Investing Glossary

1 – 9 | A – C | D – L | M – R | S – Z

1-9

12b-1 fee
Part of the overall expense ratio of mutual funds, this is an annual fee to cover a mutual fund's marketing and distribution cost and is disclosed in a fund's prospectus. Not all funds charge this fee, but a fund that charges more than 0.25% in 12b-1 fees cannot advertise as a no-load fund.

401(k)
A defined-contribution retirement plan that allows employees of a company to defer salary pre-tax to invest for retirement. Employers can also make a matching contribution in the plan.

403 (b)
A defined-contribution retirement plan similar to a 401(k) plan that allows employees of a non-profit organization to defer salary pre-tax to invest for retirement.

457
A retirement plan that allows state employees to defer salary pre-tax to invest for retirement.

529 College Savings Plan
A savings plan sponsored by a state to assist with saving money to cover the cost of educational expenses. Earnings grow tax-deferred, but contributions are not tax-deductible. Withdrawals for non-qualified educational expenses are subject to income tax and a 10% IRS penalty. Distributions may be taxable.

Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.

52-Week High
The highest price of a security over the past 52 weeks (split-adjusted).

52-Week Low
The lowest price of a security over the past 52 weeks (split adjusted).

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A – C

A

Accrued Interest

Interest accrued on a bond or other fixed income security since the last interest payment was made. At the time of a sale, the buyer of a bond pays the market price plus accrued interest to the seller. Accrued interest is calculated by multiplying the coupon rate by the annualized number of days that have elapsed since the last payment.

Actively Managed Mutual Fund
A type of mutual fund where a portfolio manager makes day-to-day decisions about what securities to buy, sell or hold in the portfolio in accordance with the fund's investment objective in an effort to outperform its benchmark index.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

After-tax return
The profit or loss made on the sale of an investment after all fees, commissions, and income and capital gains taxes have been deducted.

All or None (AON)
A stipulation applied to a buy or sell order which instructs the broker to fill the order completely or not to fill it at all. All or None orders are typically associated with large trades; investors use the restriction to prevent an order from being filled incrementally - a process which can result in payment of multiple commissions. An important distinction about AON orders is that if the trade cannot be executed it is not automatically cancelled - as it would be if the order was marked fill or kill (FOK).

Alpha
A measure of risk-adjusted return, Alpha combines the volatility that the fund's price has experienced relative to the market, and the returns the fund has generated relative to the market to define the "excess return" of a fund. A negative Alpha means a fund has under performed its index relative to how much volatility it has shown vs the market.

Alternative Minimum Tax (AMT)
An IRS mechanism created to ensure that high-income individuals, corporations, trusts, and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions.

American Depository Receipt (ADR)
ADRs are negotiable securities representing ownership of the stock of foreign corporations. U.S. banks hold the receipts in depository form, entitling investors to all dividends and capital gains. Even though ADRs do not represent direct ownership of the underlying shares, the certificate, transfer and settlement processes for ADRs are identical to those of U.S. securities. Also known as American Depository Shares.

Annual returns
The change in value of an investment usually calculated for a calendar year and year-to-date.

Annuity
A contract with an insurance company designed to provide tax-deferred growth of earnings for long-term goals, such as retirement savings. Annuity holders are taxed when taking distributions or withdrawals from the contract. Withdrawals of taxable amounts are subject to income taxes, and if taken prior to age 59½, a 10% IRS penalty may apply. Withdrawals also may be subject to surrender charges or contingent-deferred sales charges. All guarantees of annuities are based on the continued claims-paying ability of the issuing insurance company.

A fixed annuity earns a fixed interest rate that is guaranteed by the issuing insurance company for a specific period of time.

The return on a variable annuity is linked to the performance of the underlying investment sub-accounts — usually a combination of stocks, bonds, and/or money market securities — in which the contract owner chooses to invest. The principal value of variable annuities fluctuates in value, and may be worth more or less than originally invested when redeemed.

Ask
The price at which a security is offered for sale on an exchange or in the over-the-counter market. Asked price represents the lowest level at which a dealer will sell (as opposed to the bid price, which represents what a buyer wishes to pay).

Asset Allocation
The division of an investment portfolio across various types of securities, such as mutual funds, stocks and bonds, in an effort to help reduce risk. Asset allocation does not assure or guarantee better performance.

Asset Allocation Fund
A fund that seeks to provide both growth of investment and current income usually containing a mix of stock and bond securities. Asset allocation funds are subject to financial and market risks affecting stock and bond investments. Asset Allocation may also refer to a fund’s exposure to various types of asset classes, e.g. stocks, bonds, and cash.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Automatic Investment Plan
Also known as a systematic investment plan, a set arrangement where an individual invests in an investment on a periodic basis. Automatic investment plans do not assure a profit or protect against loss in declining markets.

Automatic Reinvestment
A program that allows shareholders to reinvest dividends and capital gains distributions automatically to buy additional shares.

