| A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
W |
X |
Y |
ZA ... ADV form - Form on file with the Securities and Exchange Commission that contains important financial information about a registered investment advisor.
Advisor (Adviser) - 1. Person or company responsible for making mutual fund investments. 2. Organization employed by a mutual fund to give professional advice on the fund's investments and asset management practices. Also known as investment advisor.
Aggressive growth funds - Mutual funds that strive for maximum growth as the primary objective.
Annual report - Updates that detail performance for the year.
Annual return - The percentage of change in a mutual fund's net asset value over a year's time, factoring in income dividend payments, capital gains, and reinvestment of these distributions.
Asset-allocation fund - Balanced fund in which changes are made in the stock and bond percentage mix, based on the outlook for each market.
Automatic investment plan - Program that allows you to have as little as $50 a month electronically deducted from your checking account and invested in the mutual fund of your choice.
Average price per share - Most popular method of paying taxes on mutual fund sales, in which you calculate gains or losses by first figuring an average cost per share. You calculate the total cost of all the fund shares you own and divide that by the number of shares you own. B ...Balanced funds - Mutual funds that invest in both stocks and bonds, typically in relatively equal proportions.
Bear market - Period during which the stock market loses more than 10 percent of its value.
Beta value - Measure of a fund's volatility. The lower the beta value, the less risky the fund.
Blue-chip stocks - Stocks issued by well-established companies that pay dividends.
Bond - A debt instrument issued by a company, city, or state, or the U.S. government or its agencies, with a promise to pay regular interest and return the principal on a specified date.
Bull market - Period during which the stock market moves higher for a couple of years straight. C ...Callable - Debt that may be redeemed before it matures.
Capital appreciation funds - Mutual funds that strive for maximum growth. Although these funds can earn the greatest gains, they also can rack up the heaviest losses. Also known as aggressive growth funds.
Capital gains - Profits on the sale of securities.
Certificates of Deposit (CD's) - Debt instruments issued by banks and thrifts.
Certified Financial Planner (CFP) - Financial planner that has been awarded his or her certification by the International Board of Standards for Certified Financial Planners. To become CFP licensees, candidates must first demonstrate they have completed a personal financial planning curriculum, then pass a 10-hour board examination that tests their knowledge of the components of financial planning. In addition, all CFP licensees must fulfill a continuing education requirement and abide by the CFP Board's Code of Ethics and Professional Responsibility.
Charitable lead trust - Legal document used to avoid estate taxes, in which the charity receives the investment income and the principal goes to the trust beneficiaries when you die.
Charitable remainder trust - Legal document set up with a charity, in which the charity pays you income for life. When you die, the money goes to the charity, tax-free.
Check-a-month plan - Program through which money is automatically taken out of your checking account and invested in your mutual fund.
Closed-end funds - Funds whose shares are traded on an exchange, similar to stocks. The price per share doesn't typically equal the net asset value of a share.
Common stock - Unit of ownership in a public corporation with voting rights, but with lower priority than either preferred stock or bonds if the company is ever liquidated.
Constant dollar investing - Investment strategy that preserves profits by periodic evaluation and adjustment of a portfolio. You maintain the same amount in your stock fund each year by channeling funds from and to a bond or money market fund.
Convertible bond funds - Mutual funds that invest in bonds that can be converted into stocks.
Corporate bonds - Debt instruments issued by corporations.
Custodian - Bank or other financial institution that safeguards mutual fund securities and may respond to transactions only by designated fund officers. D ...Distributions - Dividends income and capital gains generally paid by mutual fund companies to their shareholders.
Diversification - Act of investing in different kinds of investments to lessen risk.
Diversified - Spread out, as among a variety of investments that perform differently.
Dividends - Profits that a corporation or mutual fund distributes to shareholders.
Dollar cost averaging - Strategy of making regular investments into a mutual fund and having earnings automatically reinvested. This way, when the share price drops, more shares are bought at lower prices.
Dow Jones Industrial Average - Model for the overall stock market that tracks the performance of 30 U.S. blue-chip stocks.
