Glossary of Financial Terms 

Can't remember what "Cash Surrender Value" is, or simply need to brush up on Finance 101?  Here's a comprehensive list of financial terms that will help you do just that. 

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Average Tax Rate - An individual's average tax rate is the result of total income taxes paid divided by taxable income. For example, if an individual has taxable income for the year of $50,000 and paid income taxes of $10,000, the average tax rate would be 20%. ($10,000 ÷ $50,000 = .20).

B

Back-End Load (Sales Charge) - A back-end load (sometimes referred to as a contingent deferred sales charge) is usually associated with Class B shares of a mutual fund. It is a sales commission, deducted from the net asset value of the shares redeemed, that is assessed at the time you sell shares you own. It's computed as a percentage of the total selling price, but is generally not assessed on any increase in the value of your shares, or any reinvested dividends or capital gains. As an example, if you sell 1000 shares at a share price of $30 with a 1% back end load, you'll receive $30,000 less a fee of $300, or $29,700. The maximum amount of the back end load, which usually declines over time, and the period over which the load is imposed, are contained in the front of your fund's prospectus, or ask your broker.

Balance Sheet - An accounting statement that shows the amount of a company's assets, liabilities, and owner's equity on a certain date.

Banker's Acceptance - A time draft drawn on and accepted by a bank that is often used to effect payment for import-export transactions and international trade.

Bear - A person who believes that stock prices will fall. See bull.

Bearer Bond - A bond that provides for interest and principal to be paid to the bearer; an unregistered bond. See coupon bond and registered bond.

Benchmark - A standard — typically an index such as the Standard and Poor's 500 — against which investors compare the performance of a mutual fund or other investment.

Beneficiary - The party who will receive the death benefit of the contract upon the insured's death.

Bereavement period - A period of time during which the survivors adjust emotionally and financially to the loss of a loved one.

Bid Price - The highest amount a prospective buyer is willing to pay for a security at a given time. See ask price.

Blue Chips - The high-quality stocks of major corporations with long records of uninterrupted earnings and dividends, capable management, and good growth prospects.

Bonds - The debt instrument of an issuer (essentially an I.O.U. for money you lend to the issuer) that promises to pay the holder a specified amount of interest, for a specified time period, with principal to be repaid on the maturity date.

Bond Mutual Fund - An investment company that invests primarily in bonds and debt securities. The objective of most bond funds is to provide current income while protecting the principal from decreasing in value. Both the net asset value and the monthly income can fluctuate with changes in interest rates.

Book Value - An indicator of a company's value, calculated by subtracting the company's liabilities from its total assets.

Broker - An agent who executes buy and sell orders for securities or commodities for a fee.

Bull - A person who believes that stock prices will rise. See bear.

C

Call Option - A contract that gives the right to buy a certain number of shares of a stock at a definite price within a certain time period.

Callable Bond (or Preferred Stock) - A bond or preferred stock that the issuer (e.g., a corporation or municipality) may redeem before maturity.

Capital Appreciation - The increase in a fund share's value.

Capital Gain (Loss) - Profit (loss) from the sale of securities or other capital assets.

Capital preservation - A conservative investment strategy that aims to avoid risk of loss.

Capitalization - The value of all securities issued by a corporation, together with its retained earnings.

Cash Equivalents - Investments that are highly liquid and safe, and considered equal to cash. Examples are Treasury Bills, money market funds and short-term CDs and bonds (maturities of 6 months or less).

Cash Surrender Value - The value a policyowner receives upon termination of a permanent life insurance policy for any reason other than death of the insured. The cash surrender value of a life insurance contract is equal to the cash value less any surrender charge imposed by the insurance company. Cash surrender values are typically not available during the first year or two of the policy's life. Usually, the policyowner is allowed to take the cash surrender value in the form of cash, a reduced amount of paid-up life insurance, or extended term life protection.

Cash Value - The "savings" element of all permanent forms of life insurance. The cash value is the amount of money a policy owner can get for surrendering the policy. The cash value of whole life is pre-determined and fixed when the policy is issued. The cash value of a universal life policy depends on the amount and timing of premium payments, the expense and risk charges the insurance company charges for providing benefits and the interest rate the company credits. The cash value of a variable life or variable universal life policy will vary depending upon the performance of the investment accounts selected by the contract owner. Increases in cash values are not taxable until withdrawn. Some policies may allow the owner to borrow against the cash value.

Cash Value of Life Insurance - The amount of money accumulated in a whole life, universal life or a variable life insurance policy. The cash value is accumulated based on the return of the underlying investments in the policy.

Certificates of Deposit (CDs)- An FDIC-insured account offered by banks and savings and loans. As with a bond, they are usually opened with a single deposit, earn a fixed return and have a set maturity date. Their maturities normally range from three months to five years.

Churning - Unjustified, excessive trading in a customer's securities or commodities account to generate additional brokerage commissions.

Commercial Paper - Short-term unsecured obligations of corporations or banks with maturities ranging from 2 to 270 days.

Commission - A fee an investor pays a broker for buying or selling securities.

Common Stock - Securities that represent an ownership interest (with voting rights) in the issuing corporation. See preferred stock.

Consumer Price Index - A measure of the change in prices of a fixed basket of goods and services, including food, clothing, medical care, transportation, housing and electricity.

Controllable Expense - An expense over which an individual has control as to how much is spent. Examples of controllable expenses include entertainment, clothing, food, investments and savings.

Conversion Period - The period of time during which the owner of a term policy may convert it to a permanent policy without evidence of insurability.

Convertible - A provision in a term life insurance contract that allows the contract owner to convert the term policy to a permanent life policy without evidence of insurability.

Convertible Security - A bond, debenture, or preferred stock that the holder may exchange for common stock (or another security) of the same company.

Corporate Bonds - A bond issued by a corporation, which creates an obligation by the corporation to pay interest for a specified period and to repay the principal amount at the bond's maturity date.

Coupon Bond - A bond with attached interest coupons that are clipped and presented for payment as interest comes due.

Current Market Value - The largest amount any buyer is currently willing to pay for an asset.

Custodial Account - An account that allows a custodian to hold securities for the benefit of the owner. The custodian collects investment income for the owner, executes the owner's buy or sell orders, and keeps records of all transactions, among other duties.

Cyclical Stocks - Stocks of corporations whose earnings rise and fall with the business cycle.

D

Death Benefit - The amount of money paid to the beneficiary when the insured dies. The death benefit is generally equal to the policy's face value, although the death benefit can be reduced dollar-for-dollar by the amount of any outstanding policy loan.

Debenture - A corporation's promissory note, backed by the corporation's general credit.

Debt - Obligations in the form of bonds, loans, notes or mortgages, owed to another person or institution and required to be paid by a specified date.

Disability Insurance - An insurance policy designed to pay a specified monthly income to the policyholder in the event that he/she becomes either temporarily or permanently incapable of working.

Discount Broker - A broker who charges a lower commission for buy and sell orders than a full-commission broker. Typically, a discount broker does not give investment advice.

Discretionary Income - The amount of an individual's income available for spending after all fixed and necessary expenses (such as food, clothing and shelter) have been paid.

Diversification - Investing in several different companies in various industries or in several different types of investments in order to spread risk.

Dividend - A corporation's pro-rata payment to its shareholders.

Double Indemnity - Payment of double the face amount of a life insurance policy when death of the insured is due to an accident. Policies can be very specific in defining an accident.

Dow Jones Industrial Average - An average of thirty blue chip stocks commonly used as an indicator of whether the stock market is moving "up" or "down."

E

Economic Value - The value of the tasks a family member provides to the rest of the family. The economic value for a non-working spouse would be equal to the cost the family would incur to hire someone to complete the tasks in the absence of the non-working spouse less the cost of that spouse's personal maintenance. These costs usually include childcare and housekeeping but may also include transportation, the cost of eating out more often, tutoring and the like.

Emergency Fund - An emergency fund is money set aside to allow you to weather any unexpected events or expenses in your life. Emergency funds are often used to pay for expenses not incorporated into the budget such as property losses or medical expenses not covered by insurance, or living expenses during a period of unemployment. It is generally recommended that your emergency fund equal three to six months of your living expenses.

Emerging Market A stock or bond market in an economically developing country. Emerging markets are extremely volatile, but they offer the potential to share in the early stages of a country's economic growth.

Estate Planning - The process of planning for the efficient transfer of assets at one's death. Estate planning begins with preparing a will and may also include naming a power of attorney, establishing trusts and making pre-death gifts.

Estate Tax - Tax imposed by a state or the federal government on the transfer of property from a deceased to his/her heirs.

Evidence of Insurability - Proving that you are a good risk for the insurance company by answering health and lifestyle related questions and possibly submitting to a medical exam.

Executor - An individual or institution that is tasked with the settling of an estate for the deceased. Activities may include gathering the assets, paying the taxes and distributing the estate in accordance with the Will.

Ex-dividend - Without dividend. The ex-dividend date is the date when a buyer purchasing a stock has no right to the most recent dividend.

Expense - An individual's cost or obligation to meet a need or pay a debt.

F

Face Amount - The named dollar amount of coverage provided by a life insurance policy. Generally, for a whole life or term policy, the face amount is the same as the death benefit - the amount paid to the named beneficiary upon the insured's death.

Final Expenses - Expenses that occur at the death of an individual that must be paid before concluding the probate process. Examples include estate taxes, medical bills, funeral expenses, legal fees, probate costs, outstanding debts, appraisal fees and the like.

Fiscal Year - A company's accounting year.

Fixed Annuities - An investment contract offered by an insurance company that pays a fixed return (which may be periodically adjusted by the insurance company) and whose principal is guaranteed by the insurance company to be repaid at a specified date. Any earnings on the account remain tax-deferred until the interest is withdrawn from the contract. The contract can be converted to a guaranteed stream of fixed payments to the owner, either for life or for a specified period.

Fixed Expenses - Expenses that are set and difficult to change or minimize. Examples include mortgage payments, car payments, utility bills, and income and social security taxes.

Fixed-Income Securities - Investments, primarily bonds and bond funds, that generate a predictable flow of income over a specified period.

Fixed Investment - A security or investment account that pays a fixed rate of return.

401(k) - A qualified, tax-deferred retirement plan offered by employers, which allows employees to save a percentage of their current salary for retirement.

Front-End Load (Sales Charge) - A front-end load (or front end sales charge) is usually associated with Class A shares of a mutual fund. It is a sales commission, over and above the net asset value of the shares purchased, which is charged at the time you purchase shares. It's computed as a percentage of the dollar amount you're investing. For example, if you pay a front load of 3% on a $10,000 transaction, $300 of your $10,000 is paid to the mutual fund distributor, and the remaining $9,700 is used to purchase shares. The fund distributor keeps a small portion of the sales charge for its services, and the bulk of the sales charge is paid to the selling broker/dealer firm or financial institution. The agent selling the funds to you receives a portion of the sales charge from his/her firm. You can find a listing of the sales charges you will pay in the front of your fund's prospectus, or you can ask your broker.

Fund Objective - A fund's primary goal — for example, current income, capital appreciation or preservation of principal.

G

General Account - An account within an insurance company that is made up of the assets and investments that back the obligations of the insurance company.

General Obligation Bond - A type of municipal bond backed by the issuer's full faith and credit. See municipal bond.

Government Agency Bond -A debt security issued by a U.S. government related agency.

Government Agency Paper - Short-term debt securities issued by U.S. government related agencies.

Gross Income - Total personal income before taxes or other deductions.

Growth Stock - The stock of a corporation whose sales and earnings are expanding faster than the general economy.

Guaranteed Renewable - A provision in term insurance contracts that allows the owner to renew the policy at the end of its term without evidence of insurability.

H

Health Insurance - Insurance that covers medical expenses or health care services.

High-grade Bonds - Debt securities or bonds with an AAA or AA rating from an independent rating organization.

Homeowners Insurance - Insurance that combines liability insurance and hazard insurance and protects homeowners against property and casualty damage.

I

Income Stock - Common stock that pays out a relatively large portion of earnings as dividends, resulting in a high yield for investors.

Individual Retirement Account (IRA) - A tax-favored retirement account that allows all earners to make contributions (in many cases, tax deductible contributions) of up to $2,000 a year and defer income tax on the IRA earnings until distributions are made from the IRA.

Inflation - The general increase in the cost of goods and services. Inflation is often measured by the Consumer Price Index, which represents a fixed basket of goods such as food, utilities, transportation, and medical care.

Insurable - An individual is insurable if he or she is able to obtain life insurance under the insurance company's underwriting criteria. Insurability is usually based upon the individual's age, health, occupation and lifestyle.

Insurer Risk - The risk that an insurance company will be unable to meet its obligations to policyholders.

Interest Rate Risk - The risk that a rise in interest rates will cause the price of bonds to fall. In general, there is an inverse relationship between interest rates and bond prices so that when interest rates rise, bond prices fall and vice versa.

International Bond - A debt security issued by a foreign corporation or government.

Investable Assets - Financial assets that are available for investing. This would exclude money or securities set aside in an emergency fund or earmarked for other purposes.

Investment Banker - An institution that assists corporations in raising capital from investors through stock offerings, etc.

Investment Management Account - An account through which a bank or other institution has the discretionary power to make investment decisions for an investor.

Investment Vehicle - An investment product that usually provides the investor with a diversified portfolio of securities. Examples are mutual funds, unit investment trusts and variable annuities.

J

Junk Bonds - Below investment-grade bonds that provide high yields with high risk.

K

L

Leading Economic Indicators - A group of economic activity reports that tend to foretell an upswing in general economic activity.

Level Load - A level load is usually associated with Class C shares of a mutual fund. It is a sales charge deducted from the net asset value of the shares held by an investor. For example, if you buy 1,000 shares of a mutual fund that has a 1% (annualized) level load, with a share price of $30, the total worth of your shares is $30,000. Assuming the fund's NAV remained the same, you'll be charged a 12b-1 fee of 1% of that amount to pay the load (sales charge), or $300. That 12b-1 fee used to pay the sales charge would bring the worth of your holdings in the fund to $29,700, assuming there were no income (for the sake of our illustration). In actual operation, the 12b-1 fee is deducted monthly, like other fund expenses, and 1/12th of the annual fee is assessed on the average value of your account during the month.

Leverage - Using borrowed funds in addition to invested equity in a financial undertaking.

Liability - A financial obligation, debt, or claim against a person or institution.

Life Insurance - An insurance policy that pays a death benefit to the beneficiaries when the insured dies.

Limited Partnership - A partnership formed by a general partner (who usually provides management expertise) and one or more limited partners (whose liability is limited to the amount invested) to engage in a financial venture.

Limited-Pay Life - A whole life policy where the premiums are paid for a limited period of time such as 20 years or until age 65 rather than for the life of the insured. At the end of the payment period, the policy becomes "paid-up" and guarantees death benefit protection in the face amount for the remainder of the insured's life without further premiums.

Listed Stock - Stock which is traded on a securities exchange.

Living Trust - A trust established during the lifetime of the person creating the trust, rather than under the person's will. Also known as an inter vivos trust.

Liquidity - The ability of an asset to be converted into cash quickly and without significant loss of value.

Load - A sales charge on the purchase of certain mutual funds.

Long-Term Care Insurance - An insurance policy that provides medical and nursing home benefits for the chronically ill or disabled.

Long-Term Growth of Principal - Increase in the value of an investment over a sustained period-typically 12 months or longer.

M

Margin - The value of securities and cash in a brokerage account that an investor may borrow against in order to buy more securities.