Average Annual Total Returns
The annualized return for an investment, as measured over various intervals such as 1-, 3-, 5- and 10-year time periods.

Average Maturity
For a bond fund, the weighted average number of years until all negotiable instruments held by the fund become due and payable. Average maturity does not take into consideration the fact that some bond issuers may call bonds held by the fund before their maturity date.

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B

Back-end Load
Also known as a contingent deferred sales charge (CDSC), a sales charge paid by an investor when shares are redeemed. Based on the length of time an investor holds the shares, the CDSC may be reduced or eliminated over the time period that the fund is held.

Balanced Fund
See Asset Allocation Fund or Growth and Income Fund.

Bank Settlement Account
A Wells Fargo Bank checking account linked to your brokerage account for automated settlement of brokerage transactions and funds transfers.

Benchmark
A measurement, usually an unmanaged index, used for comparison when determining the performance of an investment.

Beta
A measure of risk based on the volatility of price of a security. The higher the Beta, the more sharply the fund's price has moved in relation to the market's movement. See also: Alpha and R-squared.

Bid
The highest price a prospective buyer is prepared to pay for a given security. On an exchange, bid price represents the highest price a market maker or specialist will buy.

Blue Chip
Stocks generally considered to be of large, stable and established companies that typically exhibit a measure of financial stability.

Bond
A long-term debt security that obligates the issuer to pay the security's face value amount on a specified future date. Issued primarily by governments and corporations. Also called fixed income securities, the issuer typically agrees to pay a specified interest rate at regular intervals until the bond's maturity date. Some bonds can be called, or redeemed, prior to maturity. See also: Callable.

Book Value Per Share
The accounting value of an outstanding share of stock calculated by subtracting a company's liabilities from its assets and dividing by the number of shares outstanding. Book value indicates to an investor how much a share of stock might be worth from an accountant's point of view; it is not the same as a stock's market price.

Breakpoint
The investment amount at which a load fee or sales commission is proportionally discounted. Breakpoints are typically associated with the purchase of Class A mutual fund shares. Larger purchases usually qualify for increasing discounts. See also: Load.

Brokerage Certificate of Deposit (CD)
A large-denomination CD sold by a bank to a brokerage, which then divides it into smaller pieces for sale to its customers. Brokerage CDs generally pay higher interest than CDs issued directly by banks. CD's are FDIC-insured up to $250,000 and are typically more liquid than bank-issued CDs.

Bulletin Board
An electronic quotation system for over-the-counter securities that are not part of the NASDAQ system. The term bulletin board usually refers to the OTC Bulletin Board, which is overseen by the FINRA even though the OTC Bulletin Board is not part of the NASDAQ market. Market makers of bulletin board stocks interact with others via phone, fax, or other electronic media rather than through a centralized exchange.

Buying Power
The maximum valuation available to buy securities in a brokerage account without adding additional equity. For a non-margin account, buying power is the value of cash held in the account. For a margin account, buying power is the value of cash plus marginable securities, plus the value of the Special Miscellaneous Account.

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C

Callable
A term used to describe a security which may be redeemed prior to maturity by the issuer. The term applies primarily to bonds but also to preferred stock. U.S. government securities are generally not callable, whereas municipal and corporate bonds typically are not callable for the first 10 years after issue.

Capital
Accumulated money or goods used to produce income.

Capital Gain
The positive difference in valuation between the purchase price and sale price of an investment.

Capital Gains Distribution
Payments to mutual fund shareholders of net gains realized on the sale of securities owned by the fund. The distribution reduces the net asset value (NAV) on the day it is made. Capital gains generally are taxable to the investor unless the shares are held in a qualified retirement account, such as a 401(k) plan or IRA.

Capital Loss
The negative difference in valuation between the purchase price and sale price of an investment.

Cash Account
A brokerage account in which securities purchases are paid in full within settlement date (usually three business days for stocks) after the trade is executed. By law, some types of accounts such as Individual Retirement Accounts and Custodian for Minor accounts must be cash accounts. See also: Margin Account.

Cash Dividend
A cash distribution of earnings to shareholders. Cash dividends are distinguished from stock dividends, which are payments to shareholders in the form of stock. Dividends are not guaranteed and are subject to change or elimination.

Certificate of Deposit (CD)
A debt instrument issued by a bank. The depositor agrees to leave an agreed-upon amount of money on deposit for a specified period of time in return for a rate of interest that's generally higher than that available with a savings account. CD's are FDIC-insured up to $250,000.

Closed to New Investors
An indication that a mutual fund is not available for sale to investors who do not already own shares.

Closed-end Fund
Closed-end funds issue a fixed number of shares that usually trade on an exchange, just as stocks do. The share price of closed-end funds is set by supply and demand in the market. This contrasts with open-end mutual funds, which stand ready to issue and redeem shares at net asset value on a continuous basis. Closed-end funds may be thinly-traded or trade at a discount or premium to NAV.