Duration - A way to measure part of the risk in a bond or bond fund. Duration tells you, in years, how long it will take you to recoup your principal investment. It makes for a handy way to judge the interest rate risk of your investment.
Example: if a bond or abond fund has a duration of seven years (stated as 7.0), a 1% drop in interest rates will raise its value by 7%, while a 1% rise in interest rates will lower its price by 7%. E ...Equities - Investments in stocks and other assets.
Equity income funds - Mutual funds that favor investments in stocks that generate income over growth. As a result, they can be less risky than other types of stock funds.
Ex-dividend date - Date on which the value of the income or capital gains distribution is deducted from the price of a fund's shares. F ...Face value - Value of a bond or note as given on the certificate. Corporate bonds are usually issued with $1,000 face values, municipal bonds with $5,000 face values, and government bonds, $1,000 to $10,000 face values. Also known as the principal.
Financial planner - Individual who helps establish a financial game plan. Although a financial planner may have certain licenses or designations indicating the extent of his or her training, there is no requirement that a financial planner have a license. Financial planners carry professional designations, such as CFP and ChFC.
First In-First Out (FIFO) - Basis for calculating the tax impact of mutual fund profits and losses that assumes shares sold are the oldest shares owned.
Fixed-income fund - Another term for a mutual bond fund.
Front-end loads - Sales commission paid to purchase shares of mutual funds. G ...General purpose money funds - Mutual funds that invest largely in bank CDs and short-term corporation I.O.U.'s called commercial paper.
Global funds - Mutual funds that invest in both the U.S. and foreign countries. Also known as world funds.
Growth funds - Mutual funds that invest in the stocks of well-established firms that are expected to be profitable and grow for years to come.
Growth and income funds - Mutual funds that own primarily blue-chip stocks of well-established companies that pay out a lot of dividends to their shareholders. These funds generally develop stock portfolios that balance the potential for appreciation with the potential for dividend income. H ...Hedging - Strategy of investing in one or more securities to protect yourself from potential losses in other investments.
High-quality corporate bond funds - Mutual funds that buy bonds issued by the nation's financially strongest companies.
High-yield bond funds - Risky bond mutual funds that invest in high-yield bonds of companies with poor credit ratings. The bonds are rated below triple B by Standard ST Poor's and Moody's. Also known as junk bond funds. I ...Income - Periodic interest or dividend distributions obtained from a fund.
Income funds - Mutual funds that invest in higher-yielding stocks, but may own some bonds. You get income first along with some growth. These funds usually invest in utility, telephone and blue-chip stocks.
Inflation - Rise in prices of goods and services.
Inflation hedge - Term describing an investment that performs well when inflation heats up.
Insurance agent - Individual licensed to sell insurance.
Insured municipal bond funds - Mutual funds that invest in insured bonds issued by cities, towns, states, toll roads, schools, water projects, and hospitals. The interest income is tax-free, and the bonds are insured against default by large private insurance companies, such as American Municipal Pond Assurance Corp. (AMRAC) and Municipal Bond Insurance Association (MBIA).
Interest income - Earnings received, often from bonds.
Interest rate risk - This is the danger that prevailing interest rates will rise significantly higher than the rate paid on bonds or bond funds you are holding. This drives down the price of your bonds, so if you sell you'll lose money. This is a serious risk for anyone investing in long-term bonds, including Treasurys, because the longer the maturity, the higher the interest rate risk (see duration).
Intermediate-term bond funds - Mutual funds that invest in bonds that mature in about 5 to 10 years. International bonds Debt instruments issued by foreign governments or corporations.
International funds - Mutual funds that invest in stocks or bonds of worldwide companies.
Investment banker - Firm that sells stocks or bonds to brokerages which, in turn, sell them to investors on a securities exchange.
Investment company - Firm that, for a management fee, invests pooled funds of small investors in securities appropriate for its stated investment objectives.
Investment objective - Description, included in a fund prospectus, of what a mutual fund hopes to accomplish.
