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Alpha
The amount of return expected from an investment from its inherent value
Alternative Minimum Tax
Federal tax that ensures wealthy individuals, trusts, and corporations pay some amount of tax
Annual report
Yearly audited record of a corporation or mutual fund’s condition and performance that is distributed to shareholders
Annualization
Procedure where figures covering a period of less than a year are extended to cover a 12-month period
Annualized rate of return
Average annual return over a period of years, takes into account compound growth
Appreciation
The increase in value of a financial asset
Asset allocation
Dividing investments amongst several assets to mitigate risk/optimize reward
Asset class
Securities with similar features
Average maturity
Dates debt of securities in a portfolio. Higher average maturity results in greater sensitivity and volatility
Bear market
Prolonged period of falling stock prices marked by a decline of 20% or greater, usually a result of an economic recession
Benchmark
A standard index used for comparative purposes in assessing performance of a portfolio or mutual fund
Beta
Measurement of volatility where 1 is neutral, below 1 is more volatile, and above 1 is less volatile
Blue Chip
High quality, low risk investment. Usually refers to established, well-performing companies
Board of Trustees
Governing board elected or appointed to direct the policies of an institution
Bond
Loan issued out by corporation/government. The issuer promises to repay the full amount of the loan under specific conditions to the investor
Bond fund
Mutual fund that invests exclusively in bonds
Breakpoint
The level of dollar investment in a mutual fund in which an investor becomes eligible for a discounted sales fee
Bull market
Market where prices are advancing in a steady upward trend
Capital
Funds invested in a company on a long term basis, obtained by issuing stock and retaining a portion of its earnings
Capital gains
The difference between the purchase price and selling price of a security. Long term is greater than a year while short term is less than a year
Capital gains reinvest NAV
Portion of capital gains that was automatically vested in in more shares of the security/mutual fund
Net asset value (NAV)
Value of an entity’s assets minus its liabilities. Calculated by dividing total value of the fund’s assets by the number of outstanding shares
Capital loss
The amount which the proceeds from a sale of a security are less than its purchase price
Capitalization
Market value of a company. Calculated by multiplying the number of outstanding shares by price per share
Cash equivalent
High liquidity assets easily convertible into cash amount. Examples include U.S. Treasury Bills and corporate commercial paper
Common stock
Securities that represent ownership in a corporation; must be issued by a corporation
Contingent deferred sales charge
Back-end sales charge imposed when shares are redeemed from a a fund. Usually declines over time
Corporate bond
A long-term bond issued by a corporation to raise outside capital
Country Breakdown
Breakdown of securities in a portfolio by a country
Cut-off time
The time of day when a transaction can no longer be accepted for that trading day
Default
Failure of a debtor to make payments of interest as the deadline approaches
Dividend
Portion of a company’s profit paid to common and preferred shareholders. Provide incentive to own stock
Dividend yield
Annual percentage of return earned by a mutual fund. Calculated by dividing amount of annual dividends per share by public offering price
Dollar cost averaging
Investing the same amount of money at regular intervals over an extended period of time
Dow Jones Industrial Average
Commonly used indicator of stock market performance, based on averages of prices of 30 blue chip stocks.
EPS
The portion of a company’s profit allocated to each outstanding share of common stock. One indicator of a company’s profitability
Equities
Shares issued by a company which represent ownership in it. An example is a common stock
Ex-dividend
The interval between the announcement and the payment of the next dividend for a stock
Exchange privilege
The ability to transfer money from one mutual fund to another within the same fund family
Expense ratio
The ratio between a mutual fund’s annual operating expenses and the average value of its net assets
Federal Funds Rate
The interest rate charged by banks with excess reserves at Fed reserve bank to banks needing overnight loans to meet reserve requirements. Changes daily
Federal Reserve Board
The governing board of the Federal Reserve System. Regulates national money supply by setting discount rate and availability of credit in economy
Financial materiality
Information/event that are reasonably likely to impact the financial condition of a company
Fixed-income fund
A fund where bonds are primarily purchased as investments. Does not include fixed maturity date and repayment guarantee
Fixed-income security
A security that pays a set rate of interest on a regular basis
Fund
A pool of money from a group of investors in order to buy securities. Generally offered through securities companies and bank trust depts
Green bonds
Bond that is specifically to raise money for environmental projects. Hold greater integrity/transparency
Growth stock
A successful company that is experiencing rapid growth in earnings and revenue, and usually pays no dividend
Growth-style funds
Funds with a focus on earning through future gains
Index
Tracks the performance of many investments as a measure of the overall performance of a particular investment category.
