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12b-1 Charge
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An added annual charge in a mutual fund
that charges shareholders for some of the fund's
promotion expenses.
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Adjusted Gross Income
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Total income less allowed adjustments,
which include such items as moving expenses, IRA, and
Keogh contributions, and employee business expenses.
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Back-End Load Mutual Fund
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Additional charges and fees paid out
annually rather than initially, unless money is
withdrawn early, then a surrender charge or deferred
sales charge takes affect
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Balanced Fund
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A mutual fund that invests in both stocks
and bonds.
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Bear Market
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A declining market, may refer to entire
market or individual security.
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Blue-Chip Stocks
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Shares of a large, mature company with a
steady record of profits and dividends and a high
probability of continued earnings.
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Bond
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A long term promissory note, prices go up
when interest rates go down.
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Bull Market
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A rising market
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Long Term Capital Gains
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The difference between an asset's
purchase price and selling price, on holdings of more
than 12 months.
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Capital Preservation
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Protecting the initial investment from
loss of principal, typically accomplished by investing
in conservative or guaranteed vehicles.
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Closed-End Mutual Fund
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Issues a limited number of shares and
does not redeem those that are outstanding. Trades at a
premium or discount to NAV as share prices determined by
pressures of supply and demand.
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Cost Basis
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Original price of an asset, used in
determining capital gains. It usually is the purchase
price, but in the case of an inheritance it is the
appraised value of the asset at the time of the donor's
death.
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Dilution
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Issuing additional shares, thereby
reducing proportional ownership of existing
shareholders.
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Distribution
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Pay out of realized capital gains on
securities in the portfolio of the fund or closed end
investment company.
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Diversification
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Spreading of risk by putting assets in
several categories of investments or with a broad range
of stocks in one portfolio.
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Dividend
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A share of a company's net profits
distributed by the company to its stockholders.
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Dollar Cost Averaging
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A formula-investment plan requiring
periodic fixed-dollar-amount investments. This practice
tends to average the unit cost of an investment over
time.
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Embedded (Or Inherited) Unrealized
Gains
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Unrealized gains within a mutual fund
that would create a tax liability upon sale, even for
new investors that did not participate in the gains.
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Emerging Markets
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Developing foreign markets, involving
greater volatility and higher risk than established
markets.
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Equities
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May be stock, bond, or options
(securities)
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Growth
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Investments that will provide capital
appreciation over the long-term.
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Index Fund
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A fund whose portfolio is matched to an
index, such as S & P, and whose performance therefore
mirrors the market as a whole. (Usually have low fees
and are tax efficient in bull markets.)
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Inflation Protection
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Investing a portion of the portfolio in
growth stocks or funds in order to keep up with the rise
in the price of goods and services.
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Junk Bonds
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High-risk bonds, usually promising a very
high indicated return coupled with a larger risk of
default.
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Load Fund
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Mutual fund with shares sold at it's NAV
plus a sales charge (typically 4-8%) of the net amount
invested.
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Long Position
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The ownership of stocks or other
securities, as opposed to a short position where one has
sold securities that are not owned and want the price to
go down.
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Low-Load Fund
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Mutual funds that typically charge a 1-3%
sales charge rather than a full load of 4-8%.
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Market Timing
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Market timing is the method of investing
in certain asset classes at certain times to improve
your returns - particularly stocks. Essentially, market
timers try to outguess the trend of stocks or other
prices. Although market timing may sound tempting, it
has proven to be difficult to do well over the
long-term. It may seem easy to wait for a market decline
and then buy stocks before prices start going up, but
much of the appreciation of stocks comes in brief,
unexpected spurts that catch most investors off guard.
Usually, by the time a new trend is evident, a
significant portion of the appreciation has already
passed.
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Money-Market Account
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An interest bearing account where cash is
held, generally a safer haven.
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Net Asset Value (NAV)
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The per-share market value of a mutual
fund's portfolio.
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No-load Fund
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A fund whose shares are bought and sold
directly at the fund's NAV. Unlike a load fund, no agent
or sales fee is involved, true no loads avoid deferred
sales charges and 12b-1 fees.
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Penny-Stock
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Low-priced stocks, usually considered
under $1 per share, but sometimes includes stocks below
$3.
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Portfolio
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A holding of one or more securities by a
single owner (institution or individual)..
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Preferred Stock
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Shares whose indicated dividends and
liquidation values must be paid before common
shareholders receive any dividends or liquidation
payments.
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Prospectus
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An official document that all companies
offering new securities for public sale must file with
the SEC.
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Redemption
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Liquidating a shareholder's holdings.
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Risk
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The degree of uncertainty and chance of
loss of principal regarding an investment.
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Securities
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Paper assets representing a claim on
something of value, such as stocks, bonds, mortgages,
etc.
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Split
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A securities transaction exchange whereby
each shareholder ends up with more shares representing
the same percentage of the firm. (Reverse split is when
you get less shares).
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Stock
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Ownership shares in a corporation.
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Tax Efficient Funds
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Funds that are managed to create a
minimum tax situation, but be aware of embedded
unrealized gains.
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Tender Offer
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An offer to purchase a large block of
securities made outside the general market in which the
securities are traded. Such offers are often made as
part of an effort to take-over a company.
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Total Rate of Return
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An annual return on an investment
including appreciation and dividends or interest.
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Volatility
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Characteristic of a security, commodity,
or market to rise or fall sharply in price within a
short period of time, driven by emotions of fear and
greed.
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Yield
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The return of an investment expressed as
a percentage of its market value.
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