Irrevocable trust - Legal document that allows you to avoid probate and reduce the tax bite. You give up ownership of any asset you placed in this type of trust, and it can't be changed. J ...Junk bond funds - Mutual funds that invest in bonds issued by companies or governments that are rated below BBB by Standard and Poor's or Moody's. Also known as high-yield bond funds. K ...L ...Long-term bond funds - Mutual funds that invest in bonds that mature in more than 10 years. M ...Management fee - Charge for running the fund.
Market timing - Strategy by which investors attempt to buy low and sell high by buying when the market is turning bearish and selling at the end of a bull market.
Maturity date - Date that a bond is due for payoff.
Money market mutual fund - Mutual fund that invests typically in short-term government and company loans and CDs. These tend to be lower-yielding, but less risky than most other types of funds. Also known as money market funds or money funds.
Municipal bond funds - Mutual funds that invest in tax-exempt bonds is sued by states and local governments. N ...Net asset value - Per-share value of your fund's investments. Also known as share price.
No-load mutual fund - Mutual fund that is sold without sales commission.
Note - Another word for short-term bond.
No-transaction fee account - Brokerage firm account that allows customers to purchase a selection of mutual funds with no charge or a limited charge. O ...Open-end funds - Funds that permit ongoing purchase and redemption of fund shares (mutual funds are open-end funds).
Over-the-counter market - Market that uses a network of brokers to buy and sell securities rather than an exchange. P ...Portfolio manager - Person responsible for making mutual fund investments.
Precious metals mutual fund - Mutual funds that invest in precious metals and mining stocks.
Preferred stock - Type of stock that takes priority over common stock in the payment of dividends or if the company is liquidated.
Principal - Original investment.
Prospectus - Legal disclosure document that spells out information you need to know to make an investment decision on a mutual fund or other security. Q ...R ...Rebalancing - Investment strategy in which you adjust your mix of investments periodically to keep the proper percentages of money in each fund, based on your tolerance for risk.
Regional funds - Mutual funds that invest in one specific region of the globe.
Registered representative - Person licensed to sell stocks, bonds, mutual funds, and other types of securities.
Risk - In relation to a mutual fund, chances of losing money.
Risk tolerance - Amount of money you can stomach losing in a given year. S ...SAP 500 index - Measure of the performance of a large group of blue-chip stocks in the U.S.
Salary reduction plan or 401 (k) plan - Retirement plan that allows employees to have a percentage of their salaries withheld and invested prior to the payment of federal taxes. Often, the employer might match the contribution, and earnings are tax-deferred until retirement.
Secondary market - Market wherein bonds, stocks, or other securities are bought and sold after they're already issued.
Securities - Stocks, bonds, or rights to ownership, such as options, typically sold by a broker.
Securities exchange - Tightly regulated marketplace where stocks, bonds, and cash are traded.
Securities and Exchange Commission (SEC) - U.S. government agency in charge of regulating mutual funds and other securities.
Share - Unit of ownership.
Shareholder - One who owns shares. In a mutual fund, this person has voting rights.
Short-term bond funds - Mutual funds that generally invest in bonds that mature in less than three years.
Sectors - in financial circles, refers to a particular industry within a total economy, i.e. the 'oil sector' refers to those companies engaged in businesses relating to oil exploration, production, refining, pipelines, drilling, etc.
Simplified Employee Pension Plan (SEP) - Retirement plan that permits tax-deferred investments for self-employed individuals.
Single-country funds - Mutual funds or closed-end funds that invest in one country.
Single-state municipal bond funds - Mutual funds that invest in the bonds of a single state so that investors avoid paying both state and federal taxes on their interest income.
Small company stock funds - Volatile mutual funds that invest in younger companies whose stocks are frequently traded on the over-the-counter stock market.
Socially responsible funds - Mutual funds that invest in companies that do not pollute the environment or sell arms. They will not own tobacco or alcohol stocks, nor invest in companies with poor employee relations.
Specialty funds - Funds that invest in one specific industry or industry sector.
Speculation - Gambling on a risky investment in hopes of a high payoff down the road.