Index example
S&P 500
Individual Retirement Account (IRA)
Tax-deferred account in which an eligible individual can make annual contributions up to $3000
Inflation
A rise in the prices of goods and services, often equated with loss of purchasing power
Interest rate
The fixed amount of money that an issuer agrees to pay the bondholders
Interest-rate risk
The possibility in the reduction of the value of a security, especially a bond, resulting from a rise in interest rates
Types of investment companies
Mutual funds, closed-end funds, and unit investment trusts
Investment grade bonds
A bond generally considered suitable for purchase by prudent investors
Junk bond
A lower-rated, higher yielding bond
BB credit rating
Credit rating indicating credit risk of certain companies
Large-cap
The market capitalization of the stocks of companies with market values greater than 10 Billion dollars
Liquidity
The ability to have ready access to invested money
Loads
Sales charges on mutual funds
Market price
The current price of an asset
Market risk
The possibility that an investment will not achieve its target
Market timing
A risky investment strategy that calls for buying an selling securities in anticipation of market conditions
Maturity
The date specified in a note or bond on which the debt is due and payable
Market capitalization
Market price multiplied by the number of shares outstanding
Mid-cap
The market capitalization of the stocks of companies with market values between 3 and 10 billion dollars
Money market mutual fund
A short term investment that seeks to protect principal and generate income by investing in money market securities with maturities under 1 year
Mutual fund
Fund that pools money from its shareholders and invests it in securities
NASDAQ abbreviation
National Association of Securities Dealers Automated Quotations system
NASDAQ
Computerized system that provides brokers and dealers with price quotations for securities
P/B Ratio
Price per share of stock divided by its book value per share
Par value
Amount originally paid for a bond, repaid at maturity
Positive tilt
An investment process which tilts a fund of a portfolio towards a specific sector
PPA abbreviation
Power Purchase Agreement
Power Purchase Agreement
Financial agreement where a developer arranges for the process of installing a solar energy system on a customer’s property at little cost
Preferred stock
A stock with a preference over a company’s common stock in payment of dividends and liquidation of assets
Premium
The amount by which a bond or stock sells above its par value
EPS abbreviation
earnings per share
P/E ratio
A stock’s price divided by its earnings per share, indicates how much investors are paying for a company’s earning power
Proxy
A shareholder vote on matters that require the approval of shareholder
Public offering price
A mutual fund share’s purchase price, including sales charges
R2
The percentage of a fund’s movements that result from movements in the index ranging from 0 to 100
Ratings
Evaluations of credit quality of bonds. Measure the probability of timely repayment of principal and interest on debt securities
Recession
A significant downturn in economic activity, usually at least 2 consecutive quarters of decline in a country’s GDP
Redemption
Sale of mutual fund shares by a shareholder
Rights of accumulation
The right to buy over a period of time
Securities
Alternative name for stocks and bonds
SEC abbreviation
Securities and Exchange Commission
Securities and Exchange Commission
Federal agency that oversees the securities industry
Share Classes
Represent ownership in the same fund but different classes charge different fee structures
Small-cap
Market capitalization of the stocks of companies with market values less than 3 billion dollars
Standard & Poor’s Index
Measurement in changes in stock market conditions based on the average performance of the S&P500
Stock
Same as equity
Time horizon
The amount of time one expects to stay invested in an asset or security
Long position
Position that will profit if the stock price rises
Short position
Position that will profit if the stock price falls
Total return
All of dividends and interest earned before deductions of fees and expenses
Treasury Bill
Negotiable short-term debt obligation issued by the U.S. government