Investing in a closed-end fund involves unique risks outlined in the prospectus under the heading “Risk Factors.” These securities are not suitable for all investors and should not be purchased on the basis of yield alone. The market price of these securities may decline. Dividend yields are not guaranteed and may be reduced, which may negatively impact the price of the security. Price changes may be amplified by portfolio leverage.

It is important to understand that if a closed end fund is trading at a "discount" to its net asset value (NAV), there is no guarantee that the fund will be able to maintain or increase in value or trade at or above its NAV in the future. Remember that closed-end funds are long-term investments and are not intended to be short-term trading vehicles, and it is possible to lose money by investing in them.

Commission
Fee charged by a broker for executing a trade. Commission rates are usually based on the number of shares traded or the dollar amount of the transaction.

Common Stock
A class of securities representing units of ownership in a public corporation. Holders of common stock are entitled to receive dividends and — in most cases — to vote on the selection of directors and certain other corporate matters. In the event of liquidation, holders of common stock have rights to a company's assets only after creditors, bondholders and preferred stockholders have been satisfied.

Convertible Security
A security such as a convertible bond or convertible preferred stock that can be exchanged at the option of the holder into common stock at a preset ratio and at a pre-stated price.

Corporate Bond
A debt instrument issued by a public or private corporation that pays a specified interest rate. Most corporate bonds have par value of $1,000 which is redeemable at maturity, and pay a specified semi-annual interest.

Cost Basis
For tax purposes, the original cost of an asset (including commissions and other fees) used to determine the gain or loss.

Coupon Rate
The interest rate on a debt security that the issuer promises to pay until maturity. Usually expressed as a percentage of the face value. See also: Face Value

Credit Quality
A term that refers to the perceived likelihood of default by the issuer of a bond. Credit quality is usually determined by credit ratings, which range from AAA (default highly unlikely) to D (in default). Credit ratings are published by independent bond rating services. In a mutual fund, the term credit quality refers to the average rating of the fund's underlying securities, and does not apply to the stability or safety of the fund's shares.

Credit Risk
The likelihood that an issuing entity (e.g. country, state, municipality or company) would default on interest or principal payments of a debt security.

Cumulative Preferred
A class of preferred stock having a provision that if dividends are not paid out on time — due to poor earnings or other factors — the resulting obligation must be met before dividends may be paid on the company's common stock. Most preferred stock issued today is cumulative.

Current Yield
A measurement of the yield associated with an investment, expressed as a percentage of the security's current (or market) price. For bonds and notes, current yield is the annual interest rate divided by the market price. For equities, it is the annual dividends divided by the market price.

CUSIP
A unique nine-character alpha/numeric identifier for each stock certificate or registered bond. The identifer is used to expedite clearance and settlement. CUSIP stands for the Committee on Uniform Securities Identification Procedures.

Custodial Account
An account that is created for the benefit a minor at a bank, brokerage firm or mutual fund company.

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D – L

D

Day Order

A buy or sell order that automatically expires if it is not executed or cancelled during the current trading session. Typically, all orders are day orders unless otherwise specified. See also: good till cancelled (GTC)

Debt Security
A security representing money borrowed that must be repaid, usually at a certain time and with a certain rate of interest. For example abill, bond, commercial paper or note.

Defined Benefit Plan
A corporate retirement plan that pays employees a fixed retirement benefit often determined by salary earned and length of employment.

Defined Contribution Plan
A corporate retirement plan, such as a 401(k) or 403(b) plan, where employees defer a percentage of their salaries and invest it for retirement.

Derivative
A financial contract whose value depends in part upon the value of an underlying security or asset (typically a commodity, bond, equity or currency, or a combination of these).

Distribution
For mutual funds, a distribution is the payment of dividends or realized capital gains to shareholders. Withdrawals from a retirement plan are also known as distributions. Dividends and capital gains may be taxable, unless the mutual fund shares are held in a qualified retirement account, e.g. a 401(k) plan or IRA. Withdrawals from retirement plans may be subject to income tax and if made prior to age 59 ½, a 10% IRS penalty may apply.

Diversification
The allotment of an investment portfolio across various types of investments in an effort to help reduce risk. Diversification does not assure a profit or eliminate the risks of loss.

Dividend
A distribution of corporate earnings to stockholders, usually in cash or stock. The dividend amount is declared by the company's board of directors and is usually paid quarterly. Dividends are not guaranteed and are subject to change or elimination.

Dividend Reinvestment Plan (DRIP)
A program offered by companies that automatically reinvests shareholder dividends into additional shares of the company's outstanding stock.

Dividend Yield (%)
A stock's dividend expressed as a percentage of the current share price. For example, if a stock is selling for $20 a share and pays annual dividends of $1 a share, the dividend yield would be 5%.