Spreads - For bonds, a spread is a difference in prices of similar bonds that vary in only one point, such as the quality. For options, a spread is a combination of two or more calls (or puts) on the same stock with differing exercise prices or times to maturity. For futures, a spread position is where the investor takes a long position in a futures contract of one maturity and a short position in a contract on the same commodity with a different maturity.
Stock - Investment that buys ownership in a corporation, in exchange for a portion of that company's earnings and assets.
Stockbroker - Person licensed to sell stocks and other types of securities. Also known as a registered representative.
Stock fund builder - Investment strategy in which you invest your bond fund's interest income into a stock fund to build your wealth.
Swap - Switch, as in what bond fund managers do to obtain higher-yielding bonds that have credit ratings similar or equal to their existing bonds. T ...Taxable bond funds - Bond mutual fund in which interest income is taxed by Uncle Sam.
Tax-deferred investment - An investment that is not taxed until money is withdrawn, usually at retirement.
Tax-free bond funds - Tax-free mutual funds that invest in municipal bonds issued by states, cities, and towns.
Testamentary trust - Legal document set up by a will when a person dies that is used for special situations, such as to establish a fund to pay for a child's education.
Total return - The rate of return on an investment, including reinvestment of distributions.
Transfer agent - Entity that maintains shareholder records, including purchases, sales, and account balances.
Treasury bills - Short-term I.O.U.'s to the U.S. Treasury.
Living Trust - A legal document that does not have to be approved by probate court before your loved ones can inherit your wealth.
12b-1 fee - Fee deducted from the earning of your mutual fund to cover a fund's sales and marketing expenses. U ...Uniform Gift to Minors Act (UGMA) - Law adopted in most states that sets rules for distribution of an investment to a child.
Uniform Transfer to Minors Act (UTMA) - Law in some states that governs how a child takes custody of an asset.
Uninsured high-yield municipal bond funds - Mutual funds that pay the highest tax-free yields but invest in states or municipalities with lower credit ratings.
U.S. government agency bonds - Debt instruments issued by federally sponsored agencies of the U.S. government.
U.S. Treasury bond funds - Mutual funds that invest in U.S. Treasury bonds and notes.
U.S. Treasury bonds - Debt instruments directly backed by the U.S. Treasury.
U.S. Treasury-only money funds - Funds that invest in Treasury bills, or T-bills, which are short-term I.O.U.'s to the U.S. Treasury. These funds typically pay the lowest yields but are considered the least risky money funds.
U.S. Treasury securities - Generally, Treasury notes, bills, or bonds issued and guaranteed by the U.S. government. V ...Variable annuities - An insurance program that allows you to direct your investment in a choice of underlying investments. Meanwhile, you get tax deferment of your earnings and a death benefit guarantee, and you are able to obtain periodic checks for life. W ...Wash sale - Strategy in which a security is bought back within 31 days after it is sold, 'washing out' any capability of writing off losses on income taxes.
World funds - Mutual funds that invest in both the U.S. and foreign countries. Also known as global funds. X ...Y ...Yield - Interest or market earnings on a bond or other investment.
Yield Curve - A graph of the bond yields available at a given moment in time, with yield-to-maturity rising along the vertical line and bond maturities moving outward along the horizontal line. A normal yield curve rises upward to the right, because bonds of a longer maturity generally pay higher yields. An inverted yield curve slopes downward to the right because short-term rates are higher than long-term rates. There may be several reasons for an inverted yield curve such as higher anticipated inflation in the short run versus the long run or possibly a recession in the offing. If short and long-term rates are the same, the yield curve is flat. The yield curve is typically constructed using Treasury securities. Z ...Zero coupon Treasury bond funds - Mutual funds that invest in a certain type of Treasury securities that provide no monthly income, but, instead, pay the investor accumulated income and principal at the bond's maturity.
Investors should consult all available information; including fund prospectuses,
before making any fund purchase, and must exercise their own independent
Judgment when making any investment decision. Reprinted with the
permission of Alpha Books, an imprint of Macmillan USA, a division of
Pearson Education, from The Complete Idiot's Guide to Making Money with
Mutual Funds, 2nd Edition, by A Lavine and G Liberman.
Copyright 1999 by Alpha Books.
|
