contract to buy or sell a specific commodity at a specific quantity and price on a defined date in the future.



Gift tax: A graduated federal or state tax levied on the donor of a gift when assets are passed from one person to another. Generally, the larger the gift, the higher the tax rate.

Gross Domestic Product (GDP): One our leading economic indicators in the United States, GDP measures the total output of all products and services produced by the US economy, for a defined period of time.

Growth stocks: Corporate stocks that show faster-than-average gains in earnings. Over the long term, these stocks tend to outperform slower-growing stocks.



Hedge: An investment tactic where the risk of one investment is offset by another investment.

High yield bond funds: High yield bond funds invest in lower-rated bonds of longer maturities. The principal is less stable than in fixed income funds that invest in higher-rated but lower-yielding securities.



Immediate annuities: Immediate annuities do not have an accumulation period. Withdrawals begin as soon as the contract is established. This type of annuity is useful to fund a specific period of financial need, such as four years of college. Immediate annuities are also often used to guarantee payment of financial agreements such as court settlements and business purchases.

Income fund: A mutual fund that invests primarily in stocks that produce income for the investor.

Index: A composite of securities whose performance is used as a barometer for measuring the performance of other securities.

Individual Retirement Account (IRA): A tax-deferred investment account developed expressly to provide investors with a tax-advantaged way to save money for retirement.

Inflation: An increase in the price of goods and services.

Inflation risk: The risk that increasing inflation will diminish or eliminate returns from an investment.

Initial Public Offering (IPO): The first time a company offers stock to the public.

Interest: The cost of borrowing money, usually expressed as a rate over a period of time.

Interest rate risk: The risk that interest rates will increase, reducing or eliminating your return on a rate-sensitive investment.

International funds: International funds invest in securities of foreign companies and governments. They may be stock or bond funds, with investment objectives similar to those of domestic funds. They enable investors to diversify holdings, balancing the opportunities and risks of international investing. Some international funds specialize in a region or individual country. Because of their specialization and management costs, international funds usually have higher fund expenses and management fees than most other funds.

Investment Advisor Act of 1940: Legislation passed by Congress that requires all investment advisors to register with the Securities and Exchange Commission as a measure to protect the public from misrepresentation and fraud.



Joint tenants: A specific type of account registration where two or more people share equally in the account holdings. When one account holder dies, the assets pass on to the remaining account holders. There are two types - with rights of survivorship and in common - the in common account does NOT revert to the other account holders.

Junk bond: A bond with a credit rating of BB or lower; also known as high-yield bonds. These bonds tend to be issued by companies with shorter or more volatile track records, and offer the potential for higher returns, but also greater risk.



Keogh plan: A tax-deferred retirement plan for the self-employed.



Limit order: An order to buy or sell a stock at a specific price or better.

Liquidity: The ability of an individual or company to convert assets into cash or cash equivalents without significant loss.

Load: The sales fee or commission charged by some mutual funds.

Long term capital gains: Profits received from the sale of a security that was held for more than a year.

Lump sum distribution: A single payout from your retirement plan that transfers all your assets out of the plan.



Margin: A type of account that allows you to borrow against the value of your other investments to make additional purchases.

Margin call: Margin accounts have minimum maintenance requirements. Should your account value fall below those requirements, you will receive a margin call, and be asked to deposit cash or securities into your account that raise your balance above the minimum maintenance level.

Market capitalization: The value of a corporation as determined by multiplying the number of shares of outstanding common stock by the stock’s current market price.

Market order: An order to buy or sell a security at the current market price.

Market value: The current market price of a security as indicated by the last trade recorded.

Marital deduction: A legal stipulation allowing the assets of a married person to pass to their partner upon their death, without incurring estate taxes.

Maturity: The date on which the principal of a bond or other debt instrument is required to be repaid.

Money manager: A professional responsible for the securities portfolio of individual or institutional investors. The manager has the fiduciary responsibility to manage assets prudently and choose investments which provide the best opportunity for profit.

Money market funds: Money market funds are a type of mutual fund that provides investors with immediate availability of their money, while offering a better return than some alternatives. These funds hold large quantities of short-term securities, some of which mature daily.

Money purchase pensions: Employers are required to make annual contributions to these qualified plans, even if they earn no profit. These are not defined-benefit plans, so your retirement benefits consist only of the accumulated value of your account when you retire or withdraw from your plan.

Municipal bond: A debt instrument issued by a municipality or state or local government entity, to provide funds for specific projects or general funding needs. The interest received by investors from a municipal bond is generally exempt from federal income taxes, and may be exempt from state and local income taxes in certain circumstances.