Margin Call - A request by a broker for additional cash in order to bring the equity in a customer's margin account up to the margin maintenance requirements that the stock exchange sets.

Maturity Date - The date upon which the contract must be annuitized. Some insurance companies strictly enforce the maturity date, requiring that the annuitant select a specific payout option or surrender the contract. Other insurance companies notify the annuitant that the contract has reached its maturity date but allow the annuitant to maintain the contract as a deferred annuity and do not force annuitization.

Medium-Term Bonds - Bonds that have remaining maturities of 3 to 10 years.

Minimum Rate Guarantee - The minimum fixed interest rate an insurance company pays on the cash value of a policy. The minimum rate guaranteed is stated in the insurance contract. Insurance companies are required by state law to pay a certain minimum guaranteed rate.

Modified Endowment Contract - A category of life insurance contract created by legislation passed by Congress in 1988. A policy becomes a Modified Endowment Contract (MEC) when premiums are paid into the contract in excess of the so-called seven-pay test. The purpose of the law is to discourage policyholders from making very large premium payments during the first seven years of the contract in order to create a "paid-up" policy. When a contract becomes an MEC, a policy loan may be taxable and subject to penalties. Partial surrenders of MECs are treated as first being a taxable distribution of earnings rather than a non-taxable return of premium. Taxable distributions from a MEC taken prior to the owner's age 59-1/2 may also be subject to an Internal Revenue Code penalty of 10%.

Money Market - The market for borrowing and lending large amounts of short-term funds. Money-market instruments include notes, negotiable certificates of deposit, Treasury bills, and the like.

Money Market Accounts - Federally insured accounts (with banks and other financial institutions) that pay rates established by the bank based upon money-market yields. Money Market Mutual Funds, however, are similar to Money Market accounts but are not federally insured.

Money Market Deposit Accounts - A highly liquid account offered by banks that typically provides a higher interest rate than that of a savings account. The account is FDIC insured and its rate of interest is usually sensitive to changes in market rates.

Money Market Funds - Mutual funds that invest in money-market instruments.

Money Market Mutual Fund - An open-end mutual fund which invests only in cash or cash equivalents. The fund's net asset value remains a constant $1 per share, although not guaranteed, and the interest rate fluctuates with the market.

Morningstar - A mutual fund and variable annuity research and reporting company.

Mortality Cost - The amount of money the insurance company charges (usually monthly) for providing the death benefit in a universal life policy or a variable universal life policy.

Mortgage Securities - Securities, usually bonds, that are backed by a pool of mortgages. The interest and principal payments are passed through to investors each month.

Municipal Bonds - A bond issued by a state, a municipality, or a state agency or authority for the purpose of funding some governmental function, which pays interest that is exempt from federal income tax.

Mutual Fund - An investment company that enables its shareholders to pool their funds for professional management as a single investment account.

N

Net Asset Value (NAV)- The per share value of the portfolio at the end of each day.

Net Income - For an individual, gross income minus expenses.

Net Worth - Total assets minus total liabilities of an individual or company.

O

Odd lot - A purchase or sale of fewer than 100 shares of stock. See round lot.

Option - A security that gives the owner the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) a specific amount of a security or index, at a specified price during a specified period of time.

Ordinary Life - A whole life policy where the premiums are paid throughout the life of the insured. Also known as "straight life".

Over-the-Counter Market - A market for trading stocks not listed on an exchange.

P

Pension Plan - A qualified retirement plan established by a corporation or organization to provide income for its employees when they retire.

Policy Holder - The individual or entity that owns the life insurance policy. The Policyholder may different from the insured. For example, a grandparent (the Policyholder) may own a life policy on a grandchild (the insured).

Policy Value - A Universal Life policy's equivalent of a cash value. The policy value is built by the accumulation of premiums plus interest less charges for expenses and mortality costs and other risk charges.. In Variable policies, this accumulation depends on the performance of the underlying assets and not on an interest rate set by the insurance company.

Portfolio - An individual's or institution's total investment holdings.

