_TERMINE_RELATIVO_FINANZA_(INGLESE)
_SPIEGAZIONE_DEL_TERMINE_(INGLESE)
10-K
THE OFFICIAL VERSION OF A PUBLIC COMPANY'S ANNUAL REPORT, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. IT'S NOT JUST A DUPLICATE OF THE ANNUAL REPORT, HOWEVER. THE COMPANY MUST LEAVE SPECULATION BEHIND AND MAKE ONLY PROVABLE STATEMENTS OF FACT. THAT MEANS YOU OFTEN WILL FIND MORE FINANCIAL INFORMATION AND EXPANDED DESCRIPTIONS OF THE COMPANY'S OPERATIONS AND THE RISKS IT FACES. YOU CAN GET A COPY OF THE 10-K FROM THE COMPANY OR THE SEC (HTTP://WWW.SEC.GOV/EDGARHP.HTM).
10-Q
A PUBLIC COMPANYS QUARTERLY REPORT, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS DOCUMENT CONTAINS EARNINGS, REVENUES, AND OTHER FINANCIAL DATA FOR THE MOST RECENT QUARTER AND THE YEAR TO DATE. ITS GENERALLY LEANER THAN THE 10-K, THE COMPANYS ANNUAL FILING. BUT THE 10-Q WILL GIVE YOU AN UPDATED SNAPSHOT OF THE COMPANYS PERFORMANCE.
1099
REPORTS INTEREST (1099-INT) AND DIVIDENDS (1099-DIV) PAID. IT IS SENT TO THE IRS AND TO THE TAXPAYER. 1099-OID STATEMENTS REPORT ORIGINAL ISSUE DISCOUNT SECURITIES.
12B-1 FEES
CHARGED BY SOME MUTUAL FUNDS TO PAY FOR MARKETING COSTS. TYPICAL 12B-1 FEES RANGE FROM 0.20% TO AS MUCH AS 1.0%. THE FEE IS INCLUDED IN A FUND'S ANNUAL EXPENSE RATIO. TO MAXIMIZE YOUR RETURNS, YOU SHOULD ALWAYS LOOK TO MINIMIZE YOUR FUND COSTS. FUNDS THAT DO NOT CHARGE THE 12B-1 TYPICALLY HAVE LOWER EXPENSE RATIOS. YOU CAN SEARCH FOR LOW-COST FUNDS IN OUR FUND FINDER, OR CHECK A FUND'S EXPENSES BY GETTING A FUND QUOTE. THE 12B-1 FEE IS REPORTED IN THE BACKGROUND SECTION OF THE QUOTE.
3-YEAR EARNINGS GROWTH
THE ANNUALIZED GROWTH RATE OF COMPANY PROFITS OVER THE PAST THREE YEARS. FOR MUTUAL FUNDS THE EARNINGS GROWTH RATE IS CALCULATED USING A WEIGHTED AVERAGE OF THE STOCKS IN THE PORTFOLIO. COMPANIES WITH HIGH HISTORICAL EARNINGS TYPICALLY ARE GROWTH STOCKS. INVESTORS ARE WILLING TO PAY A PREMIUM FOR STOCKS OF COMPANIES THAT ARE GROWING QUICKLY. ABOVE-AVERAGE EARNINGS GROWTH IN A MUTUAL FUND INDICATES THAT IT HOLDS GROWTH STOCKS. COMPARING MUTUAL FUND EARNINGS GROWTH RATES ALLOWS YOU TO EVALUATE THEIR RELATIVE AGGRESSIVENESS.
401(K)
A TAX-DEFERRED INVESTMENT AND SAVINGS PLAN THAT ACTS AS A PERSONAL PENSION FUND FOR EMPLOYEES. (THE NAME REFERS TO THE RELEVANT SECTION IN THE TAX CODE.) THIS PLAN LETS YOU DEFER TAXES ON A PORTION OF YOUR SALARY UNTIL YOU RETIRE. IN 1999 AN EMPLOYEE CAN CONTRIBUTE UP TO $10,000. IN SUBSEQUENT YEARS THE CONTRIBUTION LIMIT WILL BE ADJUSTED FOR INFLATION. YOU PAY TAXES ON YOUR INVESTMENT GAINS WHEN YOU WITHDRAW MONEY FROM THE PLAN, WHICH YOU CAN BEGIN DOING WITHOUT PENALTY AT AGE 59. WHEN YOU LEAVE A COMPANY, YOU CAN ROLL OVER FUNDS INTO YOUR NEW EMPLOYERS 401(K) OR INTO AN IRA. YOU MUST START WITHDRAWING FUNDS AFTER AGE 70. PART OF WHAT MAKES THIS PLAN SUCH A POWERFUL RETIREMENT VEHICLE IS THAT MANY EMPLOYERS MATCH EMPLOYEE CONTRIBUTIONS, USUALLY IN THE RANGE OF 15% TO 50%. PLAN PARTICIPANTS USUALLY HAVE A CHOICE OF INVESTMENTS, INCLUDING STOCKS, BONDS, AND FIXED INCOME FUNDS. SOME EMPLOYERS RESTRICT INVESTMENTS TO THEIR OWN COMPANYS STOCK. MANY 401(K) PLANS ALLOW YOU TO BORROW FROM YOUR NEST EGG. GENERALLY, YOU MUST PAY BACK THE LOAN WITHIN FIVE YEARS, BUT YOU MAY OWE A 10% PENALTY AND TAXES IF YOU HAVENT PAID THE MONEY BACK WHEN YOU LEAVE THE COMPANY. THE LAW ALLOWS YOU TO MAKE EARLY WITHDRAWALS IN CERTAIN CASES OF ECONOMIC HARDSHIP, BUT YOU WILL GET CAUGHT BY THE 10% PENALTY UNLESS YOU ARE DISABLED, YOU LEAVE YOUR COMPANY AT AGE 55 OR LATER, OR YOU NEED THE MONEY FOR MEDICAL EXPENSES EXCEEDING 7.5% OF YOUR ADJUSTED GROSS INCOME.
401(K) ELIGIBILITY 
ANY EMPLOYEE CAN SIGN UP FOR A COMPANYS 401(K). CONTRIBUTIONS ARE AUTOMATICALLY DEDUCTED FROM YOUR PAYCHECK. WHILE YOUR OWN CONTRIBUTIONS ALWAYS BELONG TO YOU, YOU MAY HAVE TO WAIT A FEW YEARS TO BE FULLY VESTED IN THE COMPANYS MATCH.
403(B)
A TAX-DEFERRED RETIREMENT PLAN OFFERED BY NONPROFIT ORGANIZATIONS, PUBLIC SCHOOLS, AND MUNICIPAL AGENCIES THAT ARE UNABLE TO PARTICIPATE IN 401(K) PLANS. GENERALLY, 403(B) PLANS FOLLOW 401(K) RULES FOR CONTRIBUTIONS, ROLLOVERS, AND WITHDRAWALS. YOU CONTRIBUTE TO THE PLAN VIA PAYROLL DEDUCTION. YOUR INCOME TAXES ARE DEFERRED ON THE CONTRIBUTION AND ANY PLAN EARNINGS UNTIL YOU WITHDRAW THE FUNDS, WHICH YOU CAN DO WITHOUT PENALTY AT AGE 59. YOU MUST START MAKING WITHDRAWALS AFTER AGE 70. MANY EMPLOYERS ALLOW PARTICIPANTS TO BORROW FROM THEIR 403(B) FUNDS. BUT IT IS NOT AS COMMON FOR EMPLOYERS TO MATCH EMPLOYEE CONTRIBUTIONS. INVESTMENT CHOICES ARE TYPICALLY MORE LIMITED THAN 401(K) PLANS. THE PLANS ARE OFTEN FUNDED AS ANNUITIES, BUT COMPANIES MAY ALSO OFFER A FAMILY OF MUTUAL FUNDS.
50, 200-DAY AVERAGE PRICE
THE PRICE OF A COMPANY'S STOCK, AVERAGED OVER THE LATEST 50-DAY OR 200-DAY PERIOD. THESE ARE MOVING AVERAGES, WHICH MEANS THEY CHANGE EVERY DAY AS THEY ARE UPDATED. TECHNICAL ANALYSTS OFTEN USE 50-DAY AND 200-DAY AVERAGES TO HELP DECIDE WHEN THEY WILL BUY OR SELL A STOCK. IF THE PRICE RISES ABOVE THE AVERAGES, IT IS AN INDICATOR THAT THE STOCK IS ON THE MOVE. IF THE PRICE DROPS BELOW THE AVERAGES, IT MAY SPELL TROUBLE FOR THE STOCK.
52-WEEK RANGE
A STOCKS HIGH AND LOW PRICES FOR THE YEAR. BY COMPARING THE CURRENT PRICE WITH THE 52-WEEK RANGE, INVESTORS SEE WHERE A STOCK'S CURRENT PRICE FALLS RELATIVE TO ITS 52-WEEK EXTREMES.
ADR
A RECEIPT FOR STOCK IN A FOREIGN COMPANY HELD IN TRUST BY A BANK. BUYING AN ADR, OR AMERICAN DEPOSITARY RECEIPT, IS A SIMPLE WAY FOR U.S. RESIDENTS TO INVEST IN COMPANIES THAT ARE NOT BASED IN THE UNITED STATES. ADRS TRADE DOMESTICALLY ON AN EXCHANGE OR OVER THE COUNTER AND ARE SOLD THROUGH BROKERAGE HOUSES. EACH ADR MAY REPRESENT A FRACTION OF AN ACTUAL SHARE OR SEVERAL SHARES. THE FOREIGN COMPANY IS DIRECTLY INVOLVED IN ISSUING SPONSORED ADRS IN THE U.S. MARKET. IT CHOOSES THE BANK WHERE THE SHARES ARE HELD AND THE BROKERAGES THAT DISTRIBUTE THE ADRS. THE COMPANY ALSO IS RESPONSIBLE FOR REGISTERING THE ADRS WITH THE SECURITIES AND EXCHANGE COMMISSION. PEOPLE WHO BUY THESE ADRS HAVE THE RIGHT TO RECEIVE DIVIDENDS AND TO VOTE THEIR SHARES. IN SOME INSTANCES, BANKS ISSUE UNSPONSORED ADRS WITHOUT THE COMPANYS PARTICIPATION. THE BANK IS RESPONSIBLE FOR ALL REGISTRATION REQUIREMENTS, AND THESE ADRS TRADE ONLY OVER THE COUNTER. HOLDERS RECEIVE DIVIDENDS BUT DO NOT HAVE THE RIGHT TO VOTE.
AIMR
ASSOCIATION FOR INVESTMENT MANAGEMENT AND RESEARCH.
ACCIDENTAL DEATH BENEFITS
COVERAGE THAT PAYS A BENEFIT TO THE PERSON YOU NAME AS YOUR BENEFICIARY IF YOU DIE AS THE RESULT OF A COVERED AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT ACCIDENTAL BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
ACCOUNT TYPE
IN QUICKEN BROKERAGE TRADING PAGES, THE TYPE OF ACCOUNT YOU WISH TO USE FOR A PARTICULAR TRADE. OPTIONS ARE: 1. CASH ACCOUNT - USED FOR ALL TRADES FOR WHICH YOU ARE PAYING IN FULL; 2. MARGIN ACCOUNT - USED FOR TRADING ON MARGIN (BORROWING FUNDS FROM THE BROKERAGE TO COVER A TRADE); 3. SHORT ACCOUNT - USED FOR SHORTING STOCKS
ACCOUNTS PAYABLE
DEBT A COMPANY MUST PAY OFF WITHIN THE YEAR; THAT IS, THEY ARE A CURRENT LIABILITY. TYPICALLY, THESE DEBTS ARE TO THE COMPANY'S SUPPLIERS. THE ACCOUNTS PAYABLE AMOUNT IS SUBTRACTED FROM THE SALES OR REVENUE AMOUNT ON A BALANCE SHEET WHEN NET INCOME AND NET WORTH ARE CALCULATED.
ACCOUNTS RECEIVABLE
MONEY OWED TO A COMPANY BY ITS CUSTOMERS; IT QUALIFIES AS A CURRENT ASSET BECAUSE THE COMPANY EXPECTS THE MONEY TO BE PAID TO IT WITHIN THE YEAR. INVESTORS OFTEN LOOK AT THIS NUMBER TO SEE WHETHER ACCOUNTS RECEIVABLE IS AN UNUSUALLY LARGE NUMBER IN COMPARISON TO THE COMPANY'S SALES. IF IT IS, IT MAY MEAN THAT THE COMPANY IS LOW ON CASH.
ACCRUAL-BASIS ACCOUNTING
AN ACCOUNTING SYSTEM IN WHICH INCOME IS RECORDED WHEN IT IS EARNED, RATHER THAN WHEN IT IS PAID TO YOU, AND EXPENSES ARE RECORDED WHEN YOU COMMIT TO AN OBLIGATION, RATHER THAN WHEN YOU PAY IT. SEE CASH-BASIS ACCOUNTING.
ACCRUED INTEREST
THE INTEREST A BOND HAS ALREADY EARNED BUT NOT YET PAID OUT. WHEN YOU BUY A BOND AFTER ITS ORIGINAL DATE OF ISSUE, YOU USUALLY HAVE TO PAY ACCRUED INTEREST TO THE PREVIOUS OWNER.
ACCRUED TAXES
TAXES THAT A COMPANY OWES AND HASN'T PAID YET. THEY ARE LISTED ON A COMPANY'S BALANCE SHEET.
ACCRUED WAGES
THE WAGES THAT A COMPANY OWES TO ITS EMPLOYEES AND HASN'T PAID YET. THEY ARE LISTED ON A COMPANY'S BALANCE SHEET.
ACQUISITION
WHEN ONE COMPANY BUYS ANOTHER COMPANY.
ACTUAL CASH VALUE
THIS IS HOW MUCH YOU COULD GET FOR AN ITEM IF YOU SOLD IT TODAY - - INCLUDING YOUR CAR. FOR EXAMPLE, IF YOU PAID $14,000 FOR YOUR CAR; ITS ACTUAL CASH VALUE NOW MIGHT BE $11,750. THIS IS DETERMINED BY THE PRICE OF A COMPARABLE NEW VEHICLE MINUS DEPRECATION, AND IS THE AMOUNT YOUR INSURANCE COMPANY WILL PAY YOU, IF YOU ELECT TO RECEIVE THIS COVERAGE. THIS IS A VERY IMPORTANT COVERAGE IF YOU POLICY DOES NOT COVER YOU FOR COLLISION.
ADJUSTED GROSS INCOME (AGI)
TOTAL PERSONAL INCOME FOR THE TAX YEAR MINUS ALLOWABLE ADJUSTMENTS, SUCH AS UNREIMBURSED BUSINESS EXPENSES, CONTRIBUTIONS TO A TRADITIONAL IRA, AND ALIMONY PAYMENTS. IT IS THE INCOME USED TO CALCULATE FEDERAL INCOME TAX. IT IS ALSO REFERRED TO AS AGI.
AGGRESSIVE INVESTMENT
A VOLATILE, DIFFICULT-TO-PREDICT INVESTMENT THAT IS SUBJECT TO RAPID GAIN OR LOSS. THIS TYPE OF INVESTMENT IS GENERALLY APPROPRIATE FOR LONG-TERM HOLDINGS (10 OR MORE YEARS) AND FOR INVESTORS WILLING TO ACCEPT FLUCTUATIONS IN THE VALUE OF THEIR INVESTMENTS.
ALPHA COEFFICIENT
MEASURES THE EXTENT TO WHICH A SECURITY'S PERFORMANCE EXCEEDS OR FALLS SHORT OF THE RETURN YOU WOULD EXPECT GIVEN ITS LEVEL OF RISK (BETA). AN INVESTMENT WITH A POSITIVE ALPHA HAS DELIVERED MORE RETURN THAN WOULD HAVE BEEN PREDICTED BY ITS BETA. A NEGATIVE ALPHA DENOTES PERFORMANCE THAT IS BELOW WHAT YOU WOULD EXPECT GIVEN ITS RISK LEVEL.
ALTERNATIVE MINIMUM TAX (AMT)
A FEDERAL TAX THAT SEEKS TO GUARANTEE THAT CORPORATIONS, TRUSTS, ESTATES, AND THE WEALTHY PAY AT LEAST SOME MINIMUM INCOME TAX. AMT CAN BE VERY COMPLEX, SO YOU MAY WANT TO CONSULT YOUR TAX ADVISER IF YOU NEED TO CALCULATE IT.