Municipal bond funds: These funds invest in tax-exempt bonds issued by states and local governments. The interest income from municipal bond funds is generally exempt from federal income taxes. Investors who are taxed at one of the higher marginal rates will generally benefit by investing in a municipal bond fund rather than a taxable bond fund. Investors buying bond funds in their state of residence may earn income that is exempt from state and local taxes, as well.

Mutual fund: An investment company that pools the money of a large group of investors and purchases a variety of securities to achieve a specific investment objective.



National Association of Securities Dealers (NASD): An organization of investment industry brokers and dealers who work together to establish industry standards and establish fair practices within the industry. The NASD is considered a self-regulatory organization because it is a group of industry broker-dealers policing themselves.

National Association of Securities Dealers Automated Quotations System (NASDAQ): A computerized system that provides brokers and dealers with price quotations for over the counter and many New York Stock Exchange listed securities.

Net asset value: The total market value of a mutual fund’s assets, minus their liabilities, divided by the number of shares outstanding.

Net worth: The amount by which assets exceed liabilities. For individuals, this is the total value of all possessions, such as a house, stocks and bonds, minus all outstanding debts, such as a mortgage or revolving-credit loan.

New York Stock Exchange (NYSE): The oldest and largest stock exchange in the US, with more than 1600 companies listed for trading.

No-load fund: A mutual fund that does not carry a sales charge.



Official Statement: A required document published during any municipal bond offering, the Official Statement offers financial information, details of the bond offering and a legal opinion as to the validity of the offering.

Option: A contract granting the right to buy or sell securities at a specified price on or before a stated date. If the option is not exercised, it expires and has no value.

Order: A request to buy or sell securities.

Over the Counter (OTC): A phrase used to describe stocks traded on the electronic NASDAQ exchange rather than the NYSE or other floor exchanges.



Par value: The dollar value of a share of stock, when issued; used primarily for record-keeping purposes.

Portfolio: The combined holdings of a variety of assets, including stocks, bonds, annuities or other investment tools.

Preferred stock: Class of stock that receives dividends (at a specified rate) before common shares, and also has preference during a liquidation, but generally does not have voting rights.

Premium: The payment or payments made to build an annuity fund.

Price/earnings ratio (P/E ratio): The price of a stock divided by its earnings per share. P/E is generally used as a barometer for how the market thinks the company will perform in the future; a higher P/E generally indicates favorable expectations for earnings growth.

Prime rate: The prime rate is a key interest rate, and often viewed as an economic indicator, because it is the rate at which banks lend money to their best clients.

Principal: The face value of a debt instrument or deposit on which interest is either owed or earned.

Profit margin: The ratio of gross profits to net sales.

Profit-sharing plans: Employers can make annual contributions to a retirement plan if they wish. Each year, your employer decides what percentage of its profits to contribute to the profit-sharing plan.

Prospectus: Typically associated with mutual funds, annuities or stock offerings, a prospectus is a legal document that gives prospective buyers details about an investment, including financial information, investment objectives, risks, costs, and past performance. Potential investors must be given a prospectus before a purchase is made in one of these investments.

Proxy: Giving written authorization to another person, generally someone in management, to vote for you at a shareholder's meeting.



Qualified plan or trust: A tax-deferred plan set up by an employer for employees to build up savings, which are paid out at retirement or upon termination of employment. These plans, including profit sharing and pension plans, usually provide for employer contributions and may also allow employee contributions.



Rating: An evaluation of the credit-worthiness or stability of a corporation or bond issuer.

Real Estate Investment Trust (REIT): A unique investment company that purchases real estate holdings and distributes to its shareholders at least 95 percent of its net earnings annually.

Record date: The date of record for a stock or mutual fund which has announced a dividend; all owners of record on this date will receive the dividend. Anyone who purchases the stock after this date will not receive the dividend.

Registered representative: A brokerage firm associate who has completed a required course of study and passed a series of exams affirming their understanding of the securities industry, regulations, and appropriate conduct toward clients.

Reinvestment: Using the income from existing investments to purchase more of the investment.

Required Minimum Distribution (RMD): A minimum amount that must be withdrawn from tax-advantaged retirement plans and accounts each year, beginning the calendar year after the account holder reaches age 70 ½. These guidelines are established by the IRS.

Return: The profit earned on a securities or capital investment.

Risk: The measurable possibility of an investment losing or not gaining value. Risk differs from uncertainty in that it can be measured.

Risk tolerance: The level of risk exposure an investor can tolerate within their portfolio.

Rollover: The movement of funds from one investment to another, often to avoid tax penalty. Most widely used with regard to retirement accounts, the concept is also applicable to proceeds from the sale of a house, as well as securities investments.

Roth IRA: A type of IRA in which contributions are not tax deductible, but earnings are generally tax-free.



Securities and Exchange Commission (SEC): The federal agency responsible for promoting full public disclosure and protecting the public against malpractice in the securities markets.

Securities Investor Protection Corporation (SIPC): Congress to insure the securities and cash in customer accounts of member brokerage firms against the failure of those firms.

Security: An instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond) or rights to ownership, including options, subscription rights and subscription warrants.

Settlement: To complete a securities transaction.

Share: One unit of ownership of a public corporation or mutual fund.

Short-term capital gain: Profit realized on investments held less than one year.

SIMPLE IRA/401(k): Similar to traditional IRAs and 401(k)s, these Savings Incentive Match Plans for Employees are available to companies with 100 or fewer employees, who offer no other type of retirement plan.

SEPs (Simplified Employee Pension plans): These are employee individual retirement accounts to which an employer can make tax-deductible contributions.

Spousal IRA: An IRA account established to build retirement savings for a non-working spouse.

Spread: The difference between the bid price and the asking price for securities.

Standard & Poor’s Index: Commonly known as the S&P 500, the index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

Stock: Equity ownership of a public corporation.

Stock exchange: An organized market established to facilitate the buying and selling of stocks.

Stock split: When a company decides to increase the number of shares outstanding. Stock splits are accompanied by a decrease in the share price, so an investor’s equity is unchanged.

Street name: A type of security registration where your stocks are held in the brokerage firm’s name to facilitate trades.



Target benefit plans: Plans in which employers establish a target benefit for employees, but each employee’s actual pension is based on the amount in the employee's individual account.

Taxable equivalent yield: A term used primarily with municipal bonds, which are tax-exempt. The taxable equivalent yield is calculated to provide an easy means of comparing tax-exempt bonds with taxable bond yields.

Tax-exempt bond: A bond, generally issued by a municipality or other government entity, whose interest is not subject to federal, and potentially state and local, income taxes.

Tenants in common: A type of account registration where two or more investors own a certain percentage of an account. If one of the account holders dies, his/her heirs are entitled to the proportional share of the account.

Trade: Buying or selling an investment.

Trade date: The actual date on which the investment is bought or sold.

Transfer agent: A third party, usually a financial institution, who maintains records and handles the transfer of securities for an issuing corporation.

Treasury security: A short-term, discounted government security sold through competitive bidding at weekly and monthly auctions from $10,000 to $1 million. Commonly called T-bills, these are the most widely used of all government debt instruments.

Trust: A specific investment relationship where a designated trustee holds title to all assets held in the trust, for the benefit of a designated person or persons, the beneficiaries.

Trustee: The person legal designated to hold title to all assets held in a trust for the benefit of the beneficiaries.



Unit Investment Trust (UIT): An investment vehicle that purchases shares in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates and are sold at a premium above net asset value.

Uniform Gifts to Minors Act (UGMA): A law adopted by many states that established a simple process for distributing gifts in custodial accounts (rather than trusts) to minors. The minor can take control of the account when they reach the age of majority set by their state.

Uniform Transfers to Minors Act (UTMA): Similar to UGMA, this law expands the UGMA to sanction irrevocable transfer of gifts besides cash, investments, or insurance to a minor through custodial account.

Unrealized gain/loss: An increase or decrease in the value of an investment that has not yet been realized, because you still own the security.



Valuation: The estimated value of an investment.

Variable annuities: A variable annuity allows you to diversify by investing in a professionally managed portfolio of securities with varying rates of return. Most variable annuities also offer a fixed interest rate account, providing a set return guaranteed by the insurance company, in combination with the variable investment options.

Volatility: The characteristic of a security, commodity or market to rise or fall sharply in price within a short period of time.

Volume: The amount of a security that is traded in a certain period of time. For example, the volume reported for the NYSE each day tracks the total number of shares traded.



Warrant: A security that entitles the holder to purchase a certain amount of common stock at a set price (usually higher than the current price) for a set period of time.

Wash sale rule: An IRS rule that prohibits an investor from claiming a loss on the sale of an investment if that same investment or an investment that is materially the same is purchased within 30 days before or after the sale.





Yield: The return on a capital investment.

Yield to maturity: The return an investor would receive if a security were held until its maturity date. Used with bonds or other interest-bearing investments.



Zero coupon bond: A bond in which no periodic interest is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date.