Preferred Stock - A class of stock that has preference for dividend payments over the common stock and, in many cases, also for the liquidation of the company's assets. See common stock.

Premium - The money the owner pays to the insurance company in order to obtain life insurance protection.

Prime Rate - The base interest rate that commercial banks charge on loans.

Private Placements - Stocks, bonds or other investments sold directly to an institutional investor that are intended to be investments and not resold in the secondary market.

Prospectus - A printed offering to sell a security which fully discloses relevant information on that security.

Proxy - A shareholder's written authorization that another party may vote the shareholder's shares in a corporation at a meeting of its shareholders.

Put Option - A contract giving the right to sell a certain number of shares of stock, at a definite price, within a specific period of time.

Q

R

Real Estate Investment Trust (REIT) - An investment company that invests in real estate properties and/or mortgages.

Recession - A period of general and sustained economic decline.

Registered Bond - A bond with its owner's name recorded on the issuer's books. See bearer bond and coupon bond.

Renewal Rate - The fixed rate the insurance company will pay after the initial rate period expires. Usually set annually at the end of each policy year.

Repurchase Agreement - An agreement between a buyer and seller, where the seller of debt securities, usually Treasuries, agrees to buy back the securities at a set time and price.

Return on Equity - A figure that measures the percentage a company earns on the money invested in it. The figure shows investors how effectively a company's managers invest its assets.

Return on Investments - The money you earn or lose on your investment, expressed as a percentage of your original investment.

Revocable Trust - A living trust that the creator of the trust may amend or end (revoke). See living trust and trust.

Risk - The measurable possibility of economic loss. There is risk involved if the outcome of an investment is uncertain at the time the investment is made. Although the outcome is uncertain, it is measurable.

Risk Tolerance - An investor's ability to withstand declines in the value of his/her portfolio, financially and emotionally.

"Rollover" IRA - An IRA (individual retirement account) started to receive all or part of the taxable portion of an eligible distribution from a tax-qualified retirement plan. The eligible distribution amount transferred to the IRA (together with any earnings on that amount while in the IRA) escape taxation until distributions are made from the IRA.

Round Lot - A purchase or sale of stock in a number of shares that is divisible by 100. For bonds, a round lot is normally $100,000 face value.

S

Sales Commission - A fee an investor pays a broker for buying or selling securities.

Securites - An instrument issued by a corporation or government that denotes a debt or ownership interest. Stocks and bonds are referred to as securities.

Shares Outstanding - The shares of a corporation's stock that have been issued to the public and are in the hands of investors.

Short Sale - A sale of stock before the seller owns it. The seller believes that the stock's market price will decline before the shares that will cover the sale have to be bought. If the price falls, the seller profits.

Single-Pay Life - A whole life policy purchased with one premium payment.

Special Situation - An unusual investment opportunity, such as a company involved in a merger, takeover, liquidation, spinoff, turnaround, or new product development.

Speculation - Assumption of above-average investment risk in exchange for the opportunity to secure an above-average return.

Spin-off - Division of an existing corporation into two (or more) separate corporations. The shareholders of the predecessor company receive the shares of the spun-off corporation(s).

Stock - Stock represents ownership in a company. The stock holder's percentage of ownership in the company can be calculated by dividing the number of shares he or she owns by the total number of shares outstanding. The value of a stock will fluctuate with the company's performance and the stock market in general.

Stock Dividend - A dividend paid in stock (or other securities) rather than in cash.

Stock Fund - A mutual fund that invests in many stocks, offering investors diversification and professional management.

Stock Mutual Fund - An investment company that invests primarily in stocks. The investment objective of most stock funds is growth, although some funds also have a secondary objective of income.

Stock Split - An allocation of newly issued stock to shareholders according to their current holdings so that there is no change in the shareholders' relative ownership positions. A company generally uses a stock split to reduce its stock's price to what the company believes will be a more marketable trading level.

Street Name - Securities held in a broker's name rather than the owner's. Stocks bought on margin are always held in a street name.

Surrender Charge - The fee an insurance company would assess against the cash value of a life insurance policy if the owner were to surrender the policy. The amount of the surrender charge will usually be highest in the first year of a policy and decreases over time until eventually it is zero.

Surrender Charge Period - The number of years during which the insurance company would charge the owner a fee if the owner chooses to surrender the contract.

Surrender Charge Schedule - A schedule illustrating the fee the insurance company charges for making early withdraws from the annuity contract. The surrender charge is generally on a sliding scale that decreases the longer you have owned the annuity.

Survivors - Individuals, usually family members, who face emotional and sometimes financial setbacks because of your death.

T

Tax-Deferred Investment - An investment whose income and/or capital gains are not taxed until they are removed from the investment. Examples of tax-deferred investments include annuities and the cash value of life insurance. Tax-deferral can also be accomplished through the use of IRAs and corporate retirement plans such as 401(k)s.

Tax Shelter - In general, any means used to provide favorable tax treatment for all or part of an individual's or corporation's income. More usually, "tax shelter" is an investment device that generates tax deductions larger than the income from the investment.

Taxable Income - The amount used in the calculation of an individual's income tax liability. It is equal to one's income after certain adjustments have been made and standardized or itemized deductions and personal exemptions have been deducted.

Tender Offer - An offer to purchase all or a substantial portion of a corporation's shares in order to obtain control of the company. Also, a corporation's offer to buy back its own shares.

30-Day Treasury Bill - A U.S. government security that matures 30 days after it is issued. They are sold at weekly auctions at a discount and are redeemed at face value.

Time Horizon - The length of time a sum of money is expected to be invested.

Treasury Bills - U.S. government securities that mature (are redeemed) sooner than one year after issue. They are sold at weekly auctions at a discount and are redeemed at face value.

Treasury Bonds - U.S. government securities with a maturity longer than seven years.

Treasury Notes - U.S. government securities that mature between one and seven years after issue.

Trust - A legal arrangement that one party (the grantor or settlor) uses to transfer assets to a second party (the trustee). The assets are held and invested for the benefit of one or more third parties (the beneficiaries). See living trust and revocable trust.

Trustee - The institution or individual that is named to hold, manage, and distribute a trust's assets.

U

Underwriter - Makes the determination of who can be insured and at what rate.

Uninsurable - An individual who is unable to obtain life insurance coverage due to the high risk he or she represents to the insurance company. For example, most insurance companies would consider an individual with a serious life threatening disease to be uninsurable.

Unit Investment Trust (UIT) - An SEC-registered investment company which purchases a fixed portfolio of securities and then sells a fixed number of shares in the trust to investors.

U.S. Treasury Bills - U.S. government securities that mature (are redeemed) sooner than one year after issue. They are sold at weekly auctions at a discount and are redeemed at face value.

V

Variable Annuity - An annuity contract whose growth and subsequent income payout are based on the performance of the securities held in the underlying sub-accounts selected by the contract owner. All income and capital gains produced by the sub-accounts are tax-deferred.

Volatility - A measure of price stability. An investment is volatile if its price is subject to wide swings.

W

Waiting Period - The length of time a disability policy holder must wait after submitting a claim before disability income benefits begin.

Warrant - A certificate granting the right to buy securities at a stipulated price within a specified time period or for an indefinite time period.

Wash Sale - A tax term for the purchase of securities (or options to purchase those securities) within 30 days before or after a sale of substantially the same securities. A loss from selling the original securities may not be deductible for income-tax purposes.

Will - A legally enforceable document allowing an individual to direct the distribution of his/her property after death.

X

Y

Yield - The interest or dividend payable on a security, expressed as a percentage of the price of the security. Some investment advisors also include capital gain as part of the yield.

Z

Zero Coupon Bond - A bond that pays no periodic interest, but is sold at a deep discount from the face value payable at maturity. See bond and municipal bond.

FundingEdge.com
234 West Bandera Road, # 313,  Boerne, Texas 78006  Phone: (210) 249-2111 &  (830) 331-4030  Fax: (830) 331-4025