AMERICAN STOCK EXCHANGE (ASE OR AMEX)
ONE OF THE MAJOR STOCK EXCHANGES IN THE UNITED STATES. LIKE THE NEW YORK STOCK EXCHANGE, THE AMEX IS A CENTRAL AUCTION MARKET, WHICH MEANS IT CONDUCTS BUSINESS ON A TRADING FLOOR WHERE TRADERS BUY AND SELL SECURITIES FROM SPECIALISTS, OR MARKET MAKERS IN A SPECIFIC STOCK. STARTING MORE THAN A CENTURY AGO, IT MOVED INDOORS TO ITS PRESENT MANHATTAN LOCATION IN 1921. THE AMEX IS KNOWN AS A MAJOR MARKET FOR OPTIONS AS WELL AS STOCKS. ALTHOUGH THE AMEX MERGED WITH THE NATIONAL ASSOCIATION OF SECURITIES DEALERS IN 1998, THE EXCHANGE STILL OPERATES SEPARATELY UNDER THE NEWLY FORMED NASDAQ-AMEX MARKET GROUP, A NASD SUBSIDIARY.
AMERICANS WITH DISABILITIES ACT (ADA)
A FEDERAL LAW THAT PROHIBITS DISCRIMINATION AGAINST PEOPLE WITH DISABILITIES. TITLE I OF THE ADA REQUIRES COMPANIES WITH 15 OR MORE EMPLOYEES TO MAKE REASONABLE ACCOMMODATIONS FOR QUALIFIED DISABLED EMPLOYEES SO THAT THEY CAN PERFORM THEIR JOB.
AMORTIZATION
A METHOD OF DEBT REDUCTION IN WHICH A BORROWER PAYS OFF A PORTION OF THE INTEREST AND PRINCIPAL PERIODICALLY. AMORTIZATION NUMBERS ARE FOUND ON BALANCE SHEETS.
ANNUAL PERCENTAGE RATE (APR)
AN INTEREST RATE BASED ON THE COST OF CREDIT THAT CONSUMERS PAY, EXPRESSED AS AN ANNUAL PERCENTAGE.
ANNUAL PERCENTAGE YIELD (APY)
THE RATE EARNED OR PAID IN ONE YEAR, TAKING THE EFFECT OF COMPOUNDING INTO ACCOUNT. IT IS EXPRESSED AS AN ANNUAL PERCENTAGE RATE.
ANNUAL REPORT
A DOCUMENT SENT TO SHAREHOLDERS THAT COMMUNICATES A PUBLIC COMPANYS VERSION OF OPERATIONS AND PERFORMANCE. INFORMATION INCLUDES EARNINGS, REVENUES, BALANCE SHEET DATA, AN AUDITORS STATEMENT, AND MANAGEMENTS DISCUSSION OF THE COMPANYS TRACK RECORD AND FUTURE DIRECTION. YOU CAN OBTAIN A COPY OF THE ANNUAL REPORT FROM THE COMPANY, USUALLY FROM THE INVESTOR RELATIONS DEPARTMENT.
ANNUALIZED GAIN
IN PORTFOLIO, THIS CALCULATION CONVERTS THE PRICE GAIN OR LOSS OF A SECURITY HELD FOR MORE THAN ONE YEAR INTO A COMPOUND ANNUALIZED GAIN. ANNUALIZED GAINS OFFER INVESTORS A WAY TO COMPARE HOLDINGS THAT HAVE BEEN OWNED FOR DIFFERENT LENGTHS OF TIME. THE CALCULATION FACTORS IN THE COMMISSION PAID TO PURCHASE SECURITIES, IF ANY, BUT DOES NOT INCLUDE THE REINVESTMENT OF DIVIDENDS.
ANNUALIZED RETURN
THE YEARLY INCREASE (OR DECREASE) IN THE VALUE OF AN INVESTMENT, INCLUDING THE EFFECTS OF COMPOUNDING. ANNUALIZED RETURNS ARE A BIT MORE COMPLICATED THAN AVERAGE RETURNS, WHICH YOU CAN GET BY ADDING UP THE ANNUAL RETURNS OF A STOCK OR FUND AND DIVIDING BY THE NUMBER OF YEARS. TO CALCULATE ANNUALIZED RETURN YOU NEED A GOOD CALCULATOR. FOR A THREE-YEAR ANNUALIZED RETURN, FOR EXAMPLE, YOU MUST TAKE THE CUBE ROOT OF THE CUMULATIVE RETURN FOR A THREE-YEAR PERIOD TO FACTOR IN COMPOUNDING. ANNUALIZED RETURN GIVES YOU A MUCH BETTER IDEA OF HOW A STOCK OR FUND PERFORMED AND MAKES IT EASIER TO COMPARE THEM OVER THE LONG TERM. SECURITIES THAT HAVE THE SAME AVERAGE RETURN MAY HAVE WILDLY DIFFERENT ANNUALIZED RETURNS, ESPECIALLY IF ONE SECURITY IS VOLATILE. FOR EXAMPLE, IT'S POSSIBLE FOR A STOCK OR FUND TO HAVE A RESPECTABLE AVERAGE RETURN BUT A NEGATIVE ANNUALIZED RETURNED IF GAINS IN THE FIRST TWO YEARS ARE OFFSET BY A BIG DROP IN THE THIRD.
ANNUITY
A TYPE OF INVESTMENT THAT GUARANTEES PAYMENT OF SPECIFIC AMOUNTS AT SPECIFIC TIMES, OR A SINGLE LUMP SUM PAYMENT. ANNUITIES ARE SPONSORED BY INSURANCE COMPANIES AND OTHER FINANCIAL INSTITUITIONS AND SOLD BY AGENTS, BANKS, SAVINGS AND LOANS, STOCKBROKERS, AND FINANCIAL PLANNERS. FIXED ANNUITIES WORK LIKE CERTIFICATES OF DEPOSIT (CDS); YOU INVEST A LUMP SUM, AND THE INSURER GUARANTEES A FIXED RATE OF INTEREST FOR ONE TO FIVE YEARS. VARIABLE ANNUITIES LET YOU DIRECT YOUR INVESTMENT INTO FUND-LIKE PORTFOLIOS OF STOCKS, BONDS, AND CASH EQUIVALENTS. YOUR RETURN, AS WITH A FUND, DEPENDS ON THE PERFORMANCE OF THE PORTFOLIOS YOU CHOOSE. VARIABLE ANNUITIES COME WITH ANNUAL CHARGES.
APPRECIATION
AN INCREASE IN THE VALUE OF AN ASSET SUCH AS A STOCK, BOND, COMMODITY OR REAL ESTATE.
ASK
THE LOWEST PRICE A SELLER WILL ACCEPT FOR A SECURITY. THE BID IS THE HIGHEST PRICE THAT A POTENTIAL BUYER IS WILLING TO PAY FOR A SECURITY. THE DIFFERENCE BETWEEN THE TWO PRICES IS KNOWN AS THE SPREAD.
ASSET ALLOCATION
THE DIVISION OF HOLDINGS AMONG DIFFERENT TYPES OF ASSETS, SUCH AS DOMESTIC STOCKS, INTERNATIONAL STOCKS, BONDS, REAL ESTATE, AND CASH. FINANCIAL PLANNERS REFER TO ASSET ALLOCATION WHEN DISCUSSING PORTFOLIOS. FOR EXAMPLE, IF YOU ARE YOUNG AND SINGLE SAVING FOR RETIREMENT 40 YEARS FROM NOW, A PLANNER MIGHT RECOMMEND AN ASSET ALLOCATION HEAVY IN STOCKS, WHICH TEND TO HAVE A HIGHER RISK AND A HIGHER RETURN. BUT IF YOU ARE NEAR RETIREMENT (OR ABOUT TO CASH IN SOME INVESTMENTS TO PAY FOR A CHILD'S COLLEGE EDUCATION), A FINANCIAL PLANNER MIGHT RECOMMEND A LESS RISKY ASSET ALLOCATION TO PRESERVE INCOME AND CAPITAL.
ASSET CLASS
TYPICALLY REFERS TO SECURITIES THAT HAVE SIMILAR FEATURES. FOR EXAMPLE, STOCKS AND BONDS ARE THE TWO MAIN CLASSES. THEY MAY BE SUBDIVIDED INTO OTHER CLASSES LIKE MORTGAGES, COMMON STOCK, AND PREFERRED STOCK. TYPICAL ASSET CLASSES ARE CASH (MONEY MARKET), DOMESTIC BONDS, INTERNATIONAL STOCKS, LARGE CAP STOCKS, AND SMALL CAP STOCKS. ASSET CLASSES ARE USED IN THE PROCESS OF ASSET ALLOCATION TO CONTROL THE RISK AND RETURN CHARACTERISTICS OF A PORTFOLIO. THE PREDICTIONS FOR ASSET CLASS PERFORMANCE ARE BASED ON HISTORICAL PERFORMANCE CHARACTERISTICS, WHICH INCLUDE THE EXPECTED FUTURE RETURN, THE EXPECTED FUTURE VOLATILITY (RISK) OF THE RETURN, AND HOW THE RETURNS OF ASSETS CLASSES PERFORM RELATIVE TO EACH OTHER. IN THE LONG RUN, WITH A DIVERSIFIED PORTFOLIO, OVER 90 PERCENT OF YOUR RETURNS AS AN INVESTOR ARE DETERMINED BY THE CLASS OF ASSETS YOU DECIDE TO HOLD. THE REMAINING PERCENTAGE OF YOUR RETURN DEPENDS ON WHICH SPECIFIC STOCK, BOND OR MUTUAL FUND YOU BUY AND WHEN YOU BUY IT.
ASSET MANAGEMENT ACCOUNT
ALSO CALLED A CASH MANAGEMENT ACCOUNT. AN ALL-IN-ONE ACCOUNT OFFERED BY BANKS AND BROKERAGES THAT ALLOWS CUSTOMERS TO INVEST, WRITE CHECKS, PAY BILLS, AND EARN AN ELEVATED INTEREST RATE ON THEIR CASH. IT WAS FIRST STARTED IN THE BROKERAGE INDUSTRY TO LURE PEOPLE WITH FAT BANK ACCOUNTS. BANKS ARE STRIKING BACK WITH THEIR OWN VERSIONS. TYPICALLY, A MINIMUM AMOUNT OF CASH AND SECURITIES IS REQUIRED, SOMETIMES AS MUCH AS $25,000. ANNUAL FEES CAN REACH $125 OR SO. THESE ACCOUNTS ARE ATTRACTIVE BECAUSE ANY CASH THAT COMES IN FROM INTEREST, DIVIDENDS, OR THE SALE OF SECURITIES IS SWEPT INTO A MONEY MARKET ACCOUNT. CUSTOMERS ALSO OFTEN GET FREE CHECKING AND ACCESS TO PREFERRED RATES ON LOANS. AT THE END OF THE MONTH THEY RECEIVE A UNIFIED STATEMENT FOR ALL THEIR ACCOUNTS. BECAUSE OF THE FEES, THIS KIND OF ACCOUNT BEST SERVES ACTIVE TRADERS.
ASSET-EQUITY RATIO
A COMPANY'S TOTAL ASSETS DIVIDED BY ITS SHAREHOLDERS' EQUITY. ANALYSTS USE THIS CALCULATION TO DETERMINE WHICH COMPANIES WITHIN A GIVEN INDUSTRY HAVE BUILT MORE REVENUE-PRODUCING ASSETS FROM THEIR EQUITY. THIS RATIO IS USED ONLY WHEN COMPARING COMPANIES WITHIN THE SAME INDUSTRY; IT SHOULD NOT BE USED TO SCREEN ALL INDUSTRY CLASSES. SEE DEBT-EQUITY RATIO.
ASSETS
ASSETS ARE THINGS YOU OWN, SUCH AS CASH, REAL ESTATE, STOCKS, AND BONDS. IN THE CASE OF A BUSINESS, ASSETS ALSO INCLUDE INVENTORY. ON A BALANCE SHEET, ASSETS CONTRIBUTE TO THE POSITIVE SIDE, AND LIABILITIES CONTRIBUTE TO THE NEGATIVE SIDE. FOR EXAMPLE, IF YOU OWN A $100,000 HOUSE WITH A $60,000 MORTAGE, YOU WOULD HAVE $40,000 OF THE HOUSE'S EQUITY ON THE ASSETS SIDE OF YOUR BALANCE SHEET, BECAUSE YOU OWN THAT PORTION OF THE HOUSE; THE $60,000 WOULD APPEAR ON THE LIABILITIES SIDE OF YOUR BALANCE SHEET BECAUSE YOU OWE THAT AMOUNT TO YOUR MORTGAGE LENDER.
AUTOMOBILE INSURANCE
A CONTRACT BETWEEN YOU AND AN INSURANCE COMPANY IN WHICH YOU AGREE TO PAY A PREMIUM AND IN EXCHANGE, THE INSURANCE COMPANY AGREES TO REIMBURSE YOU FOR AUTOMOBILE-RELATED LOSSES. THERE ARE FOUR MAJOR CATEGORIES OF AUTOMOBILE INSURANCE: 1. LIABILITY COVERAGE; 2. PERSONAL INJURY PROTECTION; 3. PHYSICAL DAMAGE; 4. UNINSURED/UNDERINSURED MOTORIST PROTECTION
AUTOMOBILE SHARED MARKET
A PROGRAM IN WHICH ALL AUTOMOBILE INSURANCE COMPANIES IN EVERY STATE PARTICIPATE TO MAKE COVERAGE AVAILABLE TO CAR OWNERS WHO ARE UNABLE TO OBTAIN AUTO INSURANCE IN THE REGULAR MARKETPLACE. OTHER NAMES FOR THIS MARKET ARE ASSIGNED RISK PLANS, JOINT UNDERWRITING ASSOCIATIONS, OR REINSURANCE FACILITIES.
AVERAGE CREDIT QUALITY
THE OVERALL CREDIT RATING OF A BOND FUND. CREDIT RATINGS FOR INDIVIDUAL BONDS ARE ASSIGNED BY STANDARD & POORS OR MOODYS AND ARE INDICATORS OF RISK. THE HIGHER THE RATING, THE LESS CREDIT RISK. BONDS RATED AAA ARE THE HIGHEST QUALITY FOLLOWED BY AA, A AND BBB. ANY BOND RATING BELOW BBB IS CONSIDERED TO BE NON-INVESTMENT GRADE, OR WHAT IS TYPICALLY KNOWN AS A JUNK BOND. AVERAGE CREDIT QUALITY IS THE COMBINED CREDIT RATING FOR ALL THE BONDS IN THE PORTFOLIO, WEIGHTED SO THAT LARGER HOLDINGS HAVE GREATER INFLUENCE ON THE FINAL STATISTIC.
AVERAGE EFFECTIVE DURATION
A MEASURE OF INTEREST-RATE SENSITIVITY IN BOND MUTUAL FUNDS. THE LONGER THE DURATION, THE GREATER THE SENSITIVITY TO INTEREST RATE CHANGES. FOR EXAMPLE, A FUND WITH A 10-YEAR DURATION WOULD DECLINE IN VALUE 10% FOR EVERY 1% HIKE IN INTEREST RATES. AVERAGE EFFECTIVE DURATION TAKES INTO ACCOUNT BOND MATURITIES AND COUPON RATES. LONGER MATURITIES AND SMALL COUPONS INCREASE DURATION. SHORTER MATURITIES AND HIGHER COUPONS DECREASE DURATION.
AVERAGE EFFECTIVE MATURITY
A CALCULATION OF THE AVERAGE TIME THAT SECURITIES IN A TAXABLE FIXED-INCOME FUND WILL COME DUE. THE AVERAGE IS WEIGHTED ACCORDING TO THE MARKET VALUE OF EACH SECURITY. THE LONGER THE MATURITY  AND THE HIGHER THE NUMBER  THE GREATER THE INVESTMENT RISK. AVERAGE EFFECTIVE MATURITY TAKES INTO ACCOUNT MORTGAGE PAYMENTS IN MORTGAGE-BACKED SECURITIES, ADJUSTABLE COUPONS ON BONDS, AND PUTS. CALL PROVISIONS ARE NOT INCLUDED. BECAUSE OF THESE PROVISIONS, THIS AVERAGE IS MORE ACCURATE THAN AVERAGE WEIGHTED MATURITY.
AVERAGE NOMINAL MATURITY
A CALCULATION OF THE AVERAGE TIME THAT SECURITIES IN A MUNICIPAL BOND FUND WILL COME DUE. THE AVERAGE IS WEIGHTED ACCORDING TO THE MARKET VALUE OF EACH SECURITY. THE LONGER THE MATURITY  AND THE HIGHER THE NUMBER  THE GREATER THE INVESTMENT RISK. IT DOES NOT INCLUDE ACCOUNT PREPAYMENTS, PUTS, CALLS, OR ADJUSTABLE COUPONS. AVERAGE NOMINAL MATURITY CAN BE USED TO COMPARE THE INTEREST-RATE RISK AMONG MUNICIPAL BOND FUNDS.
AVERAGE WEIGHTED MATURITY
THE AVERAGE TIME THAT BONDS AND OTHER FIXED-INCOME SECURITIES IN A PORTFOLIO WILL COME DUE. THE AVERAGE IS WEIGHTED ACCORDING TO THE MARKET VALUE OF EACH SECURITY. LARGER SECURITIES HAVE MORE INFLUENCE ON THE FINAL NUMBER THAN SMALLER SECURITIES. THE LONGER THE MATURITY  AND THE HIGHER THE NUMBER  THE GREATER THE INVESTMENT RISK. VARIATIONS ON THIS STATISTIC ARE USED FOR SPECIFIC TYPES OF FUNDS. AVERAGE EFFECTIVE MATURITY IS APPLIED TO TAXABLE FIXED-INCOME AND HYBRID FUNDS. AVERAGE NOMINAL MATURITY IS APPLIED TO MUNICIPAL BOND FUNDS.
AVERAGE ANNUAL RETURN
A CALCULATION THAT CONVERTS A CUMULATIVE TOTAL RETURN INTO AN ANNUALIZED FIGURE. FOR EXAMPLE, AN INVESTMENT THAT HAS A CUMULATIVE RETURN OF 30% OVER THREE YEARS--MEANING IT HAS GAINED 30% FOR THE ENTIRE THREE-YEAR PERIOD--HAS AN ANNUALIZED GAIN OF 9.1%. THAT IS, THE SECURITY'S AVERAGE ANNUAL RETURN FOR EACH OF THOSE THREE YEARS WAS 9.1%. (TOTAL RETURN IS THE SUM OF ANY APPRECIATION OR DEPRECIATION IN THE VALUE OF A SECURITY, PLUS THE VALUE OF ANY DIVIDENDS PRODUCED BY THE SECURITY.)
AVERAGES
THERE ARE SEVERAL AVERAGES THAT ARE USED TO MEASURE THE PERFORMANCE OF THE STOCK MARKET OR A CERTAIN TYPE OF STOCK. SOME EXAMPLES OF AVERAGES ARE THE DOW JONES INDUSTRIAL AVERAGE, THE RUSSELL 2000 AVERAGE, AND THE S&P 500 AVERAGE.
BACK-END LOAD
ALSO CALLED DEFERRED SALES CHARGE. A FEE TO SELL SHARES IN A MUTUAL FUND. THE FEE IS USUALLY A PERCENTAGE OF THE TOTAL AMOUNT WITHDRAWN AND OFTEN DECREASES THE LONGER A SHAREHOLDER REMAINS IN A FUND. SEE ALSO FRONT-END LOAD AND NO-LOAD MUTUAL FUND.
BALANCE SHEET
AN OFFICIAL FINANCIAL STATEMENT THAT INCLUDES A COMPANY'S ASSETS (THINGS IT OWNS, SUCH AS CASH, CAPITAL EQUIPMENT, AND INVESTMENTS) AND LIABILITIES (THINGS IT OWES SUCH AS ACCOUNTS PAYABLE AND LONG-TERM DEBT). TO DETERMINE A COMPANY'S NET WORTH, YOU SUBTRACT ITS LIABILITIES FROM ITS ASSETS. YOU CAN USE A COMPANY'S BALANCE SHEET TO DETERMINE ITS FINANCIAL HEALTH.
BALANCED FUND
A KIND OF MUTUAL FUND THAT TYPICALLY BUYS A MIXTURE OF BONDS, PREFERRED STOCK, AND COMMON STOCK TO ACHIEVE THE HIGHEST RETURN WITH THE LOWEST RISK. IT BLENDS LONG-TERM GROWTH FROM STOCKS WITH INCOME FROM BONDS.
BASIS
THE PRICE PAID FOR AN INVESTMENT WHEN IT WAS ORIGINALLY PURCHASED. (THIS IS ALSO KNOWN AS THE "COST BASIS.") THE BASIS INCLUDES ANY COMMISSION OR FEES YOU PAID FOR THE TRADE.
BEAR MARKET
A MARKET THAT IS DECLINING; THAT IS, STOCK PRICES ARE FALLING, AND SO IS THE AMOUNT OF MONEY THAT COMPANIES HAVE TO SPEND ON GROWTH. THIS IS THE OPPOSITE OF A BULL MARKET, WHICH IS GROWING.
BEFORE-TAX EARNED INCOME
INCOME EARNED FROM YOUR EMPLOYMENT BEFORE YOU PAY YOUR TAXES. IT INCLUDES SALARIES, COMMISSIONS, WAGES, TIPS, SELF EMPLOYMENT INCOME, ETC. -- BASICALLY, WHAT YOU GET FROM WORKING. IT DOES NOT INCLUDE INCOME FROM YOUR SAVINGS AND INVESTMENTS (WHICH IS CALLED UNEARNED INCOME).
BENEFICIARY
A PERSON, ORGANIZATION, OR TRUST WHO WILL RECEIVE THE PROCEEDS OF A LIFE INSURANCE POLICY WHEN THE INSURED PERSON DIES. IF YOU DESIGNATE YOUR SPOUSE AS THE POLICY BENEFICIARY, HE OR SHE WILL RECEIVE PAYMENT FROM YOUR LIFE INSURANCE POLICY AT YOUR DEATH.
BETA COEFFICIENT
A MEASURE OF A STOCK'S VOLATILITY RELATIVE TO THE OVERALL STOCK MARKET. THE BETA COEFFICIENT OF THE S&P 500 IS 1. ANY STOCK THAT IS MORE VOLATILE THAN THE MARKET AS A WHOLE HAS A BETA VALUE HIGHER THAN 1. IF THE BETA COEFFICIENT IS LESS THAN 1, THE SECURITY IS CONSIDERED TO BE LESS RISKY THAN THE MARKET. CONSERVATIVE INVESTORS IDEALLY SEEK TO INVEST IN STOCKS WITH LOW BETA COEFFICIENTS, WHEREAS INVESTORS WILLING TO TAKE MORE RISK SEEK TO INVEST IN HIGH-BETA STOCKS.
BID
THE PRICE THAT A POTENTIAL BUYER IS WILLING TO PAY FOR A SECURITY. THE ASK (OR ASKED PRICE) IS THE LOWEST PRICE THE SELLER WILL ACCEPT FOR THE SECURITY. THE DIFFERENCE BETWEEN THE TWO PRICES IS KNOWN AS THE SPREAD.
BINDER
A TEMPORARY INSURANCE POLICY THAT EXPIRES AT THE END OF A SPECIFIC TIME PERIOD OR WHEN THE PERMANENT POLICY IS WRITTEN. A BINDER IS GIVEN TO AN APPLICANT FOR INSURANCE TO COVER THE APPLICANT DURING THE PERIOD WHEN THE POLICY PAPERWORK IS BEING COMPLETED.
BLOCK TRADE
AT LEAST 10,000 SHARES OF STOCK BOUGHT OR SOLD BY INSTITUTIONAL INVESTORS. INDIVIDUAL INVESTORS SOMETIMES WATCH BLOCK TRADES TO DETERMINE A STOCKS ATTRACTIVENESS. RISING INSTITUTIONAL INTEREST IN A STOCK IS A POSITIVE SIGN. BUT WHEN A BLOCK TRADE COMES OVER THE TICKER, IT DOESNT TELL YOU EVERYTHING YOU NEED TO KNOW, SUCH AS WHO BOUGHT OR SOLD THE STOCK. THE TRADE COULD HAVE BEEN BETWEEN INSTITUTIONS, WHICH SHOULD HAVE LITTLE AFFECT ON THE STOCKS MARKET PRICE. BUT IF A BLOCK IS TRADED ON AN UPTICK, IT COULD BE A SIGN THAT THE STOCK IS POISED FOR GREATER APPRECIATION.
BLUE-CHIP FUND
A TYPE OF MUTUAL FUND THAT INVESTS IN BLUE CHIP STOCKS (A TYPE OF GROWTH FUND).
BLUE-CHIP STOCKS
STOCKS OF SEASONED COMPANIES THAT HAVE PAID REGULAR DIVIDENDS IN BOTH GOOD AND BAD YEARS. INVESTMENTS IN BLUE-CHIP STOCKS ARE RELATIVELY CONSERVATIVE. SOME EXAMPLES OF BLUE-CHIP STOCKS ARE THE 30 SECURITIES USED TO CALCULATE THE DOW JONES INDUSTRIAL AVERAGE.
BOARD OF DIRECTORS
A GROUP OF INDIVIDUALS, ELECTED BY THE SHAREHOLDERS, THAT DIRECT AND OVERSEE THE AFFAIRS OF THE CORPORATION AND MONITOR THE ACTIONS OF CORPORATE OFFICERS.
BODILY INJURY
BODILY INJURY LIABILITY INSURANCE COVERAGE PROTECTS YOU AGAINST FINANCIAL LOSS (INCLUDING THE COST OF YOUR LEGAL DEFENSE), WHEN YOU ARE FOUND LEGALLY RESPONSIBLE FOR INJURING OTHER PEOPLE IN AN AUTOMOBILE ACCIDENT. LIABILITY INSURANCE FOR BODILY INJURY PAYS FOR THE MEDICAL TREATMENT, REHABILITATION, OR FUNERAL COSTS INCURRED BY ANOTHER DRIVER, HIS OR HER PASSENGERS, PASSENGERS IN YOUR CAR, AND PEDESTRIANS. IT ALSO PAYS LEGAL COSTS AND SETTLEMENTS FOR NON-MONETARY LOSSES -- I.E., PAIN AND SUFFERING. KEEP IN MIND, BODILY INJURY LIABILITY COVERAGE DOES NOT PAY FOR ANY OF YOUR MEDICAL EXPENSES, LOSS OF INCOME OR PAIN AND SUFFERING RESULTING FROM AN ACCIDENT. LIABILITY (BI) AND PROPERTY DAMAGE (PD) TOGETHER ARE OFTEN REFERRED TO SIMPLY AS LIABILITY INSURANCE. MOST STATE LAWS REQUIRE THAT ALL DRIVERS CARRY LIABILITY INSURANCE OR OFFER OTHER PROOF THAT THEY ARE FINANCIALLY ABLE TO PAY ANY DAMAGES FOR WHICH THEY MIGHT BE FOUND LIABLE.
BODILY INJURY - LIABILITY
BODILY INJURY LIABILITY COVERAGE IS INSURANCE THAT PROTECTS YOU AGAINST FINANCIAL LOSS (INCLUDING THE COST OF YOUR LEGAL DEFENSE), WHEN YOU ARE LEGALLY HELD LIABLE FOR INJURING OTHER PERSONS IN AN AUTOMOBILE ACCIDENT. LIABILITY INSURANCE FOR BOTH BODILY INJURY (BI) PROPERTY DAMAGE (PD), OR PROOF OF FINANCIAL RESPONSIBILITY, ARE REQUIRED BY STATE LAW. THESE TWO COVERAGES TOGETHER, ARE OFTEN REFERRED TO AS LIABILITY INSURANCE.
BODILY INJURY - UNINSURED
BODILY INJURY UNINSURED OR UNDERINSURED COVERAGE PROTECTS YOU IN SITUATIONS WHERE YOU HAVE BEEN INJURED AND THE OTHER DRIVER HAS INADEQUATE COVERAGE OR NO INSURANCE AT ALL. YOUR INSURANCE COMPANY WOULD THEN PAY YOU, UP TO THE LIMIT OF YOUR POLICY, FOR THE INJURIES YOU SUFFERED.
BOND
A TYPE OF SECURITY THAT PAYS A FIXED AMOUNT OF INTEREST AT A REGULAR INTERVAL OVER A CERTAIN PERIOD OF TIME. BONDS ARE ESSENTIALLY LOANS GIVEN TO COMPANIES AND GOVERNMENT ENTITIES WHO PROMISE TO PAY BACK THE LOAN AT A SPECIFIED INTEREST RATE. BONDS ARE CONSIDERED LESS RISKY INVESTMENTS THAN STOCKS. A BOND'S RATING IS LIKE A PERSON'S CREDIT RATING. IT GIVES YOU AN IDEA OF WHETHER THE COMPANY THAT ISSUED THE BOND WILL BE ABLE TO MAKE ITS PAYMENTS ON THE LOAN. AS A BOND HOLDER, YOU RECEIVE THAT INTEREST PAYMENT PERIODICALLY. FOR EXAMPLE, SUPPOSE YOU OWN A MUNICIPAL $1,000 BOND THAT PAYS 7% INTEREST OVER 10 YEARS. IN THIS CASE, ASSUMING YOU BOUGHT THE BOND AT ITS PAR VALUE OF $1,000 AND HELD IT FOR 10 YEARS, YOU WOULD RECEIVE $70 A YEAR (7% OF $1,000) FOR 10 YEARS. AT THE END OF THE 10 YEARS, YOU WOULD HAVE RECEIVED $700 IN INTEREST ($70 X 10 YEARS), AND YOU WOULD ALSO GET THE $1,000 BACK. WHEN INTEREST RATES ARE RISING, BOND PRICES GO DOWN; WHEN RATES ARE FALLING, BOND PRICES RISE. SEE ALSO GOVERNMENT BOND.
BOND RATING
A LETTER GRADE FROM A RATING AGENCY INDICATING THE RISK OF DEFAULT ON MUNICIPAL OR CORPORATE BONDS. RATING AGENCIES, SUCH AS MOODYS AND STANDARD & POORS, ASSIGN A RATING WHEN A BOND IS ISSUED. THEY CONTINUE TO MONITOR THE BOND AND WILL CHANGE THE RATING IF THE ISSUERS FINANCIAL CONDITION CHANGES. THE HIGHEST RATING IS AAA (AAA FOR MOODYS). BONDS RATED BBB (OR BAA) AND ABOVE ARE CONSIDERED INVESTMENT GRADE. ANYTHING BELOW IS CONSIDERED JUNK, WHICH TYPICALLY CARRIES A HIGHER INTEREST RATE TO COMPENSATE FOR RISK. BONDS WITH A D RATING (C FOR MOODYS) ARE IN DEFAULT.
BOND-ORIENTED MUTUAL FUNDS
A TYPE OF MUTUAL FUND THAT INVESTS PRIMARILY IN BONDS. INVESTMENTS IN BOND-ORIENTED MUTUAL FUNDS ARE RELATIVELY CONSERVATIVE AND HAVE A LOWER RISK THAN INVESTMENTS IN STOCKS.
BOOK VALUE
THE TOTAL ASSET VALUE OF A COMPANY MINUS INTANGIBLE ASSETS AND TOTAL LIABILITIES. INTANGIBLE ASSETS INCLUDE SUCH THINGS AS GOOD WILL AND PATENTS.
BROKER
A BROKER IS SOMEONE WHO HANDLES THE TRANSFER OF A SECURITY FROM A SELLER TO A BUYER. BROKERS MUST BE LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC).
BROKERAGE
A BROKERAGE IS A BUSINESS THAT EMPLOYS BROKERS TO ENACT TRANSACTIONS BETWEEN SECURITIES SELLERS AND BUYERS. THERE ARE THREE TYPES OF BROKERAGES: FULL-SERVICE BROKERAGES, DISCOUNT BROKERAGES, AND DEEP-DISCOUNT BROKERAGES.
BULL MARKET
A MARKET IN WHICH PRICES ARE MOVING UPWARD. THIS IS THE OPPOSITE OF A BEAR MARKET, IN WHICH PRICES ARE DECLINING.
BUSINESS PLAN
A WRITTEN PROPOSAL FOR A NEW BUSINESS OR NEW DIRECTION IN A PREVIOUSLY ESTABLISHED BUSINESS. BUSINESS PLANS TYPICALLY INCLUDE A DESCRIPTION OF THE COMPANY AND ITS PRODUCTS OR SERVICES, A BUDGET, AN OVERVIEW OF CURRENT AND PROJECTED FINANCING, A MARKET ANALYSIS AND MARKETING STRATEGY, AND PROJECTED PROFITS AND LOSSES. BUSINESS PLANS SERVE AS AN OPERATING MODEL FOR THE BUSINESS AND OUTLINE YOUR FINANCIAL EXPECTATIONS FOR POTENTIAL INVESTORS.
BUYING ON MARGIN
WHEN AN INVESTOR BORROWS MONEY FROM A BROKER TO BUY A SECURITY. INVESTORS USUALLY DO THIS WHEN THEY ARE CONFIDENT THAT THE PRICE OF A SECURITY WILL GO UP. FOR EXAMPLE, SUPPOSE YOU WANT TO BUY 200 SHARES OF A STOCK THAT COSTS $20 PER SHARE. NORMALLY, YOU WOULD NEED $4,000 (PLUS COMMISSION) TO PURCHASE THIS SECURITY. BUT IF YOU BUY THE SECURITY ON MARGIN, YOU CAN BORROW UP TO $2,000 (50%) OF THE PURCHASE PRICE AND PAY THE OTHER $2,000 YOURSELF. IF THE VALUE OF THE STOCK GOES UP, YOU EARN ALL THE GAINS ON THE $4,000 INVESTMENT, EVEN THOUGH YOU BORROWED HALF OF THE INITIAL INVESTMENT. AT SOME POINT, OF COURSE, YOU NEED TO PAY BACK THE BORROWED AMOUNT TO THE BROKERAGE, WHICH CHARGES INTEREST FOR THE AMOUNT YOU HAVE BORROWED. IF THE VALUE OF THE STOCK FALLS, HOWEVER, YOU WILL OWE THE BROKERAGE FOR THE LOSSES. IF THE VALUE OF THE STOCK FALLS TOO FAR, THE BROKERAGE MAY GIVE YOU A MARGIN CALL.
BYPASS TRUSTS
SIMPLY PUT, FOR ESTATE PLANNING PURPOSES, YOU CAN EXCLUDE ASSETS FROM SOMEONE'S ESTATE BY PUTTING THE ASSETS INTO A TRUST. FOR EXAMPLE, TO KEEP ASSETS OUT OF YOUR SPOUSE'S ESTATE AFTER YOU DIE, YOU CAN PUT THE ASSETS IN A TRUST SUCH THAT THE SPOUSE GETS THE INCOME FROM THE TRUST, BUT UPON THE SPOUSE'S DEATH, THE BODY OF THE TRUST GOES TO THE CHILDREN. IN ESSENCE, THE SPOUSE'S ESTATE HAS BEEN "BYPASSED." FOR LARGE ESTATES, THIS CAN REDUCE ESTATE TAXES SIGNIFICANTLY.
CUSIP NUMBER
A UNIQUE NUMBER ASSIGNED TO EACH SECURITY BY THE COMMITTEE ON UNIFORM SECURITIES IDENTIFICATION PROCEDURES (CUSIP).
CAFETERIA PLAN
A BENEFITS PLAN THAT ALLOWS EMPLOYEES TO CHOOSE FROM A SELECTION OF TAXABLE AND NON-TAXABLE BENEFITS, OFTEN INCLUDING 401(K) CONTRIBUTIONS, HEALTH INSURANCE, AND FLEXIBLE SPENDING ACCOUNT CONTRIBUTIONS. EMPLOYEES CAN ELECT TO DIVERT A PORTION OF THEIR TAXABLE CASH COMPENSATION AND APPLY IT TOWARDS QUALIFIED NONTAXABLE BENEFITS.
CALL
IN OPTIONS TRADING, THE RIGHT TO BUY A SPECIFIED NUMBER OF SHARES AT A SET PRICE BY A SPECIFIC DATE. INVESTORS BUY CALL OPTIONS WHEN THEY THINK THE PRICE OF A STOCK IS GOING UP AND WANT TO LOCK IN THE CURRENT STRIKE PRICE.
CALLAN ASSOCIATES
A PRIVATELY HELD, INDEPENDENT INVESTMENT CONSULTING FIRM THAT PROVIDES A FULL RANGE OF CONSULTING SERVICES TO: CORPORATE PENSION AND PROFIT-SHARING PLANS, MULTI-EMPLOYER PLANS, ENDOWMENTS AND FOUNDATIONS, PUBLIC PENSION PLANS, HIGH NET-WORTH INDIVIDUALS, AND INVESTMENT MANAGEMENT ORGANIZATIONS.
CAPITAL ASSETS
ALSO CALLED FIXED ASSETS. TANGIBLE ITEMS USED IN THE OPERATION OF A BUSINESS BUT NOT CONSUMED IN THE COURSE OF THOSE OPERATIONS. (SOME EXAMPLES OF CAPITAL ASSETS ARE THE COMPANY'S BUILDINGS OR THE MACHINERY WITH WHICH A PRODUCT IS MADE.) FOR TAX PURPOSES, CAPITAL ASSETS MAY ALSO INCLUDE THE SECURITY INVESTMENTS (SECURITIES) OF A BUSINESS.
CAPITAL EXPENDITURES
THE PAYMENT OF MONEY BY A BUSINESS TO PURCHASE OR IMPROVE ASSETS SUCH AS BUILDINGS OR MACHINERY.
CAPITAL GAIN
THE DIFFERENCE BETWEEN AN ASSET'S PURCHASE PRICE AND SELLING PRICE. (THE DIFFERENCE IS CALLED A "CAPITAL GAIN" ONLY IF IT'S A POSITIVE AMOUNT.) FOR EXAMPLE, IF YOU BUY 100 SHARES OF A STOCK AT $35 PER SHARE AND SELL THEM FOR $45 PER SHARE, YOUR CAPITAL GAIN IS $1,000 ($4,500 - $3,500).
CAPITAL LOSS
A LOSS AN INVESTOR SUFFERS AFTER SELLING AN ASSET. INVESTORS CAN WRITE OFF CAPITAL LOSSES ON THEIR TAXES. THE RULES ARE THAT YOU CAN WRITE OFF ANY CAPITAL LOSS AGAINST AN EQUAL AMOUNT OF CAPITAL GAIN. IF YOU USE UP ALL OF YOUR GAINS, YOU CAN OFFSET UP TO $3,000 OF LOSSES A YEAR AGAINST ORDINARY INCOME. ADDITIONAL LOSSES BEYOND THE $3,000 YEARLY LIMIT CAN BE CARRIED FORWARD INTO SUBSEQUENT YEARS.
CASH
IN AN INVESTMENT PORTFOLIO, THE RELATIVELY STABLE INVESTMENTS THAT CAN BE EASILY CHANGED INTO CURRENCY, SUCH AS A CHECKING ACCOUNT, TREASURY BILLS, A MONEY MARKET ACCOUNT, OR A MONEY MARKET MUTUAL FUND.
CASH ACCOUNT
ACCOUNT HOLDING CASH THAT MAY BE USED TO MAKE PURCHASES. IN A QUICKEN BROKERAGE ACCOUNT, THE CASH ACCOUNT SEGMENT IS THE REPOSITORY FOR UNINVESTED CASH (UNLESS YOU HAVE ELECTED TO HAVE UNINVESTED CASH SWEPT INTO A MONEY MARKET FUND). STANDARD TRADES (NOT MARGIN TRADES OR SHORT TRADES) ARE TRANSACTED IN THE CASH ACCOUNT.
CASH FLOW
A MEASURE OF THE CASH RECEIPTS AND CASH PAYMENTS A COMPANY MAKES OVER A GIVEN TIME PERIOD. IF A COMPANY HAS NEGATIVE CASH FLOW, THE COMPANY MUST BORROW MONEY TO OPERATE ITS BUSINESS. IF A COMPANY HAS POSITIVE CASH FLOW, THE COMPANY HAS MONEY AVAILABLE TO SPEND ON RESEARCH AND DEVELOPMENT, TO EXPAND OPERATIONS, AND TO PAY DIVIDENDS TO INVESTORS. ON QUICKEN.COM, CASH FLOW NUMBERS APPEAR IN THREE FEATURES. IN STEP 1 OF OUR STOCK EVALUATOR, THE DOLLAR AMOUNT OF CASH FLOW IS CITED IN MILLIONS OF DOLLARS. IN THIS CASE, A COMPANY'S CASH FLOW IS CALCULATED FROM NUMBERS PROVIDED ON THE INCOME STATEMENT AND REFLECTS NET INCOME MINUS PREFERRED DIVIDENDS PLUS DEPRECIATION AND AMORTIZATION. CASH FLOW NUMBERS FOR FINANCIAL COMPANIES WILL ONLY REFLECT NET INCOME MINUS PREFERRED DIVIDENDS. THE "CASH FLOW" SECTION OF THE FUNDAMENTALS AREA USES THE SAME CASH FLOW NUMBERS. IN ONE-CLICK SCORECARD'S FOOLISH 8 STRATEGY, STEP 8 MEASURES A COMPANY'S "FREE CASH FLOW." FREE CASH FLOW IS CALCULATED FROM NUMBERS PROVIDED ON THE STATEMENT OF CASH FLOWS AND REFLECTS CASH FROM OPERATIONS MINUS PURCHASE OF PROPERTY, PLANT AND EQUIPMENT MINUS THE PAYMENT OF CASH DIVIDENDS. FREE CASH FLOW NUMBERS ARE UNAVAILABLE FOR FINANCIAL COMPANIES.
CASH MANAGEMENT ACCOUNT
AN ALL-IN-ONE ACCOUNT OFFERED BY BANKS AND BROKERAGES THAT ALLOWS CUSTOMERS TO INVEST, WRITE CHECKS, PAY BILLS, AND EARN AN ELEVATED INTEREST RATE ON THEIR CASH. IT WAS FIRST STARTED IN THE BROKERAGE INDUSTRY TO LURE PEOPLE WITH FAT BANK ACCOUNTS. BANKS ARE STRIKING BACK WITH THEIR OWN VERSIONS. TYPICALLY, A MINIMUM AMOUNT OF CASH AND SECURITIES IS REQUIRED, SOMETIMES AS MUCH AS $25,000. ANNUAL FEES CAN REACH $125 OR SO. THESE ACCOUNTS ARE ATTRACTIVE BECAUSE ANY CASH THAT COMES IN FROM INTEREST, DIVIDENDS, OR THE SALE OF SECURITIES IS SWEPT INTO A MONEY MARKET ACCOUNT. CUSTOMERS ALSO OFTEN GET FREE CHECKING AND ACCESS TO PREFERRED RATES ON LOANS. AT THE END OF THE MONTH THEY RECEIVE A UNIFIED STATEMENT FOR ALL THEIR ACCOUNTS. BECAUSE OF THE FEES, THIS KIND OF ACCOUNT BEST SERVES ACTIVE TRADERS.
CASH-BASIS ACCOUNTING
AN ACCOUNTING SYSTEM IN WHICH INCOME IS RECORDED WHEN IT IS RECEIVED, RATHER THAN WHEN IT IS INVOICED; AND EXPENSES ARE REPORTED WHEN YOU PAY THEM, RATHER THAN WHEN YOU COMMIT TO AN OBLIGATION. SEE ACCRUAL-BASIS ACCOUNTING.
CASH-VALUE LIFE INSURANCE
COMBINES BASIC INSURANCE PROTECTION WITH TAX-DEFERRED INVESTING. A PORTION OF YOUR ANNUAL PREMIUM PAYS FOR INSURANCE, WHILE THE REST GOES INTO THE POLICY'S INVESTMENT OR CASH-VALUE ACCOUNT. YOUR INVESTMENT EARNINGS ACCUMULATE FREE OF TAXES UNTIL YOU WITHDRAW THEM, BUT IT OFTEN TAKES 10 YEARS OR MORE FOR THE TAX-DEFERRAL BENEFITS TO OVERCOME THE DRAG OF THE COMMISSIONS CHARGED BY INSURERS.
CERTIFICATE OF DEPOSIT (CD)
AN FDIC-INSURED INVESTMENT OFFERED BY BANKS THAT GUARANTEES A SPECIFIED RATE OF RETURN FOR A SPECIFIED TERM. IT'S GENERALLY CONSIDERED A CONSERVATIVE INVESTMENT.
CLOSE
A SECURITY'S FINAL TRADE PRICE AT THE END OF A TRADING DAY.
CLOSED-END MUTUAL FUND
A MUTUAL FUND THAT HAS A SET NUMBER OF SHARES AVAILABLE TO INVESTORS. YOU BUY AND SELL CLOSED-END MUTUAL FUNDS ON THE OPEN MARKET, UNLIKE OPEN-END MUTUAL FUNDS, WHICH YOU BUY AND SELL THROUGH THE MUTUAL FUND COMPANY (OR A BROKER). THE SUPPLY AND DEMAND FOR A CLOSED-END MUTUAL FUND DETERMINES ITS PRICE, NOT ITS NET ASSET VALUE.
CLOSING COSTS
EXPENSES INCURRED WHEN REAL ESTATE IS TRANSFERRED FROM A SELLER TO A BUYER.
COLLECTIBLES
AN OBJECT THAT HAS POTENTIAL INVESTMENT VALUE. JUST ABOUT ANYTHING CAN BE A COLLECTIBLE THESE DAYS, INCLUDING ANTIQUE CARS, BASEBALL CARDS, RARE BOOKS, AND EVEN BEANIE BABIES. SOME PEOPLE HAVE MADE A KILLING SELLING WHAT LOOKS LIKE JUNK FROM THEIR ATTIC. AND CERTAINLY THE FINE ART MARKET HAS REACHED STRATOSPHERIC HEIGHTS. BUT MAKING MONEY ON COLLECTIBLES IS A FICKLE BUSINESS. IT IS EASY TO OVERPAY FOR ITEMS THAT MAY OR MAY NOT APPRECIATE IN VALUE. THEN YOU MAY HAVE ADDITIONAL APPRAISAL, STORAGE, AND INSURANCE COSTS. IT IS DIFFICULT TO SELL AT A PROFIT LATER BECAUSE DEALERS WILL OFFER SIGNIFICANTLY LESS THAN THE MARKET PRICE. THE BOTTOM LINE IS THAT YOU SHOULD COLLECT THINGS YOU LOVE BECAUSE YOU MAY HAVE THEM AROUND YOUR HOUSE FOR YEARS.
COMMERCIAL PAPER
SHORT TERM DEBT TYPICALLY ISSUED BY A COMPANY TO RAISE CASH. THESE INSTRUMENTS MATURE IN LESS THAN ONE YEAR AND ARE BACKED BY THE ISSUER'S CREDIT LINE.
COMMISSIONS
A FEE BROKERAGES CHARGE WHEN SECURITIES ARE BOUGHT OR SOLD. IN GENERAL, FULL-SERVICE BROKERS CHARGE THE MOST, BUT THEY ALSO PROVIDE RESEARCH AND MANY OTHER SERVICES. PEOPLE OFTEN GO TO DISCOUNT BROKERS TO SAVE ON COMMISSIONS. THESE DAYS SOME DISCOUNTERS ARE NOT COMPETING AS MUCH ON PRICE AND OFFERING MORE SERVICES. OTHERS ARE CHARGING ROCK-BOTTOM PRICES  AS LOW AS $7.95 FOR AN ONLINE TRADE. GOING TO A DISCOUNT BROKER IS BEST FOR INVESTORS WHO DO THEIR OWN RESEARCH AND KNOW WHAT THEY WANT TO BUY. BEFORE YOU HOOK UP WITH THE LOWEST BIDDER, HOWEVER, MAKE SURE YOU KNOW WHAT SERVICES YOU WANT AND WHAT THE BROKER WILL PROVIDE. MANY INVESTORS HAVE ACCOUNTS AT BOTH FULL-SERVICE AND DISCOUNT BROKERS.
COMPOSITE PRICE
WHEN A SECURITY IS TRADED ON MORE THAN ONE EXCHANGE, THE PRICE MAY VARY AMONG EXCHANGES. THE COMPOSITE PRICE INCLUDES ALL THE PRICES FOR ALL TRANSACTIONS OF THE SECURITY ON ANY EXCHANGES WHERE IT IS TRADED; AS A RESULT, YOU HAVE A BETTER IDEA OF THE SECURITY'S TRUE PRICE.
COMPOUND INTEREST
WHEN INTEREST IS EARNED ON BOTH THE PRINCIPAL AMOUNT AND ANY INTEREST ALREADY EARNED. BECAUSE OF COMPOUND INTEREST, MONEY GROWS MUCH FASTER IF THE INCOME FROM AN INVESTMENT IS LEFT IN THE ACCOUNT.
CONSENSUS RATINGS
THE AVERAGE RECOMMENDATION GIVEN TO SHARES IN A PARTICULAR COMPANY BY THE RESEARCH ANALYSTS WHO COVER THAT COMPANY. CONSENSUS RATINGS ON QUICKEN.COM ARE ON A SCALE OF 1 (STRONG BUY) TO 5 (STRONG SELL).
CONSERVATIVE
USED TO DESCRIBE AN INVESTMENT THAT IS RELATIVELY STABLE AND PREDICTABLE. IT USUALLY FEATURES A SPECIFIC (OR LIMITED) GAIN OR LOSS.
CONSUMER PRICE INDEX (CPI)
THE MOST WIDELY ACCEPTED INDICATOR OF INFLATION IN THE UNITED STATES. THE INDEX IS BASED ON THE AGGREGATE PRICE OF A WEIGHTED MARKET BASKET OF GOODS, INCLUDING FOOD, HOUSING, APPAREL, TRANSPORTATION, AND MEDICAL CARE. EMPLOYERS OFTEN USE THE CPI TO DETERMINE HOW MUCH OF A RAISE TO GIVE THEIR EMPLOYEES. SOCIAL SECURITY PAYMENTS ARE TIED TO THE CPI SO THAT RECIPIENTS WILL NOT LOSE BUYING POWER. INVESTORS MUST PAY PARTICULAR ATTENTION TO THE INDEX. WHILE BUILDING A NEST EGG, THEY MUST MAKE SURE THAT THEIR INVESTMENTS BEAT THE ANNUAL RATE OF INFLATION. AFTER RETIREMENT, THEY NEED TO FACTOR THE RATE OF INFLATION INTO THEIR CALCULATION OF HOW LONG THEIR NEST EGG WILL LAST.
CONSUMER DEBT
DEBT INCURRED FOR CONSUMABLE OR DEPRECIATING ASSETS THAT AREN'T CONSIDERED INVESTMENTS. THIS INCLUDES CREDIT CARD DEBT, STORE-FINANCED CONSUMER PURCHASES, CAR LOANS, FAMILY LOANS THAT WILL BE REPAID, ETC. IT DOESN'T INCLUDE ROUTINE BILLS PAID MONTHLY SUCH AS WATER, PHONE, AND ELECTRICITY. NOR DOES IT INCLUDE MORTGAGES, HOME OR BUSINESS EQUITY LOANS, HOME OR BUSINESS EQUITY LINES OF CREDIT, OR STOCK MARGIN ACCOUNTS.
CONTRACT
AN AGREEMENT BETWEEN TWO OR MORE PARTIES TO PERFORM OR NOT PERFORM CERTAIN ACTIONS. THE TERMS OF A CONTRACT ARE EXPRESSED, EITHER ORALLY OR IN WRITING. CONTRACTS MAY NOT BE LEGALLY BINDING UNLESS THEY ARE CORRECTLY DRAFTED AND EXECUTED.
CONTRARIAN INVESTING
A METHOD OF INVESTING WHICH INVOLVES IGNORING MARKET TRENDS AND BUYING NEGLECTED AND DEPRESSED STOCKS OF WELL-MANAGED COMPANIES. CONTRARIANS SELECT THE OPPOSITE OF WHAT MOST PEOPLE ARE INVESTING IN AT A GIVEN TIME BY LOOKING FOR HEALTHY COMPANIES IN UNPOPULAR INDUSTRIES OR OVERLOOKED FIRMS. A CONTRARIAN ADVISER TENDS TO BUY STOCKS WITH LOW PRICE-EARNINGS RATIOS (P/ES). SOME MUTUAL FUNDS USE CONTRARIAN INVESTING.
CORPORATE ACTIONS
CHANGES IN COMPANIES THAT AFFECT THEIR LISTINGS ON STOCK EXCHANGES. EXAMPLES OF CORPORATE ACTIONS ARE NEW ISSUES, DEFUNCT ISSUES, MERGERS AND NAME CHANGES.
CORPORATE BONDS
DEBT INSTRUMENTS ISSUED BY PRIVATE CORPORATIONS. THEY HAVE A PAR VALUE OF $1,000.
CORPORATION
A LEGAL ENTITY FORMED BY ONE OR MORE PERSONS. A CORPORATION IS FORMED UNDER THE LAWS OF A SPECIFIC STATE AND IS LEGALLY DEFINED AS HAVING A SEPARATE EXISTENCE FROM THAT OF ITS FOUNDERS OR OWNERS.
BASIS
THE PRICE PAID FOR AN INVESTMENT WHEN IT WAS ORIGINALLY PURCHASED. (THIS IS ALSO KNOWN AS THE "COST BASIS.") THE BASIS INCLUDES ANY COMMISSION OR FEES YOU PAID FOR THE TRADE.
COST OF GOODS SOLD (COGS)
THIS AMOUNT REPRESENTS THE COST OF BUYING RAW MATERIALS AND PRODUCING THE GOODS THAT A COMPANY SELLS. IT ALSO INCLUDES THE COST OF THE COMPANY'S LABOR FORCE. YOU CAN FIND THIS AMOUNT ON A COMPANY'S INCOME STATEMENT.
COVARIANCE
A MEASURE THAT REFLECTS BOTH THE VARIANCE (VOLATILITY) OF A STOCK'S RETURNS AND THE TENDENCY OF THOSE RETURNS TO MOVE UP OR DOWN AT THE SAME TIME RELATIVE TO OTHER STOCKS (THEIR CORRELATION). THIS IS A WAY TO SEE IF TWO STOCKS TEND TO MOVE UP OR DOWN TOGETHER AND HOW BIG THOSE MOVEMENTS USUALLY ARE.
CREDIT RATING
FOR INDIVIDUALS, CREDIT RISK IS BASED ON YOUR FINANCIAL RESOURCES AND CREDIT HISTORY. YOUR TOTAL DEBT LEVEL, TIMELINESS IN PAYING BILLS, NUMBER OF CREDIT CARDS, AND MANY OTHER FACTORS ARE TAKEN INTO CONSIDERATION. CREDIT BUREAUS USE CREDIT SCORING TO QUANTIFY TO POTENTIAL CREDITORS HOW LIKELY YOU ARE TO PAY BACK A LOAN. FOR BONDS, A CREDIT RATING IS AN INDICATOR OF THE RISK OF DEFAULT. BOND RATING COMPANIES HAVE GRADING SYSTEMS SO INVESTORS CAN QUICKLY DETERMINE WHETHER A BOND IS WORTH THE RISK. IF A COMPANY OR MUNICIPALITY HAS FINANCIAL PROBLEMS, THEIR BOND CREDIT RATING FALLS AND SO DOES THE PRICE. YOU WILL BE OK, HOWEVER, AS LONG AS YOU HOLD YOUR BONDS TO MATURITY AND THERE IS NO DEFAULT.
CREDIT SCORE
A NUMBER THAT INDICATES AN INDIVIDUAL'S CREDITWORTHINESS. CREDIT BUREAUS DETERMINE THE SCORE WITH A STATISTICAL PROGRAM. YOU ARE GIVEN POINTS FOR SUCH THINGS AS YOUR CREDIT CARD DEBT, NUMBER OF CARDS, TOTAL DEBT LEVEL, AND WHETHER YOU RENT OR OWN YOUR OWN HOME. EVEN THE NUMBER OF INQUIRIES FROM POTENTIAL CREDITORS CAN AFFECT YOUR SCORE BECAUSE A HIGH NUMBER OF INQUIRIES MAY SIGNAL CREDIT PROBLEMS. CREDITORS USE THE SCORE TO DECIDE WHETHER TO GIVE YOU A MORTGAGE, ISSUE A CREDIT CARD, OR OFFER A SMALL BUSINESS LOAN. A GOOD SCORE CAN RESULT IN A LOWER INTEREST RATE; A POOR SCORE CAN MEAN YOU WILL BE CHARGED A HIGHER INTEREST RATE OR DENIED A LOAN OR CREDIT CARD.
CURRENT BALANCE
THE BALANCE OF ALL TRANSACTIONS ENTERED AS OF TODAY. SEE ENDING BALANCE.
CURRENT RATIO
A COMPANY'S CURRENT ASSETS (TYPICALLY CASH + RECEIVABLES + INVENTORY) DIVIDED BY ITS CURRENT LIABILITIES (DEBT DUE WITHIN A YEAR). THIS RATIO GIVES YOU A SENSE OF A COMPANY'S ABILITY TO MEET ALL SHORT-TERM LIABILITIES WITH LIQUID ASSETS, SHOULD IT NEED TO. A RATIO OF 1 IMPLIES ADEQUATE CURRENT ASSETS TO COVER CURRENT LIABILITIES, AND THE HIGHER ABOVE 1, THE BETTER. THIS RATIO IS AN ADEQUATE MEASURE OF FINANCIAL STRENGTH IN THE SHORT TERM, AND CAN BE USED ON A COMPARATIVE BASIS AMONG COMPANIES. YOU MUST, HOWEVER, BE CAREFUL NOT TO MAKE IMPLICIT ASSUMPTIONS ABOUT A COMPANY'S EARNINGS OR CASH FLOW SUSTAINABILITY SIMPLY FROM THE CURRENT RATIO.
DIRECT STOCK PURCHASE (DSP)
A PLAN IN A COMPANY THAT ALLOWS INVESTORS TO BUY INITIAL SHARES OF A COMPANY'S STOCK DIRECTLY--RATHER THAN THROUGH A BROKER--WITHOUT REQUIRING PRIOR STOCK OWNERSHIP IN A DIVIDEND REINVESTMENT PLAN (DRIP). NOT ALL COMPANIES THAT OFFER A DRIP ALSO HAVE A DSP PLAN.
DEBIT CARD
A TYPE OF CARD THAT GIVES YOU ELECTRONIC ACCESS TO YOUR MONEY. ALTHOUGH IT LOOKS LIKE A CREDIT CARD, IT IS MORE LIKE USING CASH OR A CHECK TO PAY FOR YOUR PURCHASES. FUNDS ARE IMMEDIATELY WITHDRAWN FROM YOUR BANK ACCOUNT--THERE IS NO FLOAT ON YOUR MONEY. YOU MAY NOT GET THE SAME PROTECTION FROM PROBLEM PRODUCTS OR STOLEN CARDS THAT YOU GET WITH A CREDIT CARD. DEBIT CARDS ARE USUALLY EASIER TO OBTAIN THAN CREDIT CARDS AND MORE COMMONLY ACCEPTED THAN CHECKS.
DEBT-ASSETS RATIO
THE RATIO OF A COMPANY'S LIABILITIES TO ITS TOTAL ASSETS. LONG-TERM DEBT-ASSETS IS THE RATIO OF LONG-TERM LIABILITIES (THOSE THAT WON'T BE PAID OFF IN ONE YEAR) TO TOTAL ASSETS. TOTAL DEBT-ASSETS IS THE RATIO OF LONG-TERM AND CURRENT LIABILITIES (DEBT THAT WILL BE PAID OFF WITHIN ONE YEAR) TO TOTAL ASSETS. THE HIGHER THE LEVEL OF DEBT, THE MORE IMPORTANT IT IS FOR A COMPANY TO HAVE POSITIVE EARNINGS AND STEADY CASH FLOW. ASSETS ARE ALSO IMPORTANT TO CONSIDER BECAUSE THEY CAN BE A CUSHION AGAINST LOSSES IN THE EVENT OF LIQUIDATION. DEBT IS NOT "BAD," BUT SINCE IT REQUIRES THE TIMELY PAYOUT OF INTEREST TO DEBT HOLDERS, IT IS IMPORTANT TO ANALYZE A COMPANY WITHIN THE CONTEXT OF THE LIKELINESS THAT IT WILL HAVE ADEQUATE RESOURCES TO MEET ITS PAYMENTS IN THE EVENT OF MAJOR LOSSES. BECAUSE OF THE NATURE OF CERTAIN INDUSTRIES, SOME INDUSTRY SECTORS CONTAIN ONLY COMPANIES WITH A HIGH (OR LOW) RATIO. SO, FOR COMPARATIVE PURPOSES, DEBT-ASSETS RATIO IS MOST USEFUL FOR COMPANIES WITHIN THE SAME INDUSTRY. SEE ALSO DEBT-EQUITY RATIO.
DEBT-EQUITY RATIO
THE RATIO OF A COMPANY'S LIABILITIES TO ITS EQUITY (TOTAL VALUE OF STOCK). LONG-TERM DEBT-EQUITY IS THE RATIO OF A COMPANY'S LONG-TERM LIABILITIES (DEBT THAT WON'T BE PAID OFF IN ONE YEAR) TO ITS EQUITY. TOTAL DEBT-EQUITY IS THE RATIO OF A COMPANY'S LONG-TERM AND CURRENT LIABILITIES (DEBT THAT WILL BE PAID OFF WITHIN ONE YEAR) TO ITS EQUITY. THE HIGHER THE LEVEL OF DEBT, THE MORE IMPORTANT IT IS FOR A COMPANY TO HAVE POSITIVE EARNINGS AND STEADY CASH FLOW. DEBT IN AND OF ITSELF IS NOT "BAD," BUT SINCE IT REQUIRES THE TIMELY PAYOUT OF INTEREST TO DEBT HOLDERS, IT IS IMPORTANT TO ANALYZE A COMPANY WITHIN THE CONTEXT OF THE LIKELINESS THAT IT WILL HAVE ADEQUATE RESOURCES TO MEET ITS PAYMENTS IN THE COMING BUSINESS AND ECONOMIC ENVIRONMENT. BY THE NATURE OF CERTAIN INDUSTRIES, YOU WILL FIND THAT SOME CONTAIN ONLY COMPANIES WITH A HIGH RATIO (OR VICE VERSA). SO, FOR COMPARATIVE PURPOSES, DEBT-EQUITY RATIO IS MOST USEFUL FOR COMPANIES WITHIN THE SAME INDUSTRY. SEE ALSO DEBT-ASSETS RATIO.
DEDUCTIBLE IRA
THERE ARE ONLY TWO WAYS TO DEDUCT YOUR IRA CONTRIBUTIONS: WHEN YOU AND YOUR SPOUSE ARE NOT COVERED IN AN EMPLOYERS RETIREMENT PLAN, OR IF YOUR INCOME FALLS WITHIN SPECIFIED EARNINGS LIMITS. THE CONTRIBUTION IS FULLY DEDUCTIBLE FOR A SINGLE TAXPAYER EARNING $31,000 IN 1999; THE DEDUCTION IS PHASED OUT AFTER $41,000 IN EARNINGS. MARRIED COUPLES FILING JOINTLY MAY EARN UP TO $51,000 FOR THE FULL DEDUCTION, WHICH IS PHASED OUT AT $61,000. THOSE LIMITS WILL RISE TO $50,000 TO $60,000 FOR SINGLE TAXPAYERS IN 2005 AND $80,000 TO $100,000 FOR MARRIED COUPLES. THE MAXIMUM ALLOWABLE CONTRIBUTION TO AN IRA IS $2,000 PER YEAR AS LONG AS YOU EARNED AT LEAST THAT MUCH DURING THE YEAR. SEE ALSO NON-DEDUCTIBLE IRA.
DEEP-DISCOUNT BROKERAGE
TYPICALLY, A DEEP-DISCOUNT BROKERAGE EXECUTES TRADES AT LOWER RATES THAN DO DISCOUNT AND FULL-SERVICE BROKERAGES. TO KEEP COSTS DOWN, THEY DON'T OFFER THE SAME SERVICES OTHER BROKERAGES OFFER. FOR EXAMPLE, THEY MAY REQUIRE THAT YOU DO ALL TRADING OVER THE INTERNET, OR OVER THE PHONE DURING LIMITED HOURS.
DEFERRED GAIN
THE GAIN IN THE VALUE OF AN INVESTMENT (EITHER IN INTEREST, DIVIDENDS OR BOTH) THAT IS NOT TAXED UNTIL A LATER DATE (FOR EXAMPLE, WHEN YOU SELL A HOME AND REINVEST THE PROCEEDS IN A NEW HOME).
DEFERRED SALES CHARGE
A FEE TO SELL SHARES IN A MUTUAL FUND. THE FEE IS USUALLY A PERCENTAGE OF THE TOTAL AMOUNT WITHDRAWN AND OFTEN DECREASES THE LONGER A SHAREHOLDER REMAINS IN A FUND. SEE ALSO FRONT-END LOAD AND NO-LOAD MUTUAL FUND.
DEFINED-BENEFIT PENSION PLAN
THE TRADITIONAL EMPLOYER-SPONSORED PENSION. WHEN YOU RETIRE, YOU RECEIVE A PREDETERMINED BENEFIT BASED ON YOUR SALARY AND YEARS OF SERVICE. THE AMOUNT IS REDUCED IF YOU RETIRE BEFORE AGE 65. AND IF YOU ARE MARRIED, YOU WILL RECEIVE LESS BECAUSE YOUR SPOUSE WILL CONTINUE TO RECEIVE 50% OF YOUR PENSION AFTER YOUR DEATH. YOU CAN GET THE FULL PENSION, HOWEVER, IF YOUR SPOUSE IS WILLING TO SIGN A WAIVER TO HIS OR HER SHARE. THE PENSION REPLACES NO MORE THAN 45% OF YOUR ANNUAL INCOME BEFORE RETIREMENT. SINCE FEW COMPANIES GIVE COST-OF-LIVING ADJUSTMENTS, YOUR PENSION MAY SEEM MEAGER BY THE END OF YOUR LIFE. TRADITIONAL PENSIONS HAVE FALLEN OUT OF FAVOR WITH MANY COMPANIES. THEY ARE MORE EXPENSIVE THAN DEFINED-CONTRIBUTION PLANS SUCH AS 401(K) AND 403(B) PLANS. DEFINED BENEFIT PLANS ALSO AREN'T WELL DESIGNED FOR THE MODERN MOBILE WORK FORCE, SINCE IT GENERALLY TAKES FIVE YEARS TO VEST IN THE PLAN, AND TO ATTAIN A SIZEABLE BENEFIT YOU MUST STICK WITH ONE EMPLOYERS FOR MANY YEARS.
DEFINED-CONTRIBUTION PENSION PLAN
AN EMPLOYER-SPONSORED, TAX-DEFERRED RETIREMENT PLAN SUCH AS A 401(K) OR 403(B). EMPLOYEES ELECT TO CONTRIBUTE A CERTAIN PERCENTAGE OF THEIR INCOME UP TO A MAXIMUM AMOUNT. EMPLOYERS OFTEN MATCH A PORTION OF EMPLOYEE CONTRIBUTIONS. WHAT YOU GET AT RETIREMENT DEPENDS ON THE AMOUNT YOU CONTRIBUTE, THE LENGTH OF TIME YOUR INVESTMENT GROWS TAX-DEFERRED, AND THE PERFORMANCE OF THE INVESTMENTS YOU CHOOSE. YOU MUST CONTRIBUTE TO GET ANY BENEFIT AT RETIREMENT. IT CAN TAKE UP TO SEVEN YEARS TO VEST IN YOUR EMPLOYERS MATCHING FUNDS, BUT YOU ARE ALWAYS VESTED IN YOUR OWN CONTRIBUTIONS. WHEN YOU LEAVE THE COMPANY, YOU CAN ROLL OVER THE MONEY INTO AN IRA OR YOUR NEW COMPANYS PLAN. WHILE A DEFINED-CONTRIBUTION PLAN CAN BE RISKIER THAN A TRADITIONAL PENSION, IT ALSO HAS A HIGHER POTENTIAL PAYOFF.
DEFLATION
THE OPPOSITE OF INFLATION, DEFLATION OCCURS WHEN CONSUMER PRICES FALL. MOST PEOPLE THINK OF THE GREAT DEPRESSION WHEN DEFLATION IS MENTIONED. BUT MILD DEFLATION, JUST LIKE MILD INFLATION, CAN BE GOOD FOR THE ECONOMY, AND STOCKS HISTORICALLY HAVE DONE WELL DURING SUCH TIMES. A SEVERE DEFLATION, HOWEVER, CAN BE DEVASTATING. ASSETS, SUCH AS REAL ESTATE AND STOCKS, DECLINE IN VALUE ALONG WITH CONSUMER PRICES. PEOPLE FEEL LESS WEALTHY AND SPEND LESS MONEY. EVENTUALLY, THE ECONOMY CAN SPIRAL INTO A DEPRESSION.
DEPRECIATION
AN ACCOUNTING PROCEDURE THAT SPREADS THE ASSET'S PURCHASE COST OVER ITS DEPRECIABLE LIFE. (FOR EXAMPLE, A FIXED ASSET THAT COST $10,000 AND LASTED 10 YEARS COULD BE DEPRECIATED BY $1,000 A YEAR FOR 10 YEARS. FOR ACCOUNTING PURPOSES, THIS REDUCES ITS VALUE BY $1,000 EACH YEAR, UNTIL, AT THE END OF ITS "USEFUL LIFE", IT IS WORTH NOTHING.) DEPRECIATION REDUCES TAXABLE INCOME BUT DOES NOT REDUCE CASH.
DEPRECIATION, DEPLETION AND AMORTIZATION
THE ALLOCATION OF COSTS (FOR A PLANT OR EQUIPMENT, FOR INSTANCE) OVER THE USEFUL LIFE OF AN ASSET. COMPANIES CAN USE VARIOUS FORMS OF ACCEPTED ACCOUNTING PRACTICES TO ALLOCATE THE COSTS OF ASSETS OVER A CERTAIN TIME PERIOD.
DERIVATIVE
AN INVESTMENT CONTRACT BASED ON AN UNDERLYING INVESTMENT CALLED AN "INSTRUMENT." THE MOST COMMON TYPE OF DERIVATIVE IS AN OPTION CONTRACT, WHICH INVOLVES THE RIGHT TO BUY OR SELL THE UNDERLYING INSTRUMENT (SUCH AS STOCK ABC) AT AN AGREED PRICE. FUTURES CONTRACTS ARE ALSO DERIVATIVES.
DIRECT STOCK PURCHASE (DSP)
A PLAN IN A COMPANY THAT ALLOWS INVESTORS TO BUY INITIAL SHARES OF A COMPANY'S STOCK DIRECTLY--RATHER THAN THROUGH A BROKER--WITHOUT REQUIRING PRIOR STOCK OWNERSHIP IN A DIVIDEND REINVESTMENT PLAN (DRIP). NOT ALL COMPANIES THAT OFFER A DRIP ALSO HAVE A DSP PLAN.
DISCOUNT BROKERAGE
A KIND OF BROKERAGE THAT TYPICALLY CHARGES LESS THAN A FULL-SERVICE BROKERAGE BECAUSE IT DOES NOT OFFER INVESTMENT ADVICE FROM ANALYSTS AND BROKERS. TYPICALLY, DISCOUNT BROKERS BUY AND SELL STOCKS FOR THEIR CUSTOMERS WITHOUT RECOMMENDING CHOICES. HOWEVER, THEY MAY OFFER GENERAL INVESTMENT ADVICE AS WELL AS NEWS AND SOME OTHER SERVICES. THEY USUALLY OFFER THEIR SERVICES OVER THE PHONE, THE INTERNET, AND AT THEIR OFFICES.
DISCOUNT RATE
THE TERM "DISCOUNT RATE" HAS TWO DISTINCT MEANINGS: 1) IN CALCULATIONS OF A COMPANY'S INTRINSIC VALUE, THE TERM "DISCOUNT RATE" REFERS TO THE GAIN YOU'D NEED TO REALIZE TO MAKE YOUR INVESTMENT IN A GIVEN STOCK WORTH THE ASSOCIATED RISK ("OPPORTUNITY COSTS"). THE DISCOUNT RATE FACTORS IN: THE BOND RATE: YOUR INVESTMENT COULD GROW RISK-FREE AT THE BOND RATE. YOU'LL NEED TO BEAT THIS RATE TO MAKE YOUR INVESTMENT WORTHWHILE. MATCHING THE BOND RATE ALSO MEANS AUTOMATICALLY THAT YOUR MONEY WILL GROW AT OR ABOVE THE RATE OF INFLATION; IF YOU FAIL TO KEEP UP WITH INFLATION, THE PURCHASING POWER OF YOUR INVESTMENT WILL DWINDLE OVER TIME. A "RISK PREMIUM": YOU'RE PROBABLY LOOKING TO REALIZE A CERTAIN PERCENTAGE GAIN OVER AND ABOVE THE INFLATION AND BOND RATES TO MAKE ASSUMING THE INVESTMENT RISK WORTH YOUR WHILE. THE SIZE OF THIS RISK PREMIUM IS UP TO YOU. ADD THE BOND RATE AND RISK PREMIUM TOGETHER TO ARRIVE AT A DISCOUNT RATE SUITABLE TO YOUR INVESTMENT EXPECTATIONS. 2) THE INTEREST RATE THE FEDERAL RESERVE BOARD CHARGES LARGE INSTITUTIONAL BANKS FOR OVERNIGHT BORROWING. THE DISCOUNT RATE IS ALWAYS LOWER THAN THE FEDERAL FUNDS RATE, WHICH IS USED WHEN BANKS MAKE SHORT-TERM LOANS TO EACH OTHER. THE FED CAN INFLUENCE SHORT-TERM INTEREST RATES NATIONWIDE BY RAISING OR LOWERING THE DISCOUNT RATE. RAISING INTEREST RATES HELPS KEEP INFLATION IN CHECK. LOWERING THEM GENERALLY FUELS THE ECONOMY AND HEATS UP THE STOCK MARKET.
DISINFLATION
A DECLINE IN THE RATE OF INFLATION. WITH DISINFLATION, PRICES STILL RISE BUT AT A SLOWER RATE THAN BEFORE. IT SHOULD NOT BE MISTAKEN FOR DEFLATION, WHICH IS WHEN PRICES FALL. IN GENERAL, DISINFLATION IS GOOD FOR BUSINESS AND THE ECONOMY. IT OFTEN CAUSES INTEREST RATES TO FALL, WHICH CAN BOOST P/E RATIOS.
DISTRIBUTION
FOR MUTUAL FUNDS, THE DISTRIBUTION IS THE AMOUNT PAID OUT TO INVESTORS. CAPITAL GAIN DISTRIBUTION REFERS TO THE PROFITS THE FUND MAKES SELLING ITS INVESTMENTS. INCOME DISTRIBUTION REFERS TO THE MONEY THE FUND EARNS WHEN ITS INVESTMENTS GROW IN VALUE.
DIVERSIFICATION
THE PROCESS BY WHICH INVESTORS HOLD A VARIETY OF DIFFERENT TYPES OF INVESTMENTS (ASSET CLASSES) IN AN EFFORT TO REDUCE THE OVERALL VOLATILITY OF THE PORTFOLIO. SINCE DIFFERENT TYPES OF ASSETS--SUCH AS BONDS AND STOCKS, OR U.S. STOCKS AND FOREIGN STOCKS--TEND NOT TO MOVE IN TANDEM, A WELL-DIVERSIFIED PORTFOLIO SHOULD BE ABLE TO PERFORM BETTER IN A RANGE OF MARKET CONDITIONS THAN A PORTFOLIO THAT HAS PLACED ALL ITS BETS ON JUST ONE ASSET CLASS.
DIVESTITURE
TO SELL OR LIQUIDATE. ALSO, THE SALE BY ONE CORPORATION OF LARGE BLOCKS OF STOCK IT HOLDS IN ANOTHER CORPORATION.
DIVIDEND
AN AMOUNT OF MONEY OR STOCK THAT A CORPORATION PAYS TO ITS SHAREHOLDERS QUARTERLY. TYPICALLY, ONLY LARGER COMPANIES PAY DIVIDENDS; SMALLER COMPANIES NEED TO INVEST THEIR OWN PROFITS TO GROW. SOME INVESTORS INTERESTED IN PRODUCING INCOME INVEST IN DIVIDEND-PRODUCING SECURITIES; GROWTH-ORIENTED INVESTORS OFTEN ALSO BUY DIVIDEND-PRODUCING SECURITIES TO ROUND OUT THEIR PORTFOLIO.
DIVIDEND REINVESTMENT PLAN (DRIP)
A PLAN THAT ALLOWS A SHAREHOLDER'S DIVIDENDS TO BE REINVESTED AUTOMATICALLY IN MORE SHARES OF A COMPANY'S STOCK. MANY LARGE COMPANIES OFFER DRIPS.
DIVIDEND YIELD
THE RESULT OF AMOUNT OF DIVIDENDS PER SHARE DIVIDED BY A STOCK'S CURRENT MARKET PRICE. FOR EXAMPLE, IF A STOCK'S CURRENT PRICE IS $40, AND THE COMPANY PAYS A $5.00 DIVIDEND PER SHARE PER YEAR, THEN THE DIVIDEND YIELD IS 12.5 PERCENT (5/40 = 0.125, WHICH EQUALS 12.5%). SEVERAL POPULAR INVESTING STRATEGIES ARE BASED ON STOCKS' DIVIDEND YIELD. YOU CAN FIND A STOCK'S DIVIDEND YIELD IN MOST NEWSPAPERS OR BY USING QUOTES PLUS. TODAY, MANY COMPANIES OPT NOT TO PAY DIVIDENDS, PREFERRING INSTEAD TO REWARD INVESTORS THROUGH STOCK APPRECIATION THAT RESULTS FROM PLOWING ALL EARNINGS BACK INTO THE COMPANY.
DIVIDENDS PER SHARE (DIV/SHR)
THE DIVIDEND, OR PORTION OF A COMPANY'S PROFIT PAID TO SHAREHOLDERS, DIVIDED BY THE NUMBER OF COMMON SHARES OUTSTANDING (USUALLY A WEIGHTED AVERAGE OF THE NUMBER OF SHARES OUTSTANDING OVER THE REPORTING PERIOD). SOME INVESTORS BELIEVE THAT THE HIGHER THE DIVIDEND, THE MORE OPTIMISTIC THE COMPANY'S OUTLOOK ON ITS LONG-TERM EARNING POWER. GROWTH COMPANIES, HOWEVER, TEND TO HAVE NO OR LIMITED DIVIDENDS IN ORDER TO PUT THE PROFITS BACK INTO THE COMPANY FOR CONTINUED EXPANSION.
DOLLAR-COST AVERAGING
AN INVESTMENT METHOD IN WHICH YOU PUT THE SAME AMOUNT OF MONEY INTO AN INVESTMENT AT REGULAR INTERVALS, SUCH AS EVERY MONTH. AS THE MARKET PRICE OF THE INVESTMENT RISES AND FALLS, YOU END UP BUYING MORE SHARES WHEN PRICES ARE LOW AND FEWER SHARES WHEN PRICES ARE HIGH. THIS WAY, YOU DON'T HAVE TO TRACK THE MARKET AND TIME YOUR PURCHASES (THAT IS, BUY LOW, SELL HIGH).
DOMESTIC BOND MUTUAL FUND
A TYPE OF MUTUAL FUND THAT INVESTS PRIMARILY IN BONDS ISSUED BY AMERICAN COMPANIES, THE U.S. GOVERNMENT, OR MUNICIPALITIES.
DOMESTIC STOCK MUTUAL FUND
A TYPE OF MUTUAL FUND THAT INVESTS PRIMARILY IN STOCKS ISSUED BY U.S. COMPANIES.
DOW JONES INDUSTRIAL AVERAGE (DJIA)
OFTEN KNOWN AS "THE DOW", ONE OF THE MOST FREQUENTLY QUOTED MARKET INDEXES IN THE NEWS. IT REFERS TO A WEIGHTED AVERAGE OF 30 WIDELY-TRADED BLUE CHIP STOCKS (SUCH AS IBM AND COCA-COLA). THE CLOSING PRICES OF THESE 30 STOCKS ARE ADDED AND THEN DIVIDED BY A FACTOR THAT ACCOUNTS FOR STOCK SPLITS AND OTHER MARKET CHANGES. (THE NUMBER REFERS TO POINTS, NOT DOLLARS.) BECAUSE THESE STOCKS ARE IN A VARIETY OF SECTORS AND ARE ACTIVELY TRADED, THEY ARE CONSIDERED A GOOD REFLECTION OF THE MARKET.
DURABLE FAMILY POWER OF ATTORNEY
A DOCUMENT THAT ALLOWS YOU TO DESIGNATE ANOTHER PERSON WHO IS EITHER A SPOUSE OR A RELATIVE TO MAKE FINANCIAL AND OTHER DECISIONS ON YOUR BEHALF. UNLIKE A REGULAR POWER OF ATTORNEY, IT IS NOT REVOKED BY YOUR "INCAPACITY."
DURATION
THE AMOUNT OF TIME AN UNFILLED TRADE ORDER CAN WAIT TO BE FILLED BEFORE IT IS CANCELLED. MOST ORDERS ARE EITHER "DAY" ORDERS, WHICH EXPIRE AT THE END OF THE CURRENT TRADING SESSION, OR "GOOD 'TIL CANCELLED (GTC)" ORDERS, WHICH EXPIRE WHEN YOU CANCEL THE ORDER OR AT THE END OF 90 DAYS, WHICHEVER COMES FIRST.
EARNED INCOME
INCOME FROM YOUR EMPLOYMENT. IT DOES NOT INCLUDE INCOME FROM YOUR SAVINGS AND INVESTMENTS.
EARNINGS
A CORPORATION'S PROFITS. AN EARNINGS REPORT IS A STATEMENT A COMPANY ISSUES TO SHAREHOLDERS AND TO THE PUBLIC DECLARING ITS CURRENT PROFITS ON EITHER A QUARTERLY OR ANNUAL BASIS.
EARNINGS GROWTH RATE
THE PERCENTAGE CHANGE IN EARNINGS PER SHARE (EPS), USUALLY REPORTED FOR A YEAR, OR ON AN ANNUALIZED BASIS. THE FUTURE EARNINGS GROWTH RATE IS AN IMPORTANT COMPONENT IN THE PEG RATIO, AN INDICATOR OF A STOCK'S POTENTIAL. TO CALCULATE FUTURE EPS GROWTH RATES YOU NEED EARNINGS ESTIMATES, WHICH ARE AVAILABLE FROM QUOTES PLUS.
EARNINGS LIMITS
LIMITS, BASED ON INCOME, GOVERNING WHO MAY QUALIFY FOR A PROGRAM. MANY TAX CREDITS AND SPECIAL SAVINGS PLANS, SUCH AS IRAS, HAVE EARNINGS LIMITS.
EARNINGS PER SHARE (EPS)
THE NET INCOME (OR EARNINGS) OF A COMPANY FOR THE PAST 12 MONTHS DIVIDED BY THE CURRENT NUMBER OF SHARES. FOR EXAMPLE, IF A COMPANY HAS $2 MILLION IN NET INCOME AND 2 MILLION OUTSTANDING SHARES, THEN ITS EARNINGS PER SHARE IS $1.00. MANY INVESTORS CONSIDER THIS AN IMPORTANT FUNDAMENTAL TO CONSIDER WHEN DECIDING WHETHER TO BUY OR SELL A STOCK.
EARNINGS SURPRISE
WHEN A COMPANY REPORTS EARNINGS FOR A QUARTER OR YEAR THAT DEVIATE FROM THE ESTIMATES MADE BY WALL ST. ANALYSTS. AN EARNINGS SURPRISE CAN BE HIGHER OR LOWER THAN WALL ST. ESTIMATES.
EARNINGS YIELD
ALSO KNOWN AS EARNINGS-PRICE RATIO (EPR). A CORPORATION'S EARNINGS PER SHARE DIVIDED BY ITS CURRENT STOCK PRICE. IT IS USED TO COMPARE THE ATTRACTIVENESS OF STOCKS, BONDS, AND MONEY MARKET INSTRUMENTS.
EDUCATION IRA
A TAX-DEFERRED SAVINGS AND INVESTMENT ACCOUNT FOR EDUCATIONAL EXPENSES. PARENTS ARE ALLOWED TO PUT AWAY $500 A YEAR FOR EACH CHILD OR GRANDCHILD UNDER THE AGE OF 18. LIKE THE ROTH IRA, CONTRIBUTIONS ARENT TAX-DEDUCTIBLE, BUT WITHDRAWALS ARE TAX-FREE. THE MONEY MUST BE USED FOR COLLEGE OR GRADUATE SCHOOL TUITION, ROOM, BOARD, OR BOOKS, BY THE TIME THE STUDENT TURNS 30. AT THAT POINT, THE FUNDS WILL BE DISTRIBUTED TO THE BENEFICIARY AND WILL BE SUBJECT TO A 10% PENALTY AND INCOME TAXES. BEFORE THEN, HOWEVER, THE FUNDS CAN BE TRANSFERRED TO A NEW EDUCATION IRA FOR ANOTHER FAMILY MEMBER. YOU CAN MAKE THE FULL $500 CONTRIBUTION TO AN EDUCATION IRA IF YOUR INCOME IS BELOW CERTAIN LIMITS. A MARRIED COUPLE FILING JOINTLY MUST HAVE AN ADJUSTED GROSS INCOME (AGI) OF LESS THAN $150,000 AND AN INDIVIDUAL MUST MAKE LESS THAN $95,000. REDUCED CONTRIBUTIONS ARE STILL POSSIBLE FOR A MARRIED COUPLE EARNING BETWEEN $150,000 AND $160,000 AND FOR A SINGLE TAXPAYER EARNING BETWEEN $95,000 AND $110,000. YOU CANT CONTRIBUTE TO AN EDUCATION IRA AND A PREPAID TUITION PLAN IN THE SAME YEAR. BUT YOU STILL MAY MAKE A CONTRIBUTION TO A TRADITIONAL IRA.
EFFECTIVE DATE
THE DATE IN WHICH A POLICY GOES INTO FORCE.
EFFECTIVE TAX RATE
THE INCOME TAX YOU PAID OVER A PERIOD DIVIDED BY YOUR GROSS INCOME OVER THE SAME PERIOD. IT IS DIFFERENT THAN YOUR "INCOME TAX RATE" BECAUSE IT IS AN AVERAGE TAKEN OVER SEVERAL YEARS. IT IS ALSO CALLED YOUR AVERAGE INCOME TAX RATE.
ELECTRONIC COMMUNICATIONS NETWORK (ECN)
A COMPUTER NETWORK THAT ELECTRONICALLY MATCHES BUYERS AND SELLERS OF SECURITIES. THERE ARE NO BROKERS, MARKET MAKERS, OR TRADING FLOOR SPECIALISTS INVOLVED IN THE TRANSACTION. ECNS OPERATE DURING REGULAR EXCHANGE TRADING HOURS, BUT THEY HAVE ATTRACTED THE MOST ATTENTION LATELY AS AVENUES FOR AFTER-HOURS TRADING. THERE ARE JUST A HANDFUL OF ECNS, WHICH ARE REGULATED AS BROKER-DEALERS, BUT SEVERAL HAVE APPLIED TO THE SECURITIES AND EXCHANGE COMMISSION TO BECOME STOCK EXCHANGES. THE LARGEST AND BEST-KNOWN ECN IS INSTINET. TRADING VIA THE ECNS CAN SAVE MONEY BECAUSE OF INCREASED EFFICIENCY AND ACCESS TO WORLD ORDER FLOW. BUT INVESTORS SHOULD BE CAREFUL BECAUSE THE SPREAD BETWEEN BID AND ASK PRICES ARE OFTEN GREATER THAN ON THE NASDAQ. AND THAT CAN MAKE TRADES MORE EXPENSIVE.
EMERGENCY FUND
MOST FINANCIAL PLANNERS RECOMMEND THAT YOU KEEP ENOUGH MONEY IN A READILY ACCESSIBLE "FUND" TO COVER 3-6 MONTHS OF LIVING EXPENSES SHOULD AN EMERGENCY ARISE AND YOUR SOURCES OF EARNED INCOME BE CUT OFF OR REDUCED. AN EMERGENCY FUND IS USUALLY KEPT IN SAVINGS ACCOUNTS, VERY SHORT TERM CDS, OR MONEY MARKET OR FIXED INCOME MUTUAL FUNDS THAT ALLOW CHECK WRITING ON THE ACCOUNT.
EMERGING GROWTH FUND
A TYPE OF MUTUAL FUND THAT INVESTS IN STOCKS OF YOUNG, GROWING COMPANIES.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
A QUALIFIED RETIREMENT PLAN DESIGNED TO GIVE YOU AN OWNERSHIP STAKE IN THE COMPANY. COMPANIES CONTRIBUTE SHARES OF STOCK WITHOUT REQUIRING YOU TO INVEST YOUR OWN MONEY.
EMPLOYEE STOCK PURCHASE PLAN (ESPP)
A PLAN ESTABLISHED BY A COMPANY THAT PERMITS EMPLOYEES TO BUY COMPANY STOCK, USUALLY AT A DISCOUNT. IF THE STOCK PRICE GOES UP, EMPLOYEES CAN SELL THEIR STOCK FOR A GAIN. STOCK OPTIONS GENERALLY COME IN TWO FLAVORS: NON-QUALIFIED STOCK OPTIONS (NCOS) AND INCENTIVE STOCK OPTIONS (ISOS). NCOS ARE MOST COMMONLY OFFERED TO NON-EXECUTIVE EMPLOYEES, WHEREAS ISOS ARE GENERALLY GIVEN TO EXECS. IN BOTH CASES, EMPLOYERS OFFER EMPLOYEES THE RIGHT TO BUY A CERTAIN NUMBER OF SHARES IN THE COMPANY AT A FIXED PRICE AND OVER A FIXED TERM.
EMPLOYER IDENTIFICATION NUMBER (EIN), OR FEDERAL ID NUMBER
AN IDENTIFICATION NUMBER GIVEN TO BUSINESSES FOR TAXPAYING PURPOSES. AN EIN IS REQUIRED FOR PARTNERSHIPS, CORPORATIONS, AND TRUSTS UNDER ALL CIRCUMSTANCES, BUT MAY ONLY BE REQUIRED FOR SOLE PROPRIETORSHIPS THAT HAVE EMPLOYEES.
EMPLOYER CONTRIBUTION (TO TAX-DEFERRED SAVINGS)
SOME EMPLOYERS ADD TO YOUR QUALIFIED PLAN CONTRIBUTIONS, OFTEN AS AN INCENTIVE FOR YOU TO SAVE FOR YOUR OWN RETIREMENT. THE EMPLOYER MIGHT MATCH YOUR CONTRIBUTION, OR A PORTION OF IT.
ENDING BALANCE
THE BALANCE OF ALL TRANSACTIONS ENTERED IN AN ACCOUNT REGISTER INCLUDING POSTDATED TRANSACTIONS. SEE CURRENT BALANCE. 
EQUITY
OWNERSHIP. WHEN YOU OWN PART OF SOMETHING, YOU HAVE EQUITY IN IT. SO, FOR EXAMPLE, WHEN YOU OWN 3,000 SHARES OF COMPANY XYZ'S STOCK, THAT IS YOUR EQUITY IN THE CORPORATION. IN OTHER WORDS, YOU AND OTHER SHAREHOLDERS OWN A PIECE OF THE CORPORATION. IN THE CASE OF REAL ESTATE, YOUR HOME EQUITY EQUALS YOUR DOWN PAYMENT PLUS ANY PRINCIPAL YOU'VE PAID ON YOUR MORTGAGE.
ESSENTIAL SERVICES
IN-HOME SERVICES NEEDED RESULTING FROM PERSONAL INJURY ONLY. SERVICES COULD INCLUDE BUT ARE NOT LIMITED TO HOME NURSING OR THERAPY SERVICES.
ESTATE
ALL THE ASSETS YOU POSSESS AT THE TIME OF YOUR DEATH. THESE INCLUDE SECURITIES, REAL ESTATE, PHYSICAL POSSESSIONS, AND CASH. YOUR ESTATE IS DISTRIBUTED TO YOUR HEIRS ACCORDING TO THE PROVISIONS OF YOUR WILL.
ESTATE PLANNING
PLANNING TO INSURE THAT YOUR ASSETS PASS IN AN ORDERLY AND EFFICIENT MANNER TO DESIGNATED INDIVIDUALS. ESTATE PLANNING INCLUDES WRITING WILLS, SETTING UP TRUSTS, AND PLANNING AHEAD TO AVOID UNNECESSARY TAXES.
ESTATE TAX
THE IRS FEE CHARGED IN CERTAIN INSTANCES, WHEN ASSETS ARE TRANSFERRED TO YOUR HEIRS. ESTATE TAXES ARE NOT CHARGED WHEN ASSETS ARE LEFT TO YOUR SPOUSE. WHEN THE SURVIVING SPOUSE DIES, HOWEVER, ESTATE TAXES--STARTING AT 35% OR SO AND REACHING 55%--ARE LEVIED ON THE VALUE OF AN ESTATE'S ASSETS EXCEEDING THE FOLLOWING ANNUAL LIMITS: 1999: $650,000; 2000: $675,000; 2002: $700,000; 2004: $850,000; 2005: $950,000; 2006: $1,000,000
EX-DIVIDEND (EX-DIV)
LITERALLY, "WITHOUT DIVIDEND," THIS IS THE TIME PERIOD BETWEEN A COMPANY'S ANNOUNCEMENT OF A DIVIDEND AND THE PAYOUT DATE. WHEN A STOCK IS TRADING EX-DIVIDEND, IT MEANS THAT INVESTORS WHO BUY THE COMPANY'S STOCK WILL NOT BE ABLE TO COLLECT THE MOST RECENTLY DECLARED DIVIDEND. IN STOCK LISTINGS, EX-DIVIDEND IS INDICATED BY A LOWER-CASE "X". THE EX-DIVIDEND DATE IS THE DAY THE STOCK GOES EX-DIVIDEND.
EX-DIVIDEND DATE
THE DAY THE STOCK GOES EX-DIVIDEND. ON THIS DATE AND AFTER, THE BUYER OF SHARES WOULD NOT BE ENTITLED TO THE MOST RECENTLY DECLARED DIVIDEND. IN STOCK LISTINGS, EX-DIVIDEND IS INDICATED BY A LOWER-CASE "X".
EXCESS PERSONAL INJURY PROTECTION (PIP)
EXCESS PERSONAL INJURY PROTECTION INSURANCE (A FORM OF INSURANCE THAT PAYS FOR YOUR MEDICAL EXPENSES AND LOSS OF INCOME BECAUSE OF AN AUTOMOBILE ACCIDENT). PIP PAYS FOR EXPENSES YOU'VE ACTUALLY INCURRED, UP TO A SPECIFIC, PER-PERSON DOLLAR AMOUNT. EXCESS PIP PAYS EXPENSES ABOVE THOSE COVERED BY THE PRIMARY AMOUNT OF INSURANCE (PIP).
EXCHANGE
A PUBLIC MARKET FOR THE BUYING AND SELLING OF PUBLIC STOCKS. IN THE UNITED STATES, THE THREE MAJOR EXCHANGES ARE THE NEW YORK STOCK EXCHANGE (NYSE), THE AMERICAN STOCK EXCHANGE (ASE OR AMEX), AND THE NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS (NASDAQ).
EXERCISE PRICE
ALSO KNOWN AS STRIKE PRICE. IN OPTIONS TRADING, THE EXERCISE PRICE IS THE SPECIFIED PRICE FOR THE INVESTMENT INSTRUMENT UNDERLYING A CALL OR PUT. IF OPTIONS ARE EXERCISED, THE UNDERLYING SECURITIES ARE TRADED AT THIS EXERCISE PRICE.
EXIT STRATEGY
THE PROCESS BY WHICH AN OWNER OR INVESTOR LIQUIDATES HIS OR HER OWNERSHIP IN A BUSINESS.
EXPENSE PROJECTIONS
THE ESTIMATED COST OF OWNING A MUTUAL FUND EXPRESSED IN DOLLARS. THE SECURITIES AND EXCHANGE COMMISSION REQUIRES MUTUAL FUNDS TO DISCLOSE IN THE PROSPECTUS TOTAL COST PROJECTIONS FOR ONE-, THREE-, FIVE-, AND 10-YEAR PERIODS BASED ON AN INITIAL INVESTMENT OF $1,000. THE ASSUMPTIONS ARE THAT THE FUND RETURNS 5% ANNUALLY AND THAT YOU SELL THE FUND AT THE END OF EACH TIME PERIOD. ANY FRONT-END OR BACK-END LOADS, AS WELL AS ALL ANNUAL EXPENSES INCLUDING MANAGEMENT FEES, 12B-1 FEES, AND OTHER EXPENSES ARE INCLUDED. TAXES ARE NOT PART OF THE CALCULATION. EXPENSE PROJECTIONS ARE USEFUL FOR COMPARING THE COSTS OF OWNING DIFFERENT MUTUAL FUNDS OR DIFFERENT CLASSES OF MUTUAL FUNDS. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THE PROJECTIONS.
EXPENSE RATIO
THE PERCENTAGE OF TOTAL INVESTMENT THAT SHAREHOLDERS PAY ANNUALLY FOR MUTUAL FUND MANAGEMENT FEES AND OPERATING EXPENSES. COMMON STOCK FUNDS TEND TO HAVE HIGHER EXPENSE RATIOS THAN BOND FUNDS; LIKEWISE SMALLER FUNDS HAVE HIGHER RATIOS THAN LARGER FUNDS. INTERNATIONAL FUNDS AND PRECIOUS METAL FUNDS HAVE HIGHER RATIOS THAN DOMESTIC FUNDS. FIXED INCOME AND INDEX FUNDS TEND TO HAVE VERY LOW EXPENSE RATIOS, BUT THE LOWEST EXPENSE RATIOS ARE USUALLY CHARGED BY FUNDS AIMED AT INSTITUTIONAL INVESTORS.
EXTRAORDINARY MEDICAL BENEFITS
OPTIONAL MEDICAL BENEFITS THAT COVER MEDICAL EXPENSES THAT EXCEED YOUR BASIC MEDIAL EXPENSES COVERAGE. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT EXTRAORDINARY MEDICAL BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
FAIR LABOR STANDARDS ACT (FLSA)
A FEDERAL LABOR LAW THAT REGULATES OVERTIME PAY, MINIMUM WAGES, USE OF CHILD LABOR, AND EQUAL PAY FOR EQUAL WORK.
FAMILY & MEDICAL LEAVE ACT (FMLA)
A FEDERAL LAW THAT REQUIRES THAT BUSINESSES WITH MORE THAN 50 EMPLOYEES OFFER AT LEAST 12 WEEKS OF UNPAID LEAVE TO EMPLOYEES WHO NEED TO TAKE TIME OFF DUE TO PERSONAL HEALTH CONDITIONS, TO PROVIDE MEDICAL CARE FOR IMMEDIATE FAMILY MEMBERS, OR TO CARE FOR A NEWBORN OR NEWLY ADOPTED CHILD.
FAMILY FINANCES
IN ASSESSING YOUR FINANCIAL HEALTH, YOU MAY CONSIDER YOUR INDIVIDUAL FINANCES ALONE OR THOSE OF A SPOUSE OR A DOMESTIC PARTNER AS WELL. YOU CAN INCLUDE THE INCOME AND THE EXPENSES FOR ANY FAMILY MEMBER (TRADITIONAL OR NON-TRADITIONAL) THAT YOU WISH.
FEDERAL INSURANCE CONTRIBUTIONS ACT (FICA)
A FEDERAL LAW THAT REQUIRES EMPLOYERS TO WITHHOLD SOCIAL SECURITY AND MEDICARE TAX FROM AN EMPLOYEE'S WAGES OR SALARY. EMPLOYERS ARE ALSO REQUIRED TO PAY A PORTION OF THESE TAXES.
FEDERAL RESERVE BOARD
THE CENTRAL BANK OF THE UNITED STATES. FOUNDED BY CONGRESS IN 1913, THE FED IS RESPONSIBLE FOR MAINTAINING THE STABILITY OF THE U.S. ECONOMY. ITS DUTIES INCLUDE BALANCING THE SUPPLY OF MONEY AND CREDIT, REGULATING THE BANKING SYSTEM, AND PROVIDING FINANCIAL SERVICES TO BANKS AND THE U.S. GOVERNMENT. INVESTORS CLOSELY WATCH THE FEDS MOVES, ESPECIALLY WHEN IT CHANGES THE DISCOUNT RATE, WHICH IS THE INTEREST RATE BANKS PAY FOR BORROWING OVERNIGHT FROM THE FED. RAISING OR LOWERING THE DISCOUNT RATE INFLUENCES SHORT-TERM INTEREST RATES.
FEDERAL ESTATE TAX BRACKET
THE TAX RATE--STARTING AT 37% AND RISING TO AS MUCH AS 55%--CHARGED ON ASSETS ABOVE $650,000 WHEN YOU DIE. IF YOUR SPOUSE IS YOUR BENEFICIARY, HE OR SHE WILL NOT BE LIABLE TO PAY THE TAX. ALL YOUR ASSETS, INCLUDING YOUR HOME AND 401(K) ARE INCLUDED IN THE CALCULATION. THE LIMIT WILL GRADUALLY RISE TO $1 MILLION IN 2006. TO AVOID THE GOVERNMENTS ESTATE TAX BITE, YOU CAN REDUCE THE VALUE OF YOUR ASSETS BY CHOOSING TO GIVE TAX-FREE GIFTS OF AS MUCH AS $10,000 A YEAR TO RELATIVE; THE GIFTS DO NOT COUNT AGAINST THE OVERALL ESTATE TAX EXCLUSION.
FIDUCIARY
A PERSON, COMPANY OR ASSOCIATION THAT HOLDS ASSETS IN TRUST FOR A BENEFICIARY. THE FIDUCIARY IS EXPECTED TO MAKE SOUND INVESTMENT CHOICES ON BEHALF OF THE BENEFICIARY. MOST STATES HAVE LAWS THAT LIMIT HOW A FIDUCIARY MAY HANDLE THE BENEFICIARY'S ASSETS. FIDUCIARIES CAN BE: EXECUTORS OF WILLS AND ESTATES, RECEIVERS IN BANKRUPTCY, TRUSTEES OR ADMINISTRATORS OF ASSETS FOR UNDERAGE OR INCOMPETENT BENEFICIARIES.
FINANCE CHARGES
INTEREST CHARGED ON LOANS MADE TO YOU. FOR EXAMPLE, THE INTEREST RATE ON A CREDIT CARD OR THE INTEREST RATE ON A CAR LOAN IS A FINANCE CHARGE.
FIRST BOSTON HIGH YIELD INDEX
AN INDEX OF JUNK BONDS RATED BB OR LOWER BY S&P OR MOODY'S.
FISCAL YEAR END (FYE)
THE END OF AN ACCOUNTING PERIOD THAT COVERS 12 CONSECUTIVE MONTHS, WHICH DOES NOT NECESSARILY CORRESPOND TO A CALENDAR YEAR. AT THE END OF THE FISCAL YEAR, THE BOOKS ARE CLOSED AND PROFIT OR LOSS IS CALCULATED.
FIXED ASSETS
TANGIBLE ITEMS USED IN THE OPERATION OF A BUSINESS BUT NOT CONSUMED IN THE COURSE OF THOSE OPERATIONS. (SOME EXAMPLES OF CAPITAL ASSETS ARE THE COMPANY'S BUILDINGS OR THE MACHINERY WITH WHICH A PRODUCT IS MADE.) FOR TAX PURPOSES, CAPITAL ASSETS MAY ALSO INCLUDE THE SECURITY INVESTMENTS (SECURITIES) OF A BUSINESS.
FIXED-INCOME INVESTMENT
AN INVESTMENT THAT PAYS THE SAME RATE OF INCOME EVERY YEAR. A BOND IS AN EXAMPLE OF A FIXED-INCOME INVESTMENT.
FIXED-RATE LOAN
A LOAN WITH AN INTEREST RATE THAT DOESN'T CHANGE WITH FLUCTUATING MARKET CONDITIONS. FIXED-RATE LOANS USUALLY HAVE HIGHER INITIAL INTEREST RATES THAN VARIABLE-INTEREST LOANS. CONVENTIONAL MORTGAGES HAVE FIXED RATES, AS DO MOST BUSINESS LOANS AND CONSUMER LOANS.
FLEXIBLE BENEFITS PLAN
A BENEFITS PLAN THAT ALLOWS EMPLOYEES TO CHOOSE FROM A SELECTION OF TAXABLE AND NON-TAXABLE BENEFITS, OFTEN INCLUDING 401(K) CONTRIBUTIONS, HEALTH INSURANCE, AND FLEXIBLE SPENDING ACCOUNT CONTRIBUTIONS. EMPLOYEES CAN ELECT TO DIVERT A PORTION OF THEIR TAXABLE CASH COMPENSATION AND APPLY IT TOWARDS QUALIFIED NONTAXABLE BENEFITS.
FLEXIBLE SPENDING ACCOUNT (FSA)
AN EMPLOYEE BENEFIT THAT ALLOWS MONEY TO BE DEDUCTED FROM YOUR PAYCHECK ON A PRE-TAX BASIS, TO PAY FOR QUALIFYING HEALTH CARE AND DEPENDENT CARE EXPENSES. A HEALTH CARE FSA CAN SAVE YOU SUBSTANTIAL SUMS ON A WIDE RANGE OF MEDICAL, DENTAL, AND VISION EXPENSES THAT ARE NOT COVERED BY YOUR FIRM'S INSURANCE PLAN. A DEPENDENT CARE FSA CAN BE USED TO PAY FOR CHILDCARE AND ELDERCARE COSTS. CONTRIBUTIONS TO YOUR FSA ACCOUNTS ARE EXEMPT FROM FEDERAL AND IN SOME CASES STATE INCOME TAXES. THE TAX EXEMPTION IN EFFECT PRODUCES "SAVINGS" OF AS MUCH AS 40% OR MORE. YOU TYPICALLY CAN CONTRIBUTE A MAXIMUM OF $3,000 ANNUALLY TO A HEALTH CARE FSA AND $5,000 ANNUALLY TO A DEPENDENT CARE FSA. THE CATCH IS THAT YOU FORFEIT ANY MONEY LEFT IN YOUR ACCOUNT AT THE END OF THE YEAR, SO YOU MUST CAREFULLY BUDGET YOUR EXPENSES FOR THE YEAR.
FORWARD P/E
A STOCKS PRICE-EARNINGS RATIO FOR THE CURRENT FISCAL YEAR. THE P/E RATIO IS MOST OFTEN CALCULATED BY DIVIDING THE STOCKS MARKET PRICE BY ITS EARNINGS PER SHARE FOR THE MOST RECENT 12-MONTH PERIOD. THE RESULTING TRAILING P/E RATIO GIVES INVESTORS AN IDEA OF A STOCKS VALUE. THE FORWARD P/E, WHICH USES EARNINGS ESTIMATES FOR THE CURRENT YEAR, GIVES INVESTORS AN EVEN BETTER IDEA OF WHETHER A STOCK IS A GOOD BUY. IF EARNINGS ESTIMATES GO UP, THE FORWARD P/E WILL BE LOWER THAN THE TRAILING P/E. THAT COULD BE A SIGNAL THAT ITS A GOOD TIME TO INVEST IN THE STOCK.
FRANCHISE
A RELATIONSHIP THAT ALLOWS A BUSINESS OWNER TO LICENSE ITS PROPERTY, TRADEMARKS, AND CONCEPTS TO ANOTHER ENTITY. MOST FRANCHISES ARE NATIONAL OR WIDELY RECOGNIZED "CHAINS" OPERATED BY LICENSEES OR FRANCHISEES, OVERSEEN BY THE FRANCHISER.
FRONT-END LOAD
A FEE TO PURCHASE SHARES IN A MUTUAL FUND. SEE ALSO BACK-END LOAD AND NO-LOAD MUTUAL FUNDS.
FULL-SERVICE BROKERAGE
A TRADITIONAL TYPE OF BROKERAGE. IT OFFERS ADVICE ON BUILDING PORTFOLIOS, ON THE TYPES OF SECURITIES TO BUY AND SELL, AND ASSET ALLOCATION. IN GENERAL, FULL-SERVICE BROKERAGES CHARGE HIGHER COMMISSIONS IN EXCHANGE FOR THIS ADVICE.
FUND CATEGORY
A LABEL BASED ON A FUND'S INVESTMENT STRATEGY AND HOLDINGS. THE CHICAGO FUND RESEARCH FIRM, MORNINGSTAR INC., DIVIDES FUNDS INTO 44 DIFFERENT CATEGORIES, SUCH AS "LARGE VALUE," "MID-CAP GROWTH," AND "WORLD STOCK." MORNINGSTAR EXAMINES PORTFOLIO STATISTICS AND COMPOSITION FOR THREE YEARS BEFORE ASSIGNING A FUND TO A CATEGORY. IT ROUTINELY REVIEWS CATEGORY ASSIGNMENTS AND WILL CHANGE A FUND'S CATEGORY IF THERE IS A SIGNIFICANT CHANGE IN THE FUND'S INVESTMENT STYLE. CATEGORIES HELP INVESTORS LOOK BEYOND CONFUSING FUND NAMES TO DETERMINE WHETHER A FUND IS AN APPROPRIATE INVESTMENT. CATEGORIES ALSO ALLOW INVESTORS TO EASILY COMPARE THE PERFORMANCE OF SIMILAR FUNDS.
FUND EXPENSE PROJECTIONS
THE ESTIMATED COST OF OWNING A MUTUAL FUND EXPRESSED IN DOLLARS. THE SECURITIES AND EXCHANGE COMMISSION REQUIRES MUTUAL FUNDS TO DISCLOSE IN THE PROSPECTUS EXPENSE PROJECTIONS FOR ONE-, THREE-, FIVE-, AND 10-YEAR PERIODS ON AN INITIAL INVESTMENT OF $1,000. THE ASSUMPTIONS ARE THAT THE FUND RETURNS 5% ANNUALLY AND THAT YOU SELL THE FUND AT THE END OF EACH TIME PERIOD. LOADS, MANAGEMENT FEES, 12B-1 FEES, AND OTHER EXPENSES TYPICALLY ARE INCLUDED. EXPENSE PROJECTIONS ARE USEFUL FOR COMPARING WHAT YOU MIGHT ACTUALLY SPEND ON DIFFERENT MUTUAL FUNDS OR DIFFERENT CLASSES OF MUTUAL FUNDS. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THE PROJECTIONS.
FUTURES CONTRACT
AN AGREEMENT TO BUY OR SELL A SET AMOUNT OF AN INVESTMENT INSTRUMENT OR COMMODITY AT A CERTAIN PRICE BY A CERTAIN DATE. UNLIKE OPTIONS TRADING, IN WHICH INVESTORS HAVE A CHOICE WHETHER TO EXERCISE THEIR OPTIONS, BOTH BUYERS AND SELLERS OF FUTURES ARE REQUIRED TO FULFILL THEIR PART OF THE CONTRACT (UNLESS ONE OF THEM SELLS THEIR CONTRACTS TO ANOTHER INVESTOR).
GDR
A RECEIPT FOR FOREIGN STOCK HELD IN TRUST IN A BANK. IT IS A VEHICLE THAT LETS PEOPLE EASILY INVEST IN A FOREIGN COMPANY. A GDR  OR GLOBAL DEPOSITARY RECEIPT -- ALLOWS A COMPANY TO ISSUE DEPOSITARY RECEIPTS IN TWO OR MORE MARKETS AT THE SAME TIME. IN THE UNITED STATES GDRS ARE OFTEN THE SAME AS ADRS, OR AMERICAN DEPOSITARY RECEIPTS.
GINNIE MAE
A MORTGAGE-BASED INVESTMENT, ISSUED AND GUARANTEED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA, HENCE THE NAME). AS HOMEOWNERS WITH GOVERNMENT-INSURED MORTGAGES MAKE MONTHLY PAYMENTS, THEIR LENDING INSTITUTIONS DEDUCT A SERVICE CHARGE AND FORWARD THE REMAINING PRINCIPAL AND INTEREST TO GINNIE MAE INVESTMENT OWNERS. GNMA GUARANTEES TIMELY PAYMENTS TO INVESTORS, EVEN IF HOMEOWNERS FALL BEHIND IN THEIR MORTGAGES.
GLOBAL FUND
AN INTERNATIONAL MUTUAL FUND THAT INVESTS IN SECURITIES FROM AROUND THE WORLD, INCLUDING THE UNITED STATES. SEE ALSO INTERNATIONAL FUND.
GOVERNMENT BOND
THIS INTEREST-BEARING OR DISCOUNTED SECURITY IS ISSUED BY THE GOVERNMENT AND OBLIGATES THE GOVERNMENT TO PAY THE BONDHOLDER A SPECIFIED SUM OF MONEY, USUALLY AT SPECIFIC INTERVALS, AND TO REPAY THE PRINCIPAL AMOUNT OF THE LOAN AT MATURITY. GOVERNMENT BONDS ARE BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT, WHICH IF NECESSARY CAN PRINT MONEY TO MAKE PAYMENTS.
GROSS PROFIT
A COMPANY'S NET SALES MINUS ITS COST OF GOODS.
GROWTH FUND
A GROWTH FUND IS A MUTUAL FUND THAT INVESTS IN GROWTH STOCKS. INVESTORS WHO WANT HIGH CAPITAL APPRECIATION TEND TO INVEST IN GROWTH STOCKS, WHICH ARE MORE CONSERVATIVE THAN INCOME FUNDS. GROWTH STOCKS ARE USUALLY PURCHASED AS A LONG-TERM HOLDING, WITH THE EXPECTATION THAT THEY WILL APPRECIATE IN PRICE PER SHARE (AND PERHAPS PAY DIVIDENDS).
GROWTH RATE
THE RATE AT WHICH STOCKS, THE ECONOMY, OR COMPANY EARNINGS ARE GROWING. THERE ARE A NUMBER OF WAYS TO CALCULATE A COMPOUND GROWTH RATE. IN ONE-CLICK SCORECARD AND STOCK EVALUATOR, QUICKEN.COM DERIVES THE COMPOUND AVERAGE USING THE LEAST SQUARES METHOD. THE 5-YEAR GROWTH RATE CALCULATION, FOR INSTANCE, USES SIX DATA POINTS: A BASE YEAR PLUS FIVE SUBSEQUENT ANNUAL DATA POINTS. FISCAL YEAR-END FIGURES ARE USED FOR THE FIRST FIVE DATA POINTS, WITH THE CALCULATION UPDATED IN EACH INTERIM PERIOD BY TIME-WEIGHTING THE FIRST AND LAST POINTS. HOWEVER, USING THIS TYPE OF CALCULATION, A GROWTH RATE CAN NOT BE CALCULATED IF ANY OF THE DATA POINTS ARE NEGATIVE OR ZERO DURING THE SPECIFIED TIME PERIOD.
GROWTH STOCK
STOCKS OF YOUNGER OR SMALLER COMPANIES, HAVE RELATIVELY HIGH RISK AND REPRESENT RELATIVELY AGGRESSIVE INVