GLOSSARY

---

#

10-Q: A quarterly report filed by publicly-traded companies within 45 days of its quarter end in accordance with SEC rules for full disclosure.

10-K: A detailed annual report filed by publicly-traded companies within 90 days of its fiscal year end in accordance with SEC rules for full disclosure.

12B-1 fees: A predetermined percent of a mutual fund's assets used to defray marketing expenses.

401(a): A retirement plan allowing employees to make after-tax contributions.

401(k): A type of retirement savings plan, which permits an employee to defer part of his or her compensation on a pre-tax basis. Earnings on the money contributed to the plan also grow tax-deferred. These contributions reduce the current taxable income of the employee for federal income tax purposes and in most states, state income taxes. Each employee is limited to the amount they can contribute to all 401(k) plans in a given year. This amount is adjusted annually for cost-of-living increases or legislative changes.

403(b): A tax deferred retirement plan for non-profit organizations, public schools, and municipal agencies. Employees contribute through payroll deductions in the same manner as a 401(k) plan. Earnings will also grow with the same tax-deferred status as 401(k) plans. Withdrawals from the plan become mandatory after participants reach age 70. Investment options in 403(b) plans are usually more restricted than 401(k) plans.

457: A type of nonqualified deferred compensation plan that is maintained by an eligible employer. An eligible employer may be a State, political subdivision of a State, an agency or instrumentality of a State or a tax-exempt organization. A 457(b) plan is similar to 401(k) plans because the amount of compensation deferred is usually determined at the election of the employee. Distributions from the plan may be taken if an employee is separated from service before age 59.5 without the 10% early withdrawal penalty.

52 week high and low: The highest and lowest intraday prices at which a security traded in the past 52 weeks.

8-K: A notice filed by publicly-traded companies notifying investors of significant events, such as mergers, acquisition, names changes, bankruptcy, splits, etc.

Return to Top of Page

A

AAA: The highest rating given by bond rating agencies implying the least amount of risk.

abandonment: The act of not exercising or selling an option before its expiration.

acceleration clause: A provision that allows a lender the right to demand payment of the entire outstanding balance upon a creditor's missed payment or failure to meet the terms of the contract.

account: A record of all transactions.

accountant: A person who performs bookkeeping, prepares tax returns, records business transactions for individuals, and prepares financial statements for companies.

accounts payable: Amounts owed by an individual or company to a creditor for merchandise or services purchased on an account.

accounts receivable: Amounts due to an individual or company by a customer or debtor for merchandise or services purchased on an account.

accredited investor: A wealthy investor with a net worth of at least $7 million or more than $200,000 in gross annual income.

accretion: Asset growth by internal expansion or acquisition.

accrual basis accounting: A method of accounting in which transactions are recorded when revenues and expenses are incurred, regardless of whether or not cash has been paid or received.

accrued interest: All the interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security.

accumulation: Buying over a period of time, to avoid making a single, substantial purchase that might drive up the market price.

acid test ratio: Also called a quick ratio, an indicator of company's financial strength by dividing current assets minus inventories by current liabilities.

acquiring company: A company that acquires a targeted company.

acquisition: The act of one corporation buying another one.

active market: A market with a high volume of trading between securities, and very little price difference between bid and asked prices.

actuary: A specialist in the mathematics of risk covering premiums, reserves, dividends, insurance, and annuities.

adjustable rate mortgage (ARM): A mortgage in which the interest rate can fluctuate based on a stated index during a stated time period, typically with a low initial rate.

adjusted gross income (AGI): Total income as reported on Federal Form 1040, including allowable adjustments such as IRA contributions, alimony expense among others.

affiliate: A company which is controlled by another company either by ownership or a minority interest.

after hours trading: Trading that takes place after regular markets close, usually weekdays from 4:00 pm to 6:30 pm EST.

aftermarket performance: A benchmark of IPO performance, often tracked from the first day's closing price rather than the offering price.

agency security: Any bill, note or bond issued by a federal agency.

agent: A person authorized by a written agreement to act on behalf of another person.

aggressive growth fund: A mutual fund which owns stock of smaller companies with high potential for growth.

alert: A notification by email or pager of a market event or price target reached.

alimony: Payments made to a divorced or separated spouse as required by a divorce decree or legal separation agreement.

allocation: The process of deciding which investment to make and the size of the investment.

allocation: The amount of stock in an IPO granted by the underwriter to an investor, often based on investing history or ability to hold for the long-term.

all or none: A trading instruction to execute a trade if and only if it can be bought or sold in its entirety.

allowance: A fixed dollar amount given to an employee or child, usually earmarked for specific expenses.

allowance: A dollar amount used to reduce federal and state taxes.

alpha: A measure of risk-adjusted performance calculated by regressing the security's excess return on the S&P 500 excess return.

alpha equation: (y - b*x)/n, where n = number of observations in months, b = beta of a fund, x = sum of rates of return for the S&P 500, y = sum of rates of return for the fund.

alternative minimum tax (AMT): A federal tax aimed at wealthy tax payers so that they are forced to pay at least a minimum level of income tax.

American Association of Individual Investors (AAII): A non-profit organization whose mission is to help educate individual investors.

American Depositary Receipts (ADR): Certificates which represent a certain number of shares of a foreign stock, traded on U.S. stock exchanges as any other security is traded, but with the underlying foreign stock kept at U.S. banks in foreign countries.

American Depositary Share (ADS): The tradable share issued under an ADR agreement.

American Stock Exchange (AMEX): A major stocks and options exchange, merged with NASD in 1998.

American-style option: An option that can be exercised any time between the purchase date and the expiration date.

AMEX Market Value Index: An index that tracks the performance of over 800 companies that are listed on the American Stock Exchange.

amortize: To repay debt in installments over time.

analyst: A professional who studies companies and make portfolio recommendations, typically as an employee of a brokerage or investment bank.

angel investor: An investor who invests directly into private, start-up companies, usually considered among the most risky investments.

announcement date: Also called a declaration date, the date on which a company's board of directors meet to announce the date and amount of the next dividend.

annual percentage rate (APR): The interest to be paid expressed in annual terms.

annual report: A report published by a company on an annual basis to update the investment community.

annual return: The percentage profit from an investment over a one-year period.

annuitant: A person who receives payment from an annuity.

annuity: A series of payments made at equal intervals of time, such as rent, mortgage payments, auto loan payments, and interest payments.

annuity: A tax-deferred retirement account offered by an insurance company with a periodic fixed payment made to the policy owner for a specified number of years.

appraisal: The process of an appraiser giving a measure of market value to property such as residential real estate.

appreciation: An increase in the value of an asset.

appreciation fund: A mutual fund that invests in stocks whose values are expected to increase significantly.

arbitrage: Simultaneous buying and selling of a security at two different markets, with two different prices resulting in a profit.

arbitration: A method of resolving simple contract disputes by having both parties submit to settlement recommended by an agreed upon neutral mediator who also has the power to execute a settlement, as if administered in a court of law..

Arms index: Also called trading index (TRIN), a market indicator used in technical analysis taken by dividing the ratio of advancing and declining issues by the ratio of up and down volume.

ask price: The lowest price acceptable to a prospective seller for a particular security.

asset: Any possession that has value.

asset allocation: The way a person or fund chooses to assign assets among different investment categories -- i.e., stocks, bonds, mutual funds, savings, and real estate, for the purpose of reducing risk and increasing rewards.

asset allocation: A mutual fund that seeks to optimize the mix of stocks, bonds, and cash at any given time.

asset class: A classification of assets among different categories such as real estate, equities, bonds, cash.

asset-backed security: A security containing an undivided fractional interest in pools of consumer loans, such as credit card debt or car loans, or receivables held in trust.

assignment: A receipt of an exercise notice requiring a sell on a call or purchase on a put for the underlying security at the specified strike price.

at-the-money: An option with a strike price equal to the market price of the underlying security.

auction: The issuance of new Treasury bills, notes, and bonds by the Federal Reserve.

auction market: A market where buyers and sellers enter simultaneous bids and offers, such as the NYSE.

audit: An examination of a company's finances and accounting systems performed by an accountant, who gives an opinion about the financial condition of the company.

auditor: A person who examines a company's financial and accounting documents for accuracy.

Automated Clearing House (ACH): A system maintained by the Federal Reserve Bank that allows banks to process checks, transfer funds, and other things.

Automatic Investment Plan (AIP): An investment plan that automatically takes a deduction from a paycheck and invests it into a mutual fund or 401K.

autoregressive: The use of previous data to predict future data.

average: An arithmetic mean calculated by dividing the sum of the value of a group of stocks by a predetermined divisor.

average down: An investment strategy to buy more shares as the price of a stock drops, thereby lowering the average cost of each share in the entire holding.

average life: An estimate of maturity for a pool of mortgage-backed securities.

average maturity: An average time to maturity of securities held by a mutual fund.

away from the market: A trade order placed outside the current trading range.

Return to Top of Page

B

baby bond: A bond with a face value of less than $1000.

back-end load: Also called a redemption charge, a commission incurred when redeeming shares of a mutual fund.

balance sheet: One of several financial statements of a company providing a listing of assets and liabilities and giving a snapshot of a company's financial health.

balanced fund: Also called a hybrid fund, a mutual fund that invests in both stocks and bonds.

bank: A financial institution, such as a savings bank, savings and loan, credit union or trust company, engaged in the lending of money to individuals and businesses.

bank investment contract (BIC): An investment instrument issued by banks to large investors such as pension funds with guaranteed principal and interest from one to five years and insured by the FDIC.

banker's acceptance: A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment.

banker's rule: A method of calculating simple interest which assumes a 360-day year and is more favorable to the lender.

bankruptcy: A state of being unable to pay debts.

barter: A system of exchange of goods and services without currency.

barter market: A marketplace in which all goods and services are bartered.

base interest rate: Also called the benchmark interest rate, the minimum interest rate demanded by investors for non-Treasury security.

basic earnings: Earnings per share calculated as net income divided by the number of common shares.

basis: The original price paid for a property or investment.

basis point: one hundredth of a percent, usually referring to interest rates.

bear: A person who expects the market to decline.

bearer: A person in possession of an instrument, document of title, or security payable to bearer.

bearer security: A security that allows its ownership to change to the person or company having possession.

bear market: A stock market in which most stocks are trading 20% or more below their highest prices.

bear raid: A coordinated effort by traders to drive down the price of a stock.

Beige Book: Periodic anecdotal reports compiled by each Federal Reserve district for the Federal Open Market Committee since May 1970.

benchmark interest rate: Also called the base interest rate, the minimum interest rate demanded by investors for non-Treasury security.

beneficial owner: A person who is not the true owner of property but who receives all or part of the benefits by reason of a trust or other private arrangement.

beneficiary: The person for whose receives the benefits from a trust, or the proceeds of a life insurance policy.

beta: A measure of a stock's risk compared to the overall market. A beta of one represents the overall market or average risk for a stock. Stocks with betas greater than one are riskier than the average stock.

bid price: The highest price a prospective buyer is willing to pay for a particular security.

bid-to-cover ratio: The volume of Treasury securities with dealer bids divided by the volume offered for sale.

bill of exchange: A document demanding payment.

Big Blue: A nickname for IBM or International Business Machines in reverence to its stature as a leading corporation.

Big Board: Another name for the New York Stock Exchange.

Black, Eugene R.: Chairman of the Board of Governors of the Federal Reserve System from 1933 to 1934.

Black Monday: October 19, 1987 - the date of largest one day plunge of the Dow Jones Industrial Average in which the index lost 508.32 points or 22.6% of its value.

Black Friday: A reference to a day during which the markets sell off dramatically, the original one falling on Friday, September 24, 1869 when an attempt to corner the gold market led to an economic depression.

Black-Scholes option pricing model: A model developed to value options that incorporate factors such as the volatility of a security, return, level of interest rates, strike price, stock price, and the time remaining until the option's expiration date.

blended fund: A fund that invests in both value and growth stocks.

block: A large number of securities, usually referring to at least 10,000 shares of stock or $200,000 in bonds.

blow-off top: A technical analysis pattern characterized by a steep and rapid increase in price followed by a steep and rapid drop in price.

blue chip: A large, well-established brand name company with stable earnings.

blue list: A daily trade publication that contains detailed information about current municipal bond offerings of banks and brokers nationwide.

blue sky laws: State laws covering the issue and trading of securities.

board of directors: A body comprised of individuals elected by the shareholders of a company charged with making key company decisions.

boiler room: A place where unscrupulous salespeople sell speculative or worthless stock to unwitting investors.

bond: A long-term debt obligation that is collateralized by specific assets.

bond equivalent yield: The effective yield of semiannual compounding due to the fact that U.S. bonds pay coupons twice a year.

bond fund: A mutual fund which invests in different bond issues. A bond fund may invest in one particular type of bond such as corporate or U.S. Government, or in all different types of bonds. Common objectives of bond funds are stability and income.

bond rating: A rating issued by a third party to assess the possibility of default by the bond issuer.

book entry: An electronic record of ownership of Treasury or other securities.

book value: A company's net worth or equity as stated on the company's financial statements.

bottom fishing: An investment strategy based on finding bargains among low-priced stocks.

bottom line: Net income or earnings per share, literally found at the bottom of a financial summary.

breakout: A rise in the price of a stock above a resistance level, or a drop below a support level, typically construed as a buy or sell signal, respectively.

breakpoint: A purchase of shares in an open-end mutual fund that entitles the buyer to a discounted sales charge.

bridge loan: A short term loan made with the expectation of obtaining Intermediate or long term financing within a short period of time, usually three to six months.

broker: A person or firm that acts as an intermediary between buyers and sellers of securities, never taking market risk.

bubble: The notion that a market or an economy is overvalued, driven by speculation, and is due to 'burst'.

budget: A list of how a person allocates money among different expenses.

bull: A person who expects the market or markets to go up.

bull market: A stock market in which stocks as a whole are rising in value.

Burns, Arthur: Chairman of the Board of Governors of the Federal Reserve System from 1970 to 1978.

business day: A day on which exchanges are open for trading.

buy and hold: An investment strategy to buy and hold shares over several years in order to pay favorable long-term capital gains tax on profits.

buyback: A purchase of securities by the issuing company in order to take them out of circulation, usually to increase the value of remaining securities.

buyer's broker: A real estate broker who works for the home buyer as opposed to the seller.

buy-in: A purchase of security by a broker to settle an undelivered sale and to charge any loss to the seller's account.

buying power: The maximum dollar amount of marginable securities before a client needs to deposit additional funds.

buyout: An effort to purchase controlling interest in a company, typically through a tender offer of the stock.

buy side: All money management firms and funds whose job is to profit from the trading of securities.

Return to Top of Page

C

calendar: A schedule of securities that will be offered for sale, such as an IPO calendar.

call: An option that gives the owner the right to purchase the security at the exercise price.

callable bond: A bond that allows the issuer to repay the debt early.

call date: The date on which Treasury bonds are eligible to be redeemed before maturity.

call protection: The number of years that an investor has against a bond being redeemed.

call spread: The simultaneous buy and sell of call options contracts on the same security with different expiration dates and/or exercise prices.

capital: The total amount of money raised by a business.

capital asset: Long-term asset, such as land, equipment, and other fixed property.

capital expenditure: An amount spent to acquire or improve long-term assets, such as property or equipment.

capital gain: A profit incurred from the sale of a security with a cost basis that is lower than the selling price.

capital loss: A loss incurred from the sale of a security with a cost basis that is higher than the selling price.

capital structure: The mix of debt and equity maintained by a company.

capitalization: The total dollar value of all common stock, preferred stock, and bonds issued by a corporation.

capitulation: The act of giving up on a stock often characterized by panic selling.

carry: A percentage of the profits earned by venture capitalists.

carve-out: Also called a partial spin-off, an IPO or rights offering orchestrated by a company for a minority stake in a subsidiary.

cash: Coins and currencies that are readily available.

cash account: An investment account that requires all securities purchased be paid for in full, unlike a margin account.

cash-and-carry market: Also called a cash market, a marketplace in which goods are purchased with cash and 'carried away'.

cash and equivalents: The value of assets that can be converted into cash immediately or within 90 days.

cash basis accounting: A method of accounting where transactions are recorded and revenues and expenses recognized when cash is received or cash is paid out.

cash dividend: A dividend paid in cash to a company's shareholders.

cash flow: Earnings before depreciation, amortization, and noncash charges.

cash flow statement: One of several financial statements that measures cash going in and out of a company over a specified period of time.

cash management: Management of day-to-day living expenses.

cash management account: A type of account typically offered by brokerage firms which allow an individual to consolidate different accounts into one.

cash transaction: A transaction that trades and settles on the same day.

cash value: The amount of money that can be withdrawn from a whole life insurance policy while retaining coverage.

cashier's check: A draft in which the drawer and drawee are the same bank or branches of the same bank.

certificate: A physical document evidencing ownership of a stock or a bond.

certificate of deposit (CD): A savings vehicle offered by a bank with a fixed interest rate based on the term of the CD.

certified check: A check issued by a bank, payable to a designated payee, in exchange for cash.

Certified Financial Planner (CFP): A designation obtained from the Certified Financial Planner Board of Standards that experienced financial planners can achieve by completing courses on financial planning and passing a comprehensive exam.

Certified Public Accountant (CPA): An accountant who has met minimum qualifications, including passage of a two-hour comprehensive exam, sufficient work history and education, and other requirements that vary from state to state.

charitable gift: A gift of cash, stock, or personal property made to a charitable organization.

charitable remainder unitrust (CRUT): A trust which allows an individual or couple to make a charitable gift of cash, stock, or real estate, while receiving income from the trust for their lifetime.

Chartered Financial Analysis (CFA): A designation obtained from the Association for Investment Management and Research that requiring passage of comprehensive exams in accounting, economics, money management, and security analysis.

chartist: Also called a technical analyst, a proponent of an investment strategy that emphasizes technical patterns, such as trendlines, price resistance, and moving averages.

check: A draft payable on demand and drawn on a bank.

checking account: An account offered by a bank or credit union in which deposits are made and checks are written from. Most checking accounts offer minimal interest and offer cash and/or debit card capabilities.

Chicago Board Options Exchange (CBOE): The largest market for trading options.

Chicago Board of Trade (CBT): A major commodity exchange.

churning: An illegal practice by a broker placing numerous unnecessary transactions in a client's account for the benefit of gaining transaction fees.

circuit breaker: A stock market mechanism by which trading is automatically halted (and resumed) when certain events take place causing a panicked sell-off.

class: Options of the same type, calls or puts, on the same underlying security.

clearing corporations: A central distribution center for member brokerage firms that expedite trade comparisons, settlement, and assignment procedures.

cliffing: An investment strategy of arranging bonds so they all mature in the same year.

close: Also called a closing price, the final market price at the end of a trading session at which a security is bought or sold.

closed-end fund: A mutual fund which raises capital through the sale of a fixed number of shares with investors trading the shares in the open market, usually at a discount to its NAV to account for tax liabilities or liquidity concerns.

closed-end mortgage: Mortgage in which no additional money can be advanced.

closely held: A corporation with most of its stock held by a few shareholders.

closing price: Also called a close, the final market price at the end of a trading session at which a security is bought or sold.

closing purchase: A purchase made in order to reduce or eliminate a short options position.

closing costs: One time costs to make the purchase of a home, including points, title insurance, pro-rated property tax, a credit report fee, mortgage interest for the period between closing and the first mortgage payment, and others.

codicil: A legal instrument made subsequent to a will, modifying it, and becoming part of the original will.

cold call: An unsolicited sales call to a person or company in which no relationship currently exists.

collateral: An asset which is pledged by a borrower to secure a loan.

collateralized mortgage obligations (CMO): A more complex MBS designed to lessen uncertainty in cash flow by not having a specific maturity date and sold on an 'average life' basis.

collateral trust bond: A debt instrument issued by one corporation backed by the securities of another corporation.

commercial paper: Short term, unsecured corporate bonds issued to cover short-term cash needs and backed by the general creditworthiness of the issuer rather than by specific assets, typically having a maturity of less than 270 days.

commission: The fee a broker charges to buy or sell securities or property for a client.

Committee on Uniform Security Identification Procedure (CUSIP): An interindustry security code that identifies all stocks and registered bonds.

commodity: A raw material, such as wheat, coffee, pork bellies, gold, etc.

common stocks: Certificates representing ownership in a corporation with the least claim to company assets.

compensation package: An employee compensation plan that may include salary, benefits, pension, allowance, equity through stock grants and options, and other perks.

compound interest: A method of calculating interest, which allows interest payments to be added to the principal to accelerate capital growth.

conference call: A telephone-based or online forum offered by a publicly-traded company for the discussion of earnings results, once only available to analysts and now open to the public.

confirmation: A notice detailing the execution of a trade and its settlement terms.

consensus earnings estimates: The average of earnings estimates issued by analysts following a particular stock.

consent to loan agreement: An agreement that margin customers sign authorizing the brokerage firm to lend the customer's securities to itself or other firms.

conservative: An investment strategy focused on capital preservation over capital appreciation.

consideration: The value of a transaction before adding commission.

consolidation: The combination of two or more institutions to form a new one.

consumer confidence: A measure of overall economic health that focuses on consumers' sentiment, savings plans, and spending plans.

Consumer Price Index (CPI): A measure of the monthly change in price for 80,000 consumer products as tracked by the Bureau of Labor Statistics.

contingent annuity: An annuity having payments with uncertain or varying terms.

contingent deferred sales charge: A pricing structure that imposes a sales charge when exiting a mutual fund.

contrarian investing: A method of investing to take positions contrary to overall market sentiment.

controller: A person who performs bookkeeping, records business transactions, and prepares financial statements for companies.

control person: A director, officer, or other affiliate of the issuer or a stockholder who owns at least 10% of any class of outstanding stock.

control securities: Securities owned by a control person.

convergence: The movement of futures price towards the true price of a commodity as the expiration date approaches.

convert: Also called a convertible, any security that can convert into another issue, usually common stock.

convertible issue bond: A bond that can convert into another issue, usually common stock.

convertible preferred stock: A preferred stock that can convert into common stock.

convexity: The graphical relationship between price and yield for a standard, noncallable bond in that they always move in opposite directions.

cooling-off period: The period, usually 20 days, between the filing of the registration statement on a new issue with the SEC and the effective date of the offering.

corporate bond fund: This type of mutual fund buys bonds issued by corporations. High-quality corporate funds invest in bonds rated A or higher. Other corporate bond funds invest in bonds with varying credit ratings.

corporate bonds: Bonds issued by a corporation, as opposed to the federal, state or city government.

corporation: A form of business organization which is owned by its stockholders who owns shares that may be transferred or sold privately or in the public markets.

country funds: Mutual funds that concentrate on a single foreign country, outside of the US.

coupon: The detachable part of a certificate exchangeable for dividend payments.

coupon rate: The interest rate stated on a bond.

crash: A market condition characterized by a sizable drop in stock price.

credit: An agreement allowing a company or individual to purchase goods or services now and to pay at a later date.

credit card: A rotating short-term debt instrument, normally payable within 30 days that charges relatively high interest rates.

credit enhancement: A fiscal structure that allows corporations to produce an audit balance sheet in place of a pro form balance sheet.

credit report: A report used by lenders to determine a consumer or a company's creditworthiness.

credit risk: The possibility of losing part of an investment based on the debtor's credit history.

credit spread: The difference in yield between two bonds of similar maturity but different credit quality.

creditor: A person or entity who is owed payment.

Crissinger, Daniel R.: Chairman of the Board of Governors of the Federal Reserve System from 1923 to 1927.

cumulative total return: The total return of a mutual fund over time assuming all dividends and capital gains are reinvested.

currency: A mutually agreed upon medium of value for purposes of exchanging goods and services.

current assets: Assets in a corporation that can be converted into cash in 12 months or less.

current income: Earnings that take the form of dividends or interest as opposed to capital growth.

current liabilities: Debt or obligations owed and payable by a company, usually within one year.

current maturity: The number of years until a bond matures.

current ratio: A value calculated by dividing current assets by current liabilities.

current yield: The coupon rate of a bond divided by the market price of the bond.

custodial account: An account created for a minor at a bank, mutual fund, or brokerage.

custodian: An adult responsible for managing a custodial account.

cyclical stocks: Also called cyclicals, stocks that generally move with the ups and downs of the overall economy.

Return to Top of Page

D

daisy chaining: The illegal practice by brokers of creating artificial transactions to give the appearance of activity and interest in a particular security.

day order: An order that is automatically canceled if it is not filled that day.

day trade: A buy and sell of a securities position on the same day.

dead cat bounce: A small, temporary recovery in the price of the stock that has been dropping.

dealer: A person or firm that buys or sells securities, normally for a profit.

death benefit: The amount of money paid to a beneficiary when a policyholder dies. The death benefit is the face value of a policy. The beneficiary is not taxed on the benefit when s/he receives it.

debenture: A long-term debt obligation that is backed by the creditworthiness of the issuer rather than by specific assets.

debit: An accounting entry which results in either an increase in assets or a decrease in liabilities or net worth.

debit balance: The amount of loan in a margin account.

debit card: A credit card tied to a checking account so that the amount charged is deducted from the checking account electronically.

debt: Money borrowed with an obligation to pay back, usually with interest.

debt-equity ratio: A value calculated by dividing the long term debt by the common stockholders' equity.

debtor: A person or entity who owes payment.

decile rank: Performance of a mutual fund over time on a scale of 1 to 10, 1 being in the top 10 percentile, 2 being in the top 20 percentile, and so on.

declaration date: Also called an announcement date, the date on which a company's board of directors meet to announce the date and amount of the next dividend.

deduction: An amount subtracted from adjusted gross income for the purposes of paying taxes.

deed of trust: Also called an indenture, a document defining the terms of a corporation's plans to issue bonds or other debt securities.

default: The status of debt with delinquent or nonpayment�??�?�¢�??�??�?�¢�??�?�¢s.

defensive stocks: Stocks that generally move counter to the ups and downs of the overall economy, and hence viewed as safe havens in a weak economic environment.

deferred tax: Amount allocated to cover tax liabilities that have not yet been paid.

defined benefit plan: A retirement plan that provides a predetermined payment schedule without adjusting for inflation.

defined contribution plan: A retirement plan with varying contribution and benefit schedules depending on the return on the investments.

deflation: A decrease in the cost of goods and services.

delayed quotes: Stock quotes that are delayed by at least 20 minutes.

delisting: Removal of security listing from an exchange, often due to failure to meet minimum exchange requirements, but also due to mergers or a switch to another exchange.

delivery date: The expiration date of future contracts.

demand deposit: A checking account that pays no interest and can be drawn when needed.

Department of the Treasury: A federal agency responsible for the issuance and sales of Treasury bonds, as well as the circulation of currency.

dependent: Individuals included in a household who depend on a primary caregiver.

deposit: Cash or any order with a dollar value placed into an account.

depository: A central location for the safekeeping of securities.

depository trust company (DTC): A corporation, owned by banks and brokerage firms that holds and delivers securities and settles their transactions.

deposit slip: A slip that records and facilitates a deposit into an account.

depression: A severe economic downturn.

depreciation: The process of writing down the value of an asset each year to reflect the fact that it becomes less valuable over time.

depreciation expense: A fraction of the original cost of a fixed asset that is recorded as an expense for using the asset in a period.

derivative: Also called derivative security, a security derived from an underlying, real or financial asset, normally for purposes of hedging or reducing risk.

derivative zero: A zero-coupon bond created by stripping coupon and principal payments from a U.S. Treasury security.

devaluation: Lowering of the value of a country's currency relative to gold or the currencies of other nations.

differential: A small charge added to the sale price of odd lot orders as compensation to the dealer or specialist handling the order.

diluted earnings: Earnings per share calculated as net income divided by the sum of the number of common shares, warrants and stock options if exercised, and all outstanding convertibles if converted.

dilution: The impact of a transaction that reduces a company's earnings per share.

director: A corporate board member elected by shareholders.

director: An individual elected by fundholders to oversee the fund's management.

direct public offering: Offering of new securities to the public without the assistance of an investment banking firm.

discount broker: A firm that executes orders and provides little or no research or investment advice, but charges low transaction fees.

discount bond: Also called a zero coupon bond, a bond that does not pay interest income until it matures.

discount rate: The interest rate charged to member banks that borrow from the nine Federal Reserve Banks.

disinflation: A slowdown in the rate of inflation without going into deflation.

disposable income: Money available for spending or investing after taxes have been deducted.

distribution: Payments from a fund or DRP.

diversification: The act of allocating money into multiple investments in order to offset the impact of dramatic changes in any single investment.

dividend: Payment in cash or additional stock that a corporation makes to its shareholders.

dividend reinvestment plan (DRP): A plan offered by corporations to re-invest dividends, often at a discount from market price and without incurring any fees.

dividend stock: A stock that regularly pays dividends, such as a utility.

divestiture: A sale of a company's assets.

dollar cost averaging: An investment strategy to invest a fixed amount of money regularly over time by buying more shares as prices go down and fewer shares as prices go up, thereby optimizing the cost per share.

double witching: Similar to triple witching, but having only two classes of options or futures expiring on the same day.

Dow Industrial Average Model New Depositary Shares (DIAMONDS): A UIT that tracks the DJIA trading as DIA on the American Stock Exchange.

Dow Jones Industrial Average (DJIA): Also called the Dow, the leading indicator of the stock market, which is a composite of 30 large industrial stocks.

down payment: Part of the purchase price that is paid to the buyer up front.

downgrade: A negative change in rating for any stock or bond.

downtick: A drop in the price of a security in the latest sale compared to the previous sale.

draft: Also called a check, a document signed by a drawer to a drawee ordering payment on a future date.

drawer: The party that draws a draft.

drawee: The party that receives payment on a draft.

due diligence: All the research involved in learning more about a possible investment.

due diligence meeting: The last meeting between corporate officials and underwriters to finalize the contents of the prospectus for a new security.

dumping: Selling items below cost to eliminate surplus, hurting competitors and gaining market share.

durable goods: Also called hard goods, items are not consumed or quickly disposed of and may be used for years.

duration: A measure of a bond's price sensitivity to changes in interest rates.

duty: A tax on imports and exports.

Return to Top of Page

E

early withdrawal penalty: A common practice in which an early withdrawal incurs a cash penalty or partial or complete loss of tax deferral privileges.

earnings: The net positive return generated by a business on its operations.

earnings before interest, tax, depreciation, and amortization (EBITDA): Earning numbers that supposedly presents a clearer picture of cash flow by ignoring noncash charges.

earnings estimates: A determination made by analysts of a company's upcoming earnings based on guidance provided by the company.

earnings per share (EPS): The earnings (or losses) of a company divided by the number of shares outstanding.

earnings report: A corporate financial statement which reports either a profit or a loss by tallying revenues, expenses and other items.

earnings surprise: The degree from which actual earnings differ from consensus forecast.

earnings yield: The earnings of a company divided by the number of outstanding shares, divided by recent market price.

Eccles, Marriner S.: Chairman of the Board of Governors of the Federal Reserve System from 1934 to 1948.

economic indicators: Key statistics showing the direction of the economy, such as unemployment rate, inflation rate, consumer confidence, and balance of trade.

economy: All the activities involved in the production and distribution of goods and services in a particular region or country.

economy of scale: Operational efficiencies gained from increased production, thereby reducing cost per unit.

EDGAR: Short for Electronic Data Gathering, Analysis, and Retrieval, the SEC's system for the filing of quarterly and annual reports and other disclosures.

edgarize: The process of preparing a document for use with the EDGAR system.

education IRA: An individual retirement account that allows parents to contribute $500 per year in their child's IRA, which may be distributed for education purposes only when they reach the age of 18.

effective date: The first date on which a new security can be offered after the cooling-off period.

efficient market theory: A theory that accepts the notion of an already efficient market and that efforts to beat the market are futile.

elasticity: The degree to which the price of an item changes to accommodate a change in either supply or demand.

electronic funds transfer (EFT): The transfer of funds between accounts and firms electronically.

elevator pitch: A succinct one-minute explanation of a business, usually for the purpose of attracting new investors.

emergency cash reserve: The amount of money a person saves in preparation for a financial emergency.

emerging market: A market with short or uncertain history, such as that of a developing country.

emerging markets fund: A mutual fund that focuses on stocks listed in developing countries exchanges.

employee stock purchase plan (ESPP): A program offered by a company to its employees to purchase its stock at a discount to its fair market value.

endorsement: A signature on a security or instrument that matches the registered name in order to make the document negotiable.

equity: The value of the common stockholder's interest as listed on the balance sheet.

equity: Ownership interest in a corporation, typically in the form of stocks.

equity fund: Also called a stock fund, the value of this mutual fund depends on the value of stocks within a fund's portfolio.

equity option: A security entitling the holder to buy or sell 100 shares of stock at a specific price for a limited time period.

escrow: The holding of important documents and money by a neutral third party until the close of a transaction or the conditions of a contract are met.

estate planning: Planning for the handling, disposition, and administration of an estate when an owner dies or is disabled.

Eurodollar: US money held in European bank accounts.

European-style option: An option that can only be exercised at the expiration date.

excess equity: Equity in a margin account greater than the requirement set under Regulation T.

exchange: The marketplace in which securities, such as stocks and bonds, are bought and sold. Two examples of stock exchanges are the New York Stock Exchange and the American Stock Exchange.

ex-dividend date: The first day of trading when the seller, rather than the buyer, of a stock is entitled to the most recently announced dividend payment.

execution: The actual fulfillment of an order to buy or sell securities.

executor: The person or firm appointed by an individual and named in a will to administer the estate.

exemption: A tax deduction taken by an individual, a spouse, and each dependent.

exercise: To act on an option by purchasing the underlying security.

exercise price: Also called the strike price, the price at which an option executes on a future date.

expense ratio: The cost of owning a mutual fund, or the operating expenses.

expenses: Costs incurred to create revenue.

expiration date: The last day on which an option can be exercised.

ex-rights date: The date after which stocks are traded without subscription rights.

ex-warrants date: The date after which stocks are traded without granting warrants to the buyers.

Return to Top of Page

F

face value: Also called par value, the original price of a stock or bond.

Fannie Maes: Mortgage-backed securities guaranteed by the FNMA for payment of principal and interest.

FDIC insured: An account that is insured by the FDIC, currently up to $100,000.

Federal Deposit Insurance Corporation (FDIC): An independent federal agency that insures bank and savings and loan deposit accounts up to $100,000. The FDIC was created to protect the consumer against bank or savings and loan failure.

federal funds rate: The interest rate on reserves traded among commercial banks for overnight use.

Federal Home Mortgage Association (FHLMC): A stockholder-owned corporation chartered by Congress to help stabilize the mortgage market and make housing more affordable.

Federal Housing Administration (FHA): A federal agency that insures mortgage loans.

Federal National Mortgage Association (FNMA): The federal agency that issues Fannie Maes.

Federal Reserve Board: Also known as the Fed, officially renamed Board of Governors of the Federal Reserve System by the Banking Act of 1935, the seven-member governing body of the Federal Reserve System that sets reserve requirements and the discount rate.

Federal Reserve Bank: One of 12 member banks of the Federal Reserve System responsible for compliance among commercial and savings banks in its region.

Federal Reserve System: A federal agency established in 1913 and expanded by the Banking Act of 1935 authorized to set monetary policies and to ensure banking compliance.

fiduciary: A person or firm holding assets for another party with the authority and duty to make decisions in the best interests of that other party.

finance charge: The total amount of interest charged over the term of the loan expressed in dollar terms.

financial planner: A professional who assist investors by creating a long term financial plan.

firm commitment: A type of underwriting wherein the underwriter purchases the entire issue from the issuer in order to resell the securities in a secondary market.

First Call: A leading aggregator of analysts' earnings estimates.

fiscal period: A corporation's yearly accounting period which covers a 12 month period for which business activities are reported and profit or loss is determined.

fixed annuity: A tax deferred retirement vehicle which offers a fixed rate of return each year with earnings from the annuity that are tax deferred until withdrawn.

fixed asset: Tangible assets which are held long-term such as buildings and equipment, that are used in the operations of a business rather than held for sale.

fixed loan rate: A loan based on a predetermined rate.

fixed-rate mortgage: Typically, a 15- or 30-year mortgage in which the interest rate is fixed during the set term. The monthly principal and interest payment will remain the same during the term of the mortgage.

flexible spending plan: An employee benefit plan that allows a person to pay certain expenses with tax-free money.

flight to quality: A tendency for investors to move capital to safer investments during times of crisis or uncertainty.

flip: To sell a stock on its first day of trading.

float: The total number of outstanding shares available for trading by the public.

floating loan rate: A loan with a rate based on an external index of interest rates in the financial markets.

flotation: The introduction of a company's shares into the market.

fluctuation: A change in price or interest rates over time.

foreclosure: The process by which the mortgage holder of a property recovers the property through the courts after the property owner is seriously delinquent and unable to redeem the mortgage and become current.

foreign exchange: An instrument such as currency, notes, and checks, used to make payments between countries.

Forex: An over-the-counter market where buyers and sellers conduct foreign exchange transactions.

forfeiture: A loss of money, property or privileges due to a breach in contract.

forgery: An illegal modification of a legal document, signature or legal tender.

Form 3: A document required by the SEC announcing owners with a 10% or more equity stake in a company.

Form 4: A document required by the SEC announcing owners with a change in their 10% or more equity stake in a company.

forwards: An obligation to buy or sell an asset on a specific date at a set price, similar to futures, but usually a private transaction between two parties and not actively traded.

fraud: A misrepresentation of the truth for the purpose of deceit.

Freddie Macs: Mortgage backed securities guaranteed by the FHLMC for payment of principal and interest.

free stock: A security that can be used for loan in a margin account to represent a debit balance.

free-trading stock: Stock can be bought and sold freely without restrictions imposed by the issuing company or the SEC.

Friedman, Milton: An economist and leading advocate of monetarism.

front-end load: A sales fee charged on the day an investor purchases mutual fund shares, usually between 3 to 8.5 percent of the investment.

frozen account: A brokerage account that requires cash in advance for a period of 90 days in order to trade triggered by a failure to make timely or complete payments.

full-service broker: A brokerage firm that offers extensive investment advise and research to its clients.

fund: A pooling of money to be invested.

fund exchange: An ability to allocate investments from one fund into another within the same mutual fund family.

funding: The raising of money to launch or expand a business.

fund manager: A professional whose job is to make investment decisions for a mutual fund.

fundraising: The solicitation of funds for either a business or a nonprofit organization, such as a charity.

fundamentals: Inherent factors of a company, including earnings, cash flow, balance sheet, and overall condition of the company's industry.

futures: An obligation to buy or sell an asset on a specific date at a set price.

futures price: The set price of a futures contract on the delivery date.

Return to Top of Page

G

generally accepted accounting principles (GAAP): The common set of standards and procedures, promulgated by the Financial Accounting Standards Boards, by which audited financial statements are prepared.

Ginnie Maes: Mortgage backed securities guaranteed by the GNMA for payment of principal and interest.

Glass-Steagall Act: Officially known as the Bank Act of 1933, a Depression-era act aimed at protecting financial institutions (commercial banks) that take customer deposits from the risks associated with securities activities.

global fund: A mutual fund that invests in stocks and/or bonds in any region of the world, including the U.S.

globalization: An economic trend or business initiative to expand across markets on more than one continent.

going public: The process of preparing for an initial public offering.

golden parachute: A stipulation in an executive compensation package which grants the executive upon departure or termination a lump sum payment or an annuity.

good 'til canceled (GTC): An order to buy or sell a security that stays in effect until executed or cancelled by the investor.

goodwill: Additional asset created when the purchase price exceeds the book value of the asset which is written off as an expense, typically over a 40-year period, and may skew reported earnings.

government bond: A bond issued by the U.S. Treasury.

Government National Mortgage Association (GNMA): A government agency part of the Department of Housing and Urban Development (HUD) that buys VA and FHA loans from lenders, securitizes them, and sells them to investors.

Greenspan, Alan: Chairman of the Board of Governors of the Federal Reserve System from August 1987 to present, serving his 4th term.

gross domestic product (GDP): The total value of all goods and services produced in the US.

gross income: Income before expenses.

gross national product (GNP): The total value of all goods and services produced in the US.

gross spread: The difference between an IPO's offering price and the price paid to the issuers by an underwriter to account for syndication fees and underwriter's discount.

growth fund: A mutual fund that invests in companies with high growth potential with the goal of a higher than average return.

growth stock: A stock having earnings growth at an above-average rate.

guaranteed investment contract (GIC): Investment instruments issued by insurance companies to large investors such as pension funds with guaranteed principal and interest from one to five years.

guidance: An effort by companies to provide analysts with sufficient information to create revenue and earnings projections.

guru: An analyst that makes recommendations on various stocks and tries to predict how stocks will perform in the future.

Return to Top of Page

H

Hamlin, Charles S.: Chairman of the Board of Governors of the Federal Reserve System from 1914 to 1916.

Harding, W.P.G.: Chairman of the Board of Governors of the Federal Reserve System from 1916 to 1923.

head and shoulders: A chart formation characterized by three rallies, the second one reaching the highest point, and viewed by technical analysts as a very bearish indicator.

hedge fund: A private investment partnership limited to 99 high net-worth or institutional investors, taking long and short positions and using leverage.

hedging: A strategy to reduce or eliminate investment risk.

high-growth stocks: Stocks in industries that grow at a significantly faster pace than the overall economy.

high price: The highest intraday price of a stock over the past 52 weeks, adjusted for any stock splits.

high-yield bond: Also referred to as a junk bond, a bond that is rated BB or below by Standard & Poor's, paying a higher interest rate and considered riskier than higher quality bonds.

holding company: A corporation that owns or controls several different corporations.

home equity: Value accumulated in a property through payments on the principal of the property's mortgage.

hostile takeover: An unsolicited acquisition of one company by another, or an attempt to do so.

hypothecation: The pledging of margin securities by a brokerage to secure the funds necessary to carry an account's debit balance.

Return to Top of Page

I

illiquid: An inability to easily convert into cash.

income: Regular earnings, generally from corporate dividends and interest on bonds.

income statement (profit and loss statement): One of several company's financial statements which provides a summary of revenues and expenses over a period of time.

income stock: A publicly-traded company with consistent performance and operate in stable industries, usually having a history of consistent dividend payments to stockholders.

indenture: Also, called a deed of trust, the terms of a corporate bond.

index: A measure of a group of stocks, often the sum of the weighted value of each stock in that group.

index fund: A mutual fund that holds all or nearly all stocks in a standard market benchmark.

indexing: The weighting of one's portfolio to match a broad-based index and its performance.

indicated dividend: The projected total amount of dividends to be paid over the next 12 months based on the most recent dividend.

indicated yield: The indicated dividend divided by the price of the stock.

individual retirement account (IRA): An account which allows an investor to defer taxes while investing into the account. Taxes on the earnings are paid upon withdrawal from the account, usually upon the investor's retirement.

industry: Also called a sector, a category that describes a company's primary business activity and identifies its competitors.

inflation: An increase in the cost of goods and services, which results in a loss of purchasing power for any given constant amount of money.

inflation rate: An annual rate of inflation, based on a basket of goods and services, announced on a monthly basis.

inflation risk: The risk that the purchasing power of an investment, after adjusting for inflation, will be negative.

initial public offering (IPO): Securities issued by a company and initially offered for sale to the public through a broker.

insider: A person close to a company who may have access to material, nonpublic information.

insider trading: Buying or selling of a company's stock by that company's management, board of directors or persons holding more than 10% of a company's shares.

institutional investor: Organizations such as mutual funds, pension funds, and insurance companies that trade in large volumes of securities.

instrument: An unconditional promise or order to pay a fixed amount of money with or without interest.

insurance premium: An amount paid for insurance by a policyholder.

intangible asset: An asset that does not exist on a physical level but has some value assigned to it.

interactive chart: An online chart that enables an investor to change the view and scope of chart data in real-time or delayed format.

interest: Amount charged for borrowing money or for the use of a commodity.

interest rate: Rate of interest charged for the use of money or commodity. The rate is derived by dividing the amount of interest by the amount of principal borrowed.

interest rate risk: A risk assumed by bond investors that interest rates will rise.

interest rate swap: An arrangement to swap a fixed loan rate for a floating loan rate, or vice versa.

interest-sensitive stock: A stock whose operations and earnings are impacted by changes in interest rates.

Internal Revenue Service (IRS): A branch of the government that collects nearly all government revenue and enforces compliance with tax laws.

international fund: A type of mutual fund that invests in markets (stocks and bonds) outside of the US.

intestate: An estate without a will.

intraday high and low: The highest and lowest prices of a securities traded during a single day.

inventory: A company's products that are ready for sale.

inventory turnover: The rate at which a company sells or turns over its inventory.

inverted yield curve: A rare occurrence during which short-term rates are higher than long-term rates.

investment: Property acquired and held for future income or appreciation.

investment banker: A professional who engages attorneys, accountants, and market specialists to arrange for public sale of a company's stock.

investment club: A group of amateur investors who pool their assets together to jointly buy and sell securities.

investment grade bond: A bond rated AAA by Standard & Poor's or Aaa by Moody's considered of high quality having little risk.

investment property: Property acquired for the purpose of income accumulation and/or appreciation.

investment trust: A closed-end fund that specializes in a sector or country and traded on the secondary market like corporate stocks.

investor relations (IR): Efforts undertaken by companies to communicate with its shareholders and analysts, and to raise company awareness in the general investment community.

issue date: The month and day on which a security is initially issued.

issued stock: Stock sold to the public.

Return to Top of Page

J

January effect: A temporary rally in the stock market during the first month, especially the first few days of the new calendar year, caused by renewed demand stocks that were sold off for year-end losses.

joint account: An account with two or more individuals acting as co-owners.

junk bond: A high-yield bond offering a higher interest rate than the average bond, but with a higher risk of nonpayment.

Return to Top of Page

K

Keogh Plan: A retirement plan for the self-employed to set aside up to $30K or 25% of their annual income on a tax-deferred basis.

Return to Top of Page

L

large cap: A company with a total market capitalization of over $5 billion.

last: The latest price available on a security.

lead investor: The principal entity that originates and structures a syndicated deal raising money for a company.

leakage: Issuance of securities to prohibited entities.

legal tender: An accepted form of payment for a debt.

lessee: A person or corporation that rents an asset from another person or corporation.

lessor: A person or corporation that rents an asset to another person or corporation.

letter of credit: A document issued by a bank which guarantees the payment of a customer's draft up to a specific amount and time period.

letter of intent: A nonbinding letter from one company to another acknowledging a willingness and ability to enter into a deal.

level load: An annual sales charge incurred when holding a mutual fund, usually labeled class C shares.

Level I Quotes: Quote listings that reveal the best bid and ask prices for NASDAQ stocks.

Level II Quotes: Quote listings that reveal the best bid and ask prices for NASDAQ stocks, as well as the bid and ask prices of other dealers and the number of shares at which they are willing to trade.

leverage: The management of debt to generate a higher return.

leveraged buyout (LBO): The process by which a company is purchased with borrowed money, which is repaid out of cash generated from the acquired company's operations or from the sale of its assets.

liability: Any kind of debt, from bank debt to money a business owes to suppliers to refunds it owes customers.

lien: A legal claim against a property to secure payment for monies owed.

life annuity: An annuity with payments made only during an individual's lifetime, such as retirement benefits.

limit order: A market order to buy at a given price or lower, or an order to sell at a given price or higher.

line of credit: An open-ended arrangement for a company to borrow and repay debt at its discretion, subject only to a maximum limit.

liquidation: The act of closing down a business, including the sale of its assets.

liquidity: The ease by which an asset can be converted into cash without losing its value.

listed security: A stock or bond that has been listed on one of the registered securities exchanges in the US.

living trust: A trust created while the donator is living.

living will: An estate planning tool to identify an individual's wishes for health care decisions in times of crisis.

Livingston Survey: Started in 1946, the longest running survey of economists' expectations issued biannually and managed by the Federal Reserve Bank of Philadelphia since 1990.

load: This is a sales charge for owning a mutual fund, usually totaling 3 to 5 percent of the amount invested.

lock-in: A mortgage lender's commitment and written agreement to guarantee a specified interest rate to a homebuyer, given that the loan closes within a period of time. The lock-in also details the number of points to be paid at closing.

lock-up period: A period of time, typically 180 days, directly after an initial public offering where the lead underwriter restricts insiders from selling their shares. Also known as a lock-down period.

London Interbank Offered Rate (LIBOR): Short-term interest rate used by London banks and quoted in the European money markets for Eurodollar transactions.

long position: The total value of one of an investor's stock holdings.

long-term debt: Debt that requires interest payments and due after one year.

long-term equity anticipation securities (LEAPS): Stock options which last up to three years.

long-term investing: An investment strategy based on holding stocks for at least eight years to stay invested through economic cycles.

long-term liability: Liabilities that are due after one year.

loss: The net negative return generated by a business on its operations.

low price: The lowest intraday price of a stock over the past 52 weeks, adjusted for any stock splits.

Return to Top of Page

M

M1: A money aggregate measuring the amount of currency in circulation and deposits into checking accounts.

M2: A money aggregate measuring the M1 plus the amount of deposits in savings accounts, CD's under $100,000, money-market funds, and overnight repurchase agreements.

M3: A money aggregate measuring the M2 plus CD's over $100,000, institutional money-market funds, and term repurchase agreements.

macroeconomics: The study of the behavior of the overall economy.

margin: Partial payment for a security involving full ownership rights and risks with the balance financed typically by a brokerage.

margin account: A brokerage account that allows a person to borrow funds to purchase securities.

margin call: Demand for additional funds in a margin account to meet or re-meet minimum maintenance requirements.

market breadth: A measurement of the number of advancers vs. decliners on a particular trading day.

market capitalization: The total value of a company calculated by multiplying the company's share price by the total number of shares outstanding.

market commentary: A summary of market news, which may be either objective or subjective reporting.

market correction: A market condition characterized by at least a 10% drop in stock prices, either within a sector or across the entire market.

market maker: A professional trader whose job is to maintain adequate inventory of one or more securities to facilitate the buying and selling of those securities.

market order: An order to buy or sell a stock immediately at the best available current price, which guarantees execution but not necessarily at a predetermined price.

market price: The latest price at which a security has been bought or sold.

market timing: A decision to buy or sell securities based on economic indicators or technical trends.

market value: The total dollar value of securities based on its market price.

market value: The highest price that a buyer would pay and the lowest price a seller would accept on an asset.

Martin, William McChesney: Chairman of the Board of Governors of the Federal Reserve System from 1951 to 1970.

material information: Information which is likely to effect the stock price when disclosed to the public.

McCabe, Thomas B.: Chairman of the Board of Governors of the Federal Reserve System from 1948 to 1951.

mediation: A method of resolving simple contract disputes by having both parties submit to settlement recommended by an agreed upon neutral mediator who does not have the power to execute a settlement.

merger: The act of combining two or more companies and the issuance of stock to reflect the newly combined organization. Mergers are generally used with large companies that are approximately the same size.

Meyer, Eugene: Chairman of the Board of Governors of the Federal Reserve System from 1930 to 1933.

mezzanine financing: Late-stage venture capital financing, often the final round prior to an IPO.

micro cap: A company with a total market capitalization of less than $250 million.

microeconomics: The study of the behavior of small economic units, such as consumers and households.

mid cap: A company with a total capitalization of approximately between $1 and $5 billion.

Miller, G. William: Chairman of the Board of Governors of the Federal Reserve System from 1978 to 1979.

momentum trading: A trading strategy based not on company fundamentals, but on price movement and market sentiment.

monetarism: A school of economic thought that considered the money supply as the main determinant of economic activity and dominated U.S. economic policymaking in the early 1980's.

monetarist: A proponent of control of the money supply as the main determinant of economic activity and direction.

monetary policy: a policy managed by the Federal Reserve Board to control the availability and cost of borrowing money.

money laundering: Schemes to route illegally acquired cash through bank accounts and business so that the funds appear legitimate and honestly earned.

money market fund: A mutual fund that invests in very safe short-term government and corporate issues. Shares in money market mutual funds are valued at $1.00 in order to maintain their cash equivalent status.

money purchase plan: A defined contribution plan where the employer has made a commitment to contribute a specific percentage or amount of the participant's compensation to the plan each year. The contribution formula must be specified in the plan. Unlike a profit sharing plan the employer contribution is required. Employee's can more easily predict a retirement benefit because contributions are made regularly. An employer may have a contribution formula as high as 25% of compensation and may be integrated with social security.

money supply: The amount of money in circulation, broken down by monetary aggregates, such as M1, M2, and M3.

Moody's Investors Service: A leading bond rating agency.

mortgage bond: A bond secured by a mortgage on property which may be sold to satisfy the debt if the borrower defaults.

mortgage broker: A person or firm who helps home buyers or owners find an appropriate mortgage. A fee or commission is charged for this service.

mortgage backed securities (MBS): Securities which are created out of a defined pool of real estate mortgages and issued by the GNMA, the FHLMC or the FNMA with investors receiving periodic payments consisting of both principal and interest.

most actives: A listing of the most actively traded stock by stock exchange during a given time period.

moving average: The average of all the market prices for a security drawn from a progressing block of time.

municipal bonds: Bonds offered by cities or states often used to pay for state funded projects, such as schools, highways, or hospitals.

municipal over bond (MOB): The difference in price between a municipal bond futures contract and a Treasury bond futures contract listed on the Chicago Board of Trade.

mutual fund: A group of securities managed by an investment company that sells shares to individual investors.

Return to Top of Page

N

NASD: National Association of Securities Dealers.

NASDAQ: Also called the National Association of Securities Dealers Automated Quotation System, a NASD-owned computerized system which tracks price quotations, and facilitates trades for over-the-counter stocks.

negotiable: The ability to transfer ownership of a security without the need to secure the permission of the issuer.

net asset value (NAV): The value of a single mutual fund share determined each day by adding up all of the mutual fund's holdings, subtracting the liabilities, and then dividing by the number of total shares.

net income: The company's total earnings based on revenues minus cost of goods, depreciation, interest, taxes and other expenses.

net worth: Total assets minus total liabilities.

new comparability plan: A special type of profit sharing plan that generally allocates different contribution levels to different groups of employees within the plan. Commonly one group (usually the owners of the company) receives a greater share of the contribution than what is available with other allocation methods. As with profit sharing plans the allocation is not required every year. New Comparability Plan's are a very attractive option for most business owners.

Nikkei: The index tracking 225 leading stocks traded on the Tokyo Stock Exchange.

no-load fund: A mutual fund in which no sales fee is charged to purchase shares.

nominal interest rate: Interest rate earned or paid, not adjusted for inflation.

noncash items: Expenses charged against revenues, which do not directly affect cash flow.

notary public: One authorized by law to acknowledge and certify documents and signatures.

note: A written promise to pay certain sum of money at a certain time that can transferred by endorsement.

NYSE: New York Stock Exchange.

NYSE Composite Index: An index which tracks the change in market value of all common stocks traded on the New York Stock Exchange. The NYSE also provides indexes on four sectors: industrials, utilities, transportation, and finance.

Return to Top of Page

O

objective: The stated goal of a fund, not necessarily a guarantee of performance.

odd lot: Less than 100 shares of stock.

open-end fund: A mutual fund that continuously accepts new funds for investments through the sale of additional shares and allow the redemption of shares for the current NAV of the shares.

open interest: The number of outstanding option contracts in a market or particular class or series.

operating cash flow: Cash generated from a company's normal business activities.

opportunity cost: A valuable alternative which is given up when a particular investment is made.

options: Financial instruments which give the owner the right to buy or sell a security on a future date at a fixed price.

order: A written instruction to pay money signed by the person giving the instruction.

ordinary income rate: A person's regular tax rate.

over-the-counter (OTC): A decentralized market of small cap companies, usually trading less than $1 and having limited liquidity or volatile trading.

over-the-counter bulletin board stock: An over-the-counter stock (OTC) that is publicly-traded meeting the requirements for full disclosure on its financials but not for stock price, market cap, or asset base as needed for listing on the NASDAQ.

overvalued: The state of a security being unjustifiably priced too high, usually when viewed through price/earnings ratios.

Return to Top of Page

P

panic selling: A situation in which many investors sell a security with market orders expecting no minimum sale price.

paper profit or loss: Unrealized capital gain or loss in an investment that has not yet been sold.

par value: Also called face value, the amount which is repaid to the purchaser of a bond at maturity, or the value assigned to a stock when issued by the company.

passive investing: An investment strategy requiring little effort by investing in an index fund simply to stay even with the overall market.

payment date: The date on which an investor receives a dividend payment, or interest on a bond.

P/E-to-growth ratio (PEG): A value calculated by dividing the P/E ratio by the projected annual five-year growth rate.

penny stocks: Stocks that trade for less than $1 per share.

pension manager: A professional who makes investment decisions for the fund.

pension plan: An employer-funded retirement plan in which the employer contributes money on the employees behalf.

periodic rate: The monthly rate at which a borrower is charged interest for borrowing money.

perpetuity: An annuity having payments that continue forever.

pink sheet stock: An over-the-counter stock (OTC) that is publicly-traded without full disclosure of its financials to the public.

point: Interest paid up front when closing on loan representing a percentage of the total loan amount and paid to reduce the interest rate on a loan.

Ponzi scheme: A type of investment fraud in which early investors are guaranteed a return and paid off with the proceeds from subsequent investments in an ongoing basis.

pooling of interests: An accounting method used in the combining of companies simply by adding them together item by item, resulting in a tax-free transaction.

portfolio: A collection of assets (generally stocks and bonds) owned by a person or company.

portfolio allocation: Spreading investments over different asset classes to reduce overall risk.

portfolio tracker: An online tool that enables investors to track their portfolio in real-time or with closing prices.

positive yield curve: A typical occurrence during which short-term rates are lower than long-term rates.

preferred stocks: Certificates representing ownership in a corporation with possible dividend payout and secondary claim to company assets over common stockholders.

premium: The price of an option contract.

premium bond: A bond selling for more than its par value.

prepayment penalty: A penalty assessed to discourage a borrower from making early payments on a loan.

price-earnings ratio (PE): Also referred to as a 'multiple,' a value calculated by dividing the price of the stock by the earnings per share and commonly used to compare against companies in the same sector.

price-sales ratio: A value calculated by dividing the price of the stock by the revenue per share and commonly used to compare against companies in the same sector.

price-to-book value ratio: A value calculated by dividing the price of the stock by the assets per share.

primary dealers: Dealers who do business directly with the Fed and the Treasury Department.

primary market: A market for the first buyer of a newly issued security.

prime rate: The base rate used on high-grade corporate loans by major rates, serving as an index for many types of loans.

principal: The original amount of a loan.

principal: The total amount of money invested in a stock, bond or other type of investment.

private mortgage insurance (PMI): Insurance required if the down payment on a home is less than 20 percent.

private placement: A cash-for-equity arrangement offered to a select group of institutions rather to the public.

privatization: A transfer of ownership of a firm from the government to the public.

probate: A legal procedure in which the Will of a deceased person is presented to a court, and an administrator is appointed to carry out the terms of the Will.

probate sale: The sale of home and property that occurs when the owner dies and the property is to be divided among inheritors or sold to pay debts.

Producer Price Index (PPI): A measure of the monthly change in wholesale prices as tracked by the Bureau of Labor Statistics.

profit: Gain from the sale of an investment, such as stocks, bonds, or real estate.

profit sharing plan: A type of defined contribution plan in which, employees can share in their employer's profits. The employer has discretion as to the amount to contribute to the plan each year, however; the plan must contain a formula for allocating the contribution to participants. Profit sharing allocations can be integrated with social security. The maximum amount an employer can deduct on its tax return is 25% of total eligible compensation of all participants.

program trading: Institutional buying and selling of stocks included in an index automatically triggered to take advantage of temporary price variations.

progressive tax: A tax system that charges a higher rate to those who are able to pay more. Federal income tax is an example of a progressive tax.

promissory note: A written unsecured note promising to pay a specified amount of money on demand, transferable to a third party.

property tax: Tax on property owned.

prospectus: Formal written documents that describe a plan for a proposed business, often issued by mutual funds that describe objectives, risks, and other necessary information.

proxy: A document conferring to another party the right to vote a stock.

proxy fight: A battle for control of firm by voting in a new slate of directors.

proxy statement: A notice providing shareholders with the necessary information to vote on matters to be brought up at a shareholders' meeting.

pump and dump: A term coined by traders referring to a stock that trades higher on questionable developments and subsequently sold off for a quick profit.

purchase acquisition method: An accounting method used in the combining or merging of companies by treating the acquisition as an investment and treating the premium as goodwill.

pure index fund: A fund managed to replicate the performance of an index.

pure play: A company involved in only one line of business.

put: An option that gives the owner the right to sell the security at the exercise price.

put-call ratio: A ratio of the volume of put options traded to the volume of call options traded.

pyramid scheme: A type of investment fraud that requires an endless stream of recruits who give money to the recruiter.

Return to Top of Page

Q

quarter: A fiscal period lasting three months, commonly used for purposes of reporting earnings.

quarterly refunding: The issuance of new 5 and 10-year notes by the Treasury Department every February, May, August and November.

qualified investment buyer (QIB): An investor who is permitted to acquire restricted securities.

Qube (QQQ): A UIT that tracks the NASDAQ 100 Index trading as QQQ on the American Stock Exchange.

quick ratio: Also called an acid test ratio, an indicator of company's financial strength by dividing current assets minus inventories by current liabilities.

quiet period: A period of time, starting with hiring underwriters to 90 days after a company goes public, during which a company cannot make any public comments.

Return to Top of Page

R

Real Estate Investment Trust (REIT): A company that manages a portfolio of real estate investments, similar to closed end mutual funds.

real rate of interest: The rate of interest after inflation.

real rate of return: The return or percentage profit after inflation and taxes.

real-time quotes: Stock quotes that reflect the latest market data.

recession: Reduced economic activity, evidenced by a decline in GDP (gross domestic product) for two or more consecutive quarters.

recommendation: A statement issued by analysts about the prospects of a stock, typically in the form of a strong buy, buy, accumulate, hold, or sell recommendation.

record date: A date by which a shareholder must officially own shares in order to be entitled to a dividend.

red herring: A preliminary prospectus distributed to prospective investors in a new issue of securities.

redemption charge: Also called a back end load, a commission incurred when redeeming shares of a mutual fund.

refinance: The act of taking out a new mortgage loan to pay off an existing mortgage, usually to take advantage of lower interest rates or to accelerate the payment schedule.

regional fund: A mutual fund that concentrate on a certain geographic area.

registered security: A security that assigns its ownership to a specific person or company.

registry notice: A document that tracks and proofs securities.

regressive tax: A tax with the same rate for everyone, thus taking a larger percentage of income from the lower income earner. Sales and gasoline tax are examples of a regressive tax.

Regulation A: An SEC regulation that governs the issuance of new securities.

Regulation T: An SEC regulation that governs the lending of money by brokerages to its customers.

reinvestment: A system in which dividends, interest, and capital gain distributions earned in a mutual fund are used to purchase additional units of the same mutual fund.

relative strength: A stock's price movement compared to the movement of a market index, such as the S&P 500.

reopening: The issuance of a Treasury bond with the same coupon and maturity date as a previous offering.

repurchase: An action taken by a company to buy back its own shares in the open market, thereby reducing the number of shares outstanding and increasing earnings per share.

resistance level: Real or artificial price ceiling in technical analysis that when overcome signify a new upward trading trend.

restricted stock: A stock with trading restrictions, normally at least one year.

retained earnings: Profits that are kept by the company rather than paid out as dividends.

return on asset (ROA): Net income minus preferred stock dividends divided by average total assets.

return on equity (ROE): Net income divided by average total common equity, which is higher than the ROA if debt is leveraged effectively.

return on investment (ROI): The percentage of profit made on an investment.

revenue: The total amount of money generated by a business for products and services sold to customers.

reverse merger: The process by which a company merges itself into a smaller company, normally in order to assume majority control of a publicly-trade entity.

reverse mortgage: A mortgage allowing elderly homeowners to tap into their home's equity without selling their home.

reverse stock split: A decrease in the number of shares and a proportionate increase in the price per share which effectively maintains the market capitalization of a security.

rights offering: The issuing of rights to current shareholders to buy a proportionate number of additional securities at a discounted price within a certain time period.

risk: The likelihood that an investment will lose money.

risk-reward ratio: A measure of an investment's ability to generate high returns versus the possibility of losing money on the investment.

road show: A marketing presentation by an issuer of securities to potential buyers to promote the investment of these securities, usually as part of an initial public offering

rollover: The process of moving qualified retirement money or tax-deferred money from one account to another, tax free.

Roth IRA: An individual retirement account that permits tax-free distributions after age 59 1/2.

round lot: One hundred shares of stock or multiples of one hundred shares of stock, i.e., 200, 300, or 1000 shares of stock.

Rule of 72: A mathematic shortcut used to approximate the number of years to double one's money simply by dividing 72 by the annual interest rate.

Russell 2000: A stock market index which tracks the performance of the smallest 2000 US company stocks in the Russell 3000.

Russell 3000: A stock market index which tracks the performance of 3000 largest US company stocks in various industries.

Return to Top of Page

S

S1: A registration statement filed with the SEC prior to an IPO.

safe harbor: A provision in a law which excuses liability if an attempt to comply in good faith can be demonstrated, such as in making earnings projections.

sales charge: A fee incurred upon purchase of shares in a mutual fund.

schedule 13d: The form that must be filed by an individual (or individuals acting in concert) after acquiring beneficial ownership of 5% or more of any nonexempt equity security.

SEC filing: The process by which a publicly-traded company submits the appropriate forms to the SEC to fully disclose the company's financials.

second mortgage (home equity loan): A second mortgage ranks after a first mortgage in the event of foreclosure. Sales of a home from foreclosure proceedings are used to pay off the loans in the order they were recorded.

secondary market: A market for previously owned securities are traded.

secondary mortgage market: A network of investors willing to purchase mortgage loans originated by mortgage bankers.

secondary offering: Public sale of previously issued securities held by large investors, institutions or affiliated persons.

Section 16(a): A provision in the Securities Exchange Act requiring beneficial owners of more than 10% of a company's stock

Section 203(b): A program designed to provide mortgage insurance for someone to purchase or refinance a principal residence, usually funded by a lending institution, such as a mortgage company, bank, savings and loan association and insured by HUD.

Section 203(k): A loan, or mortgage, from the Department of Housing and Urban Development (HUD) that provides for rehabilitation of units in one-to-four unit structures.

Section 529: A program designed to help parents finance their children's college expenses.

sector: Also called an industry, a category that describes a company's primary business activity and identifies its competitors.

sector fund: Also called a specialized fund, a fund focused on investing in a specific industry.

security: Generally speaking, any note that represents ownership in or an obligation with a business entity and can be transferred or sold for a profit.

Securities Act of 1933: A law enforced by the SEC requiring the registration of securities and the disclosure of pertinent information relating to new issues so that investors may make informed decisions.

Securities and Exchange Commission (SEC): A federal agency that regulates the securities industry, enforces full disclosure, and engages in the prevention of fraud and other illegal practices.

securitization: The process of distributing risk by repackaging loans and selling certificates, or securities. This entitles the owner to some or all of the repayments on the loans.

selling short: A method of investing by borrowing rather than buying stocks in hopes of purchasing the stock at a later date at a lower price.

sell side: All analysts who cover companies for brokerages and investment banks in that they 'sell' investment ideas.

settlement: Payment for a trade.

shareholder: An investor who holds common or preferred stock in a company.

shareholders' equity: Total assets minus total liabilities of a company.

shares: Certificates representing ownership in a corporation.

short: The act of executing a short sale.

short: An investor who holds a short position on a stock.

short interest theory: The theory that large short interest in anticipation of lower stock prices eventually must be covered causing upward price pressure.

short position: The total value of the shares of a stock an investor has shorted.

short sale: An investment strategy to borrow a stock at its current market price and to 'cover' at a later date at a lower price, thus capturing the difference as a profit.

short squeeze: A situation in which high demand for a stock in short supply forces short sellers to cover their losses, which in turn pushes the stock price even higher.

simple interest: A method of calculating interest using 365 as the exact number of days in a year.

Simplified Employee Pension (SEP) plan: A retirement savings program designed for the self employed and is suitable for small businesses and sole proprietors. An employer contributes tax-deferred dollars to individual retirement accounts for employees.

small cap: A company with a total market capitalization of less than $1 billion.

soft landing: A calculated strategy to maintain steady economic growth without triggering high inflation.

S&P effect: A small and often sustainable rally in the price of a stock slated to join the S&P 500 attributed to the fact that index funds need to buy the stock in order to mimic the index's performance. Meanwhile, being dropped from the S&P 500 forces index funds to liquidate their positions in the affected company.

specialist: Member of a stock exchange whose job is to maintain a fair and orderly market in one or more securities.

specialized fund: Also called a sector fund, a fund focused on investing in a specific industry.

speculator: A person who invests in highly risky securities.

spot market: Also called an exchange, a marketplace where goods and services are valued, but not necessarily delivered until a future settlement date.

spot price: The current price of an asset with a futures contract.

spread: The difference between the ask price and the bid price.

spread: The difference between the yield rates of two different securities.

spinoff: A new company created through selling or distributing new shares for an existing part of another company.

Standard and Poors: A leading bond rating agency.

Standard and Poors 500 Index (S&P 500): A stock market index of 500 mostly large company stocks used to reflect the market as a whole.

Standard and Poors Depositary Receipt (SPDR): Also called a Spider or Spyder, a UIT that tracks the S&P 500 trading as SPY on the American Stock Exchange.

standard deviation: A measure of how a stock or bond fund's return fluctuates around its average return.

stock: An ownership share of a corporation.

stock exchange: A marketplace of brokers that buy and sell securities on behalf of clients.

stock option: The right to buy a set number of shares of stock at a set price before a specific date.

stock option plan: A plan that allows employees to buy their company stock at a discount and get a tax break when they sell it.

stock screener: A research tool used to filter and identify stocks based on criteria, such as market capitalization, price, volatility, and P/E ratios.

stock split: An increase in the number of shares and a proportionate decrease in the price per share which effectively maintains the market capitalization of a security.

stop buy order: An order to buy a stock if the price rises to a certain level, typically to limit the potential loss of a short sell.

stop loss order: An order to sell a stock if the price falls to a certain level, in order to protect an investor from further losses.

strike price: Also called the exercise price, the price at which an option executes on a future date.

subscription right: The right to buy newly issued shares ahead of the general public in order to maintain current proportion of ownership in a company.

Super Bowl theory: A theory that the stock market does well when an NFC team wins and poorly when an AFC team wins.

support level: Real or artificial price floor in technical analysis that when overcome signify a new downward trading trend.

sweat equity: The value of ownership assigned to a borrower or earned by an employee for work performed on an asset to increase the value through improvements.

synergy: Positive gains made from two firms engaging in a partnership or merger.

Return to Top of Page

T

takeover: A change in who controls a corporation. A takeover generally happens when one company buys another company.

target price: A projection of the stock price made by analysts, but not a guaranteed outcome.

tax bracket: Schedule of income tax with various percentage rates depending on amount.

tax deductible: Payments that are deducted against federal and state taxable income.

tax deferred: The ability to pay taxes at a later date.

tax selling: Year-end selling of securities to realize losses in a portfolio which can be used to offset capital gains, thereby lowering overall tax liability.

teenie: A difference of 1/16 or 6.25 cents on the spread between the bid and the ask, when security prices are quoted in fractions.

tenants-in-common (TIC): Two or more parties owning an equal amount of securities.

tender offer: An offer to buy shares of a company at a premium for the purpose of taking control of the company.

testamentary trust: A trust created by a will.

tick: A movement in price, either upward or downward.

ticker symbol: A letter combination issued to each class of stock in a publicly-traded company by the stock exchanges.

tick indicator: A market indicator based on the number of stocks whose last trade was an uptick or a downtick.

title: A document that shows the evidence of a right to, or ownership in, a property.

title insurance: A closing cost to cover legal fees and expenses necessary to defend the title against claims made against ownership of a property.

tombstone: An announcement giving basic information about an offering of securities to investors, but not as a solicitation.

top line: Total revenues, literally found at the top of a financial summary.

total return: A percentage profit on investment.

tracking stock: A stock issued to track the performance of a portion of a company's assets or business.

trade: A transaction in which one party buys a security from another party.

trading halt: A temporary halt to stock trading, typically due to pending news from the company, or in some cases, due to a stock exchange's concern about unusual trading activity.

trading range: The difference between the high and low prices traded during a period of time.

transfer agent: An agent whose job is to maintain shareholder records, including purchases, sales, and account balances on behalf of a corporation.

transfer tax: A tax charged by some state and local governments for the transfer of real estate.

treasurer: A company officer responsible for planning and implementing the company's financing and investing activities.

Treasury bills (T-bills): Short term government bonds with maturities of one year or less.

Treasury bonds: Long term government bonds with maturities of 10 years or more.

Treasury Inflation Protected Securities (TIPS): Treasury bonds with the added advantages of having its par value adjusted every six months for inflation based on the CPI and having coupon payments calculated using the bond's revised value.

Treasury notes: Medium government bonds with maturities of two to 10 years.

triple witching: Often associated with volatility, the final trading hour of the 3rd Friday of March, June, September, and December as contracts for stock index futures, stock index options and stock options all expire at the same time.

Truth in Lending Act: Title 1 of the Consumer Credit Protection Act of 1968 calling for the fair and accurate disclosure of the terms of consumer loans to borrowers, namely the finance charge and the annual percentage rate.

trust: A legal agreement created to control the distribution of assets for the benefit of one or more parties, including the surviving spouse, children, or charities.

trustee: The person responsible for investing trust assets properly as well as administering the trust according to fiduciary laws.

Return to Top of Page

U

underlying security: The security that can be bought or sold upon exercising an options contract.

undervalued: The state of a security being unjustifiably priced too low, usually when viewed through price/earnings ratios.

underwriter: The parties responsible for raising investment capital from investors on behalf of corporations and municipalities that are issuing securities.

underwriting: The process by which investment bankers raise investment capital from investors on behalf of corporations and municipalities that are issuing securities.

underwriting group: A group of underwriters that coordinate their efforts to issue new securities.

unit investment trust (UIT): A collection of securities, similar to a mutual fund, traded on an exchange, such as SPDR.

uptick: An increase in the price of a security in the latest sale compared to the previous sale.

use of proceeds: An explanation about the way that fund raised in a private placement or IPO will be used to start or expand the business.

usury: Charging more than the maximum legally permitted rate of interest.

Return to Top of Page

V

valuation: A determination of the value of an asset.

value fund: A type of fund that invests in companies that are undervalued, or are priced low in relation to their earnings potential.

Value Line: An index of approximately 1700 NYSE, AMEX, and NASDAQ stocks tracked by the Value Lie Investment Survey.

Value Line Investment Survey: A popular publication offering condensed, single-page reports used by investors to research widely-held stocks and mutual funds.

value stock: A stock that is perceived as trading at a low price compared to industry peers.

variable annuity: A tax deferred retirement plan where investors can choose how they want their money invested.

venture-backed: A way of getting start-up businesses funded with capital from private sources.

venture capital (VC): A type of funding source that invests into start-up businesses.

venture fund: A fund set up for the expressed purpose of investing into start-up businesses.

vest: To earn the rights of ownership of company stock, usually as a part of a compensation package.

vesting schedule: A schedule indicating the length of time employees are required to remain with their employer before they earn the right to their stock options or retirement account balances.

Veterans Administration (VA) loan: A fixed-rate mortgage for veterans of the U.S. military service, typically with little or no down payment.

viatical market: An exchange to buy and sell viatical settlements.

viatical settlement: A payoff in advance to terminally-ill life insurance policyholders at a fraction of the policy's face value.

volatility: A measure of the fluctuations of a stock price over time.

Volcker, Paul A.: Chairman of the Board of Governors of the Federal Reserve System from 1979 to 1987.

volume: The number of shares traded during a specific period, usually in thousands.

volume restriction: A limit on the number of shares that can be bought or sold, usually determined to be a percentage of total volume traded.

voucher: A document acknowledging a liability or providing authorization to pay a debt.

Return to Top of Page

W

W-2: A form issued by employers that tallies earnings and amount withheld in taxes.

W-4: A form which calculates the number of allowances claimed on a tax return.

W-9: A form which certifies an individual's tax identification number.

wallflower: A stock that has fallen out of favor with investors.

Wall Street: Name for the financial district in lower Manhattan, New York City, and the street where the NYSE, AMEX and many banks and brokerages are located.

Wall Street Journal: A reputable daily business newspaper.

warehousing: Borrowing of funds by a mortgage banker using a mortgage note as collateral until the note is sold to a permanent investor in the secondary mortgage market.

warrant: The option to buy stock at a very low price, usually as an incentive or reward for performance.

wash sale rules: A rule for the purchase and sale of a security with a loss restricting an investor from deducting the loss on a security if repurchased within 30 days.

watch list: A list of securities being monitored particularly closely by a brokerage or investor.

when issued: A transaction on an authorized, but not yet issued security.

whisper number: An unofficial earnings estimate circulated by insiders, extrapolated from multiple sources or based on rumor.

white knight: A 'friendly' company that acquires another one to avoid a hostile takeover.

will: A witnessed legal document with instructions on the distribution of a person's inheritance.

Wilshire 5000: The largest market index. Includes almost all publicly traded stocks.

window dressing: A common practice by mutual funds to take or get out of equity positions at the end of the quarter in order to improve perceptions.

withdrawal: Cash or any order with a dollar value taken from an account.

withdrawal slip: A slip that records and facilitates a withdrawal into an account.

working capital: Current assets minus current liabilities

workout: An attempt to resolve fiscal problems or bad debt.

wraparound mortgage: A way of financing where the existing loan of the seller remains intact. The buyer makes payments to a wraparound note holder that in turn pays the existing mortgage.

write-off: A charge of an asset amount as an expense or loss in order to reduce the value of that asset and one's earnings.

writer: The seller of an option contract.

Return to Top of Page

Y

year-to-date (YTD): A period of time starting from January 1 to a specified date.

yellow sheets: A daily bulletin from the National Quotation Bureau which provides updated bid and ask prices for over-the-counter corporate bonds.

yield: The rate of return based on the dividend return of a security or the rate offered by a bond.

yield advantage: The yield on a corporation's convertible securities minus the dividend yield on its common stock.

yield curve: A graphic representation of a curve that shows interest rates at a specific point for all securities having equal risk but different maturity dates.

yield to maturity: The rate of return anticipated on a bond held until the maturity date.

Young, Roy A.: Chairman of the Board of Governors of the Federal Reserve System from 1927 to 1930.

Return to Top of Page

Z

zero coupon bond: Also called a discount bond, a bond that does not pay interest income until it matures.

zero coupon convertible: Also called a split coupon bond, a zero-coupon bond that can be converted into common stock.

zero plus tick: A transaction matching the price of the latest uptick.

zero minus tick: A transaction matching the price of the latest downtick.