Do Not Reduce (DNR)
Stipulation added to a buy or sell order instructing a broker not to decrease the limit, stop, or stop-limit price orders by the amount of the cash dividend on the ex-dividend date. When a stock goes ex-dividend, its price is usually reduced by the amount of the dividend. A do not reduce order tells the broker to ignore these fluctuations and keep the order at the specified price.

Dollar Cost Averaging
A method of accumulating assets by purchasing securities at regular intervals with a fixed dollar amount. Since prices may rise or fall over time, the fixed dollar amount buys more shares when prices are low, fewer shares when prices are high. Dollar cost averaging does not assure a profit or protect against loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels and an investor should consider his or her financial ability to continue purchases through periods of low price levels.

Dow Jones Industrial Average (DJIA)
A price-weighted stock market index based on 30 designated company stocks that are mostly listed on the New York Stock Exchange generally representing a range of industries. Stocks in the DJIA are often referred to as "blue-chip" stocks. An investor cannot invest directly in an index.

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E

Earnings Per Share (EPS)
The portion of a company's earnings theoretically allocated to each share of outstanding stock. EPS can be useful when assessing a stock's relative investment value, but should be used along with other measures, as companies may use different approaches when accounting for various expenses and sales. Current EPS is calculated as total earnings for the prior 12 months ending with the last calendar quarter divided by the average number of shares outstanding for the period.

Education Savings Account
An investment account designed to assist with paying for education-related expenses. Contributions grow tax-deferred and distributions are not taxed if used for qualified expenses. Withdrawals for non-qualified educational expenses are subject to income tax and a 10% IRS penalty. Distributions may be taxable.

Emerging Markets
Financial markets of developing countries that usually have smaller and more volatile economies than more mature and developed countries.

Equity
In a brokerage account, equity refers to the market value of securities held in a given account. Equity is determined by deducting market value of short positions from the market value of long positions. Any outstanding debit balances or credit balances are also factored in.

When referring to corporate ownership, equity is the ownership interest of common and preferred shareholders in a corporation.

Exchange
See Stock Exchange

Exchange-Traded Fund (ETF)
These are investment vehicles that combine the diversification of mutual funds with the trading characteristics of individual securities. ETFs typically track an index and are traded like an individual stock on an exchange, enabling it to be bought and sold at any time during market hours.

Exchange Traded Funds seek investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched. Exchange Traded Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Ex-dividend date
Date on which a stock's price drops by the amount of a declared dividend. Ex-dividend is the time interval between the announcement and the payment of the next dividend; an "x" will appear next to the name of a stock trading ex dividend. An investor who buys shares during this interval is not entitled to the dividend.

Expense Ratio (%)
Annual management fees and operating expenses paid by shareholders of mutual fund companies. The expense ratio of a fund can be found in its current prospectus.

F

Face Value
The value of a debt security, such as a bond or note, that appears on the face of the certificate or instrument. Face value is ordinarily the amount the issuing company promises to pay at maturity. Also referred to as Par Value.

Federal Call (Reg T)
This Federal Reserve Board regulation covers the extension of credit to customers in a margin account by securities brokers, dealers, and members of the national securities exchanges.

Federal Deposit Insurance Corporation (FDIC)
Federal agency that insures deposits of member institutions for up to $250,000 per depositor.

Fee, 12(B)-1 fee
A fee assessed to defray a mutual fund's marketing and distribution cost. Not all funds deduct this fee, which can affect shareholders' returns over time.

Fill or Kill (FOK)
An order to buy or sell securities that must be executed immediately and filled completely or cancelled. FOK only applies to Limit Orders.

Financial Industry Regulatory Authority (FINRA)
A self-regulating organization for the investment industry that enforces standard investing practices and ethical standards among its members.

Fixed-income Security
An investment, typically a bond, that returns periodic payments at a fixed rate of interest.

Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity.

Freeriding
Practice in which a brokerage client buys a security in a cash account and (prior to the settlement) sells the same security without putting up money for the purchase. This type of activity may encourages speculation and violates the credit extension provisions of the Federal Reserve Board. The penalty for freeriding requires that the customer's account be frozen for 90 days.

Front-end Load
Sales charge assessed at the time of purchase, with the amount often depending on the dollar amount of the purchase. Also see: Breakpoint

Fund Family
An investment company that issues shares of mutual funds.

Futures Contract
A standardized, exchange-traded contract to buy or sell a particular commodity at an agreed upon price and date in the future.

Investments in commodities, futures, and managed futures are speculative, involve substantial risk, and are not suitable for all investors.

G

GNMA (Ginnie Mae)
Government National Mortgage Association, a government-owned agency that securitizes mortgages. These mortgage-backed bonds are backed by the “full faith and credit" guaranty of the United States government. The market value of these securities prior to redemption is not guaranteed and may fluctuate.

Good-till-Canceled (GTC)
An order to buy or sell securities — usually at a particular price — which remains in effect for 60 calendar days unless filled, canceled or modified.

Government Bond
Bonds issued by the U.S. Government, typically regarded as the highest-grade securities issues with the least amount of default risk. The major types include: Treasury bills, Saving bonds, Treasury notes, Treasury bonds.

Growth and Income Fund
A fund that seeks to provide both growth of investment and current income usually containing a mix of stock and bond securities. Growth and Income funds are subject to financial and market risks affecting stock and bond investments.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Growth Strategy
An investment strategy that seeks capital appreciation over time, typically in the form of capital gains.

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H

HIFO
"Highest In, First Out". When a customer owns multiple lots of an investment but only sells a portion of shares owned, an instruction to sell the shares that cost the most first, generally in an effort to reduce capital gains or generate capital losses.

House Maintenance Requirement
The level of equity that brokerage firms require on a customer's margin account. Usually higher than the level required by FINRA. House maintenance requirements are set and enforced internally.

I

Inception Date
The date a mutual fund commenced operations.

Income Strategy
An investment strategy that seeks current income and steady cash flow, typically in the form of interest and/or dividends.

Index
For investors, an index represents a hypothetical, unmanaged portfolio of securities, the performance of which is used as a benchmark in measuring performance of actual securities or of markets in general. Investors cannot directly invest in an index although they can invest in mutual funds or exchange-traded funds that seek to match the holdings of an index. Common examples of an index include the Dow Jones Industrial Average and the Standard & Poor's 500. An investor cannot invest directly in an index. See also: Index Funds.

Index Funds
Mutual funds that strive to invest in companies that comprise a market index in an effort to generate similar returns. Indices are unmanaged and investors cannot invest directly in an index. All mutual funds are subject to risks, which can be found in the current prospectus.

Index Funds seek investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched. Index Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Individual Retirement Account (Rollover IRA)
A tax-free reinvestment of a lump-sum distribution from a qualified retirement plan into an IRA or other qualified plan within 60 days in order to avoid a penalty for early withdrawal. Withdrawals are subject to income tax, and if made prior to age 59 ½, may be subject to a 10% IRS penalty.

Individual Retirement Account (Traditional IRA)
An individual, tax-deferred retirement account for employed persons. Subject to certain limits, contributions are deductible from gross income earned that year. Interest and profits accumulate tax-deferred until the funds are withdrawn at age 59½ or later. Early withdrawals are subject to a 10% penalty. Withdrawals also may be subject to income tax.

Industry
The main category of the type of business of a company. Examples include: Apparel Retail, Oil and Gas Drilling, and Steel

Inflation
An ongoing increase in the level of consumer prices as measured by the Consumer Price Index economic indicator.

Initial Public Offering (IPO)
A company's first sale of stock to the public.

Investment Objective
A financial goal - usually expressed in terms of growth, income and safety of principal - that can be used by an investor to determine which types of investments are appropriate.

IRA Rollover
See Individual Retirement Account (Rollover IRA)

J

Joint Tenants with Rights of Survivorship
With this type of account, the account title is registered in two or more names and upon death of one party, the survivors automatically gain ownership of the decedent's interest.

L

Lehman Brothers Aggregate Bond Index
An unmanaged index that tracks the total U.S. bond market, which includes U.S. Treasury, government agency, investment-grade corporate bond and mortgage-backed securities with maturities of at least one year. The index includes reinvestment of interest. An investor cannot invest directly in an index.

Leverage
Using borrowed money to make an investment. Leveraging has a higher return potential as well as a higher loss potential.

Limit Order
An order to buy or sell a stated quantity of a security only at a specified price (the limit) or better. A limit order to sell would be at the limit or higher. A limit order to buy would be at the limit or lower.

Limited Access Investment Accounts
These accounts are investment accounts you do not own. Access is authorized by the account owner and is defined by one of the following levels: Limited Trading or Online View-only.

Liquidity
The capability of easily converting investments into cash.

Load
Sales charge or commission paid by an investor in a load mutual fund. Loads can be charged when shares are purchased (front-end loads), when shares are sold (back-end loads) or at regular intervals over time (level loads). Funds that do not levy a sales charge and have 12b-1 fees of 0.25% or less are called no-load mutual funds.

Long-term Capital Gains
Profit from selling or exchanging an investment that has been held more than 12 months. Generally long-term gains are taxed at a lower rate than short-term gains.

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M – R

M

Maintenance Call

A call from a broker demanding the immediate deposit of cash or marginable securities to satisfy exchange requirements and/or the minimum house maintenance requirement.

Management Fee
A charge paid to a mutual fund's investment manager for services including portfolio management. This fee, a fixed percentage of the fund's assets, is disclosed in the prospectus.

Margin Account
A brokerage account which allows customers to purchase securities with money borrowed from a broker/dealer. Margin accounts are governed by rules of the Federal Reserve Board, the NYSE, FINRA, and the brokerage house itself. A signed and approved Margin Agreement is a prerequisite to trading on margin.

Margin borrowing may not be suitable for all investors. When you use margin, you are subject to a high degree of risk. Market conditions can magnify any potential for loss. The value of the securities you hold in your account, which will fluctuate, must be maintained above a minimum value in order for the loan to remain in good standing. If it is not, you will be required to deposit additional securities and/or cash in the account or securities in the account may be sold.

Please carefully review the margin agreement, which explains the terms and conditions of the margin account, including how the interest on the loan is calculated.

Margin Call
A demand that a customer deposit enough money and/or securities with the broker to meet the house minimum requirements established for a margin account. Securities in an account may be liquidated to cover a margin call if the client does not respond. Terms and conditions of margin calls are governed by The Federal Reserve Board's Regulation T.

Market Capitalization
The market value of an entire company as determined by multiplying the stock price by the number of outstanding shares. Generally, small-cap companies are under $1 billion, mid-cap are $1 billion to $5 billion, and large-cap is greater than $5 billion.

Market Order
An order to buy or sell a security at the best possible price at the time the order is received at an exchange; or at the current bid and ask price if traded over-the-counter.

Maturity Date
The date on which the face value (or principal amount) and last interest payment of a debt security (such as a bill, note, bond, or CD) becomes due and payable. The maturity date of a bond is the date when the bond’s principal and final interest payment are paid.

Minimum Initial Investment
The lowest amount of money that one can invest in a security at the time of first purchase. Generally associated with mutual fund investing.

Minimum Maintenance Requirement
A specified level of equity that must be maintained in a customer's margin account. Required by the FINRA, NYSE, and individual brokerage firms.

Minimum Subsequent Investment
The smallest additional amount of money that can be invested into a security after an initial investment. Generally associated with mutual fund investing.

Modern Portfolio Theory
Modern Portfolio Theory statistics measure a securities historical volatility, risk, and correlation. See also: Alpha, Beta, R-Squared and Standard Deviation.

Money Market Fund
A fund that seeks to provide higher degree of relative safety as well as some current income while generally striving to maintain a constant net asset value of $1 per share. Money market funds invest in short-term (less than thirteen months), highly liquid debt securities including certificates of deposits, U.S. Treasury bills, and commercial paper. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds generally seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

Mortgage-backed Securities
Securities backed by a pool of mortgages. Often issued by agencies such as GNMA "Ginnie Mae", FNMA "Fannie Mae", and FHLMC "Freddie Mac".

MSCI EAFE Index
The MSCI Europe, Australasia, Far East (EAFE) Index is an unmanaged, free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. An investor cannot invest directly in an Index.

Municipal Bond ("Muni")
A debt obligation issued by a county, city, district or authority, typically for day-to-day governmental needs or for special projects like building roads, schools and hospitals. Income from municipal securities is generally free from federal taxes and state taxes for residents of the issuing state. While the interest income is tax-free, capital gains, if any, will be subject to taxes. Income for some investors may be subject to the federal Alternative Minimum Tax (AMT).

Mutual Fund
An open-ended investment company that pools money from shareholders for investing in stocks, bonds, or money market securities in accordance with a stated investment objective. Mutual funds offer investors diversification and professional management. Shares can be redeemed daily at the current net asset value (NAV).

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, which contains this and other information, can be obtained by calling your financial advisor. Read the prospectus carefully before you invest.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

N

NASDAQ

National Association of Securities Dealers Automated Quotations system, a system used to place over-the-counter stock trades.

Net Asset Value (NAV)
The price of a mutual fund share, computed by subtracting a fund's total liabilities from total assets and dividing by the number of shares outstanding. The NAV does not include any associated sales charges, and is calculated at the close of each business day.

No-Load Fund
A mutual fund that does not charge a sales charge when you buy or sell shares and has a 12b-1 fee of 0.25% or less For some no-load funds, a brokerage firm may charge a transaction fee on some transactions. Other fees and expenses apply to a continued investment in a mutual fund. Please carefully review the mutual fund's prospectus for details.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

No-Load No-Transaction Fee Fund
A no-load mutual fund you can buy or sell in a brokerage account without paying a sales charge or transaction fee. Other fees and expenses apply to a continued investment in a mutual fund. Please carefully review the mutual fund's prospectus for details.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

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O

Odd Lot
In stock trading, a purchase or sale of less than 100 shares (typically). Commission rates on odd lot trades tend to be higher than those for normal trading units. See also: Round Lot.

Offer
Price at a security is offered for sale. Also know as the Ask price.

Open-end Mutual Fund
A mutual fund that continually issues new shares to investors on demand. The share price of an open-end fund (net asset value) is determined by the value of the securities the fund owns. See also: Net Asset Value (NAV)

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Operating Expenses
A mutual fund's annual expenses including operating expenses, management fees and 12(b)-1 fees that are deducted from its assets.

Order
In a brokerage account, an instruction to a broker to buy or sell securities. See also the four basic order types: Market, Limit, Stop, Stop Limit.

Ordinary Income
Generally, all income that cannot be considered capital gains such as wages, dividends, and interest on savings and checking accounts.

Over the Counter (OTC)
A market, regulated by FINRA, for trading securities that are not listed or traded on an organized exchange but instead through the National Association of Securities Dealers Automated Quotations System (NASDAQ), National Market System (NMS), OTCBB (Bulletin Board) or Pink Sheets.

P

Par
See Face Value

Pay Date
The day on which a stockholder of record will receive a dividend.

Penny Stocks
Shares that typically trade below $1 a share on the over-the-counter market. Penny stocks are generally issued by companies with a history of short or erratic revenues, and most brokerages have special precautionary rules about trading in them.

Preferred Stock
A class of stock that pays a fixed dividend. This class of stock has preference over common stock in the payment of dividends and the liquidation of assets, but generally has no voting rights.

Price/ Earnings Ration (P/E)
The current price of a stock divided by its earnings per share over the last 12 months. P/E is a measure may be useful in assessing the company's relative valuation.

Primary Beneficiary
A person or entity named to receive investment assets in the event of the original owner's death.

Primary Market
Market for new issues of securities, as distinguished from the secondary market, in which previously issued securities are traded. These issues are known as initial public offerings or IPOs. Mutual fund shares are also traded in the primary market.

Principal
In an investment, the basic amount invested, exclusive of earnings.

Prospectus
A document that describes a mutual fund or security and offers its shares for sale. It contains information about investment objectives and policies, investment restrictions, officers and directors, charges and financial statements, and purchasing and selling shares.

Q

Quote
The highest bid and lowest offer price currently available on a security. Bid and asked quotes assume round lot transactions - 100 shares of stock, for example.

R

Reinvestment
Purchasing additional shares of a company or mutual fund with dividends, interest, or capital gains earned.

Rights
An entitlement granted to existing shareholders of a company to subscribe to shares of a new issue of common stock before it is offered to the public. The new shares are usually offered below the current public offering price and for a limited amount of time, allowing shareholders to maintain a proportionate share of ownership.

Risk
The potential for losing money invested due to factors such as the volatility of a security's price, and changing market and economic conditions.

Roth Individual Retirement Account (IRA)
An individual retirement account with non-deductible contributions, subject to certain income limits, designed to provide tax-free distributions during retirement. Contributions may be withdrawn tax-free at anytime. Tax- and penalty-free withdrawals of earnings may begin when the account has been established for at least five years, and you're at least 59½ years old, for a first time home purchase ($10,000 lifetime limit), or in the event of disability or death. Non-qualified distributions of earnings may be subject to income tax as well as a 10% IRS penalty. Unlike Traditional IRAs, you aren't required to start taking distributions at age 70½.

R-Squared
R-squared indicates how closely correlated the fund's performance was to the index. The higher the R-squared (out of a possible 100), the more relevant the Alpha and Beta figures may be.

Russell 2000 Index
An unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index. An investor cannot directly invest in an index.

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S – Z

S

S&P 500 Index

A widely recognized, capitalization-weighted stock market index of 500 publicly traded stocks that includes the reinvestment of dividends. An investor cannot invest directly in an index.

Sales Charge
Load or commission paid by an investor in a mutual fund. A sales charge can be charged when shares are purchased, sold, or at regular intervals over time. Funds that do not levy a sales charge are called no-load mutual funds.

Sector Fund
A mutual fund that invests in securities within a specific industry. Being less diversified, these funds are often considered to be riskier investments.

Investment returns of mutual funds may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Securities and Exchange Commission (SEC)
A federal regulatory agency created by the Securities and Exchange Act of 1934 to protect investors from fraud within the securities market.

Securities Investor Protection Corporation (SIPC)
Non-profit corporation established by Congress to insure securities and cash in customer accounts of member brokerage firms against loss from the failure of firms. Overall maximum is $500,000 of coverage per customer, with a limit of $250,000 for cash. It does not protect against market risks.

Self-directed Retirement Account (SDA)
A retirement account that allows a participant to make his/her own investment decisions with regards to the contributions.

Settlement Date
The date on which an executed order is settled, either by a buyer paying for securities or by a seller receiving the proceeds for the sale. In most stock transactions, the settlement date is three business days after the execution of the trade (T+3).

Share
A unit of equity interest in a corporation. Also unit of ownership in a mutual fund.

Sharpe Ratio
A measure of risk-adjusted performance. The Sharpe Ratio is similar to alpha except that it measures risk and performance in excess of a risk-free investment (the 90-day Treasury bill) instead of the benchmark index. Higher values are desirable and indicate greater return per unit of risk.

Short Sale
A market transaction in which an investor sells borrowed securities. This technique is employed when the investor believes that the price of the security will fall. If the price of the security rises, however, a loss results.

Short-term Capital Gains
Profit from selling or exchanging an investment that has been held 12 months or less. Generally taxed as ordinary income, at rates higher than the long-term capital gains tax rate.

Short-term Redemption Fee
A fee assessed when a shareholder sells mutual fund shares within a specified time period from the date of purchase. Generally charged to discourage market timing.

SIMPLE IRA
Savings Incentive Match Plan IRA. Retirement plan designed for the employees who work for small companies (less than 100 employees) without 401(k) plans. Contributions are made pre-tax.

Simplified Employee Pension Plan (SEP)
Pension plan in which both the employee and employer contribute to an IRA. Limited to small businesses with less than 25 employees. Employee participation must be at least 50%. As with an IRA, contributions are tax-deductible.

Standard Deviation
A statistical measure of the average volatility of a security's returns in relation to its average value. Money-market securities, which generally have stable asset values, have standard deviations of zero. More volatile, aggressive-growth portfolios usually have a higher percentage of deviation. Standard deviation gives the investor an idea of how much a security's price can be expected to fluctuate based on past results.

Stock Exchange
An organized marketplace in which stocks are traded by members of the exchange, acting both as brokers (agents working on behalf of a client) and as principals (dealers who trade for their own account). Stock exchanges have physical locations where members meet face to face in order to buy and sell securities.

Stock Index Fund
A mutual fund that invests in securities that attempt to match the composition and weighting of a particular stock index.

Index Funds seek investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched. Index Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

Stock Split
Increasing the number of outstanding shares of stock without any change in shareholder's equity. A shareholder who owns 100 shares at $50, for example, would own 200 shares at $25 after a 2-for-1 split.

Stop Limit Order
A specialized order to a broker containing instructions to buy or sell at a specific price or better, but only after a given price has been reached or passed. It is a combination of a Stop Order and a Limit Order.

Stop Order
An order to buy or sell a security when it begins to trade at a designated price. A stop order guarantees execution but not price; once the stop target has been reached, a stop order becomes a market order.

Symbol
The letter combination used to identify a particular stock, mutual fund, etc. Also referred to as "ticker symbol" or "trading symbol."

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T

Tax Advantaged
An investment that has tax benefits such as tax-free or tax-deferred.

Tax Deferred
The ability to postpone paying taxes on distributions or capital gains in an investment or account, for example a retirement plan or savings bond.

Tax Exempt
An investment that is not subject to taxation at the federal level. Such investments may be subject to state, local, or the federal alternative minimum tax.

Tax Free
See: Tax Exempt

Ticker Symbol
The letter combination used to identify a particular stock or mutual fund, etc. Also referred to as "symbol" or "trading symbol."

Total Return
A measure of performance, total return is composed of share price appreciation plus interest or dividends and capital gains, if any.

Transaction Fee
A fee charged when no-load mutual fund shares that are subject to a transaction fee are bought or sold. See also: No-Load No-Transaction Fee Funds

Treasury Bond
See Treasury Security

Treasury Security
Debt obligations of the U.S. government. Treasury securities are considered to be among the more conservative investments because they are backed by the full faith and credit of the U.S. government for the timely payment of interest and principal if held to maturity. The interest on Treasury securities is exempt from state and local taxes but is subject to federal income tax. There are three types of treasuries: Treasury Bills, with maturities of one year or less; Treasury Notes, with maturities ranging from one to 10 years; and Treasury Bonds, long-term instruments with maturities of 10 years or more.

Trust
A contract naming a trustee to manage the investments or property within the trust for another person or entity, the trustor, for the benefit of a named beneficiary.

Turnover Ratio
A measure of the amount of buying and selling within a portfolio or mutual fund. A turnover of 100 percent, for example, implies that positions are held, on average, for about a year.

Volatility
The degree of fluctuation of a security's price.

Volume
Total daily number of shares of a security that are traded.

Warrant
A certificate issued by a company giving the holder the right to purchase securities at a stipulated price within a predetermined period of time or perpetually. A warrant is sometimes offered by a company as an incentive to buy. After issue, a warrant trades as a security, with prices reflecting the value of the underlying stock. Warrants are often included in new debt issues in order to stimulate investor interest. Also known as a subscription warrant.

Wash sale
Purchase and sale of the same or similar security simultaneously or within a short period of time. An IRS regulation (known as the Thirty Day Wash Rule) prohibits a taxpayer from claiming a loss on the sale of an investment if that same or similar investment was purchased within 30 days before or after the sale date.

Yield (%)
The rate of return, usually dividend or interest payments, on an investment, expressed as a percentage of market price.

Zero Coupon Bond
A bond that makes no periodic interest payments but instead is sold at a deep discount from its face value. The buyer receives a rate of return by the gradual appreciation. It is then redeemed at face value on a specified maturity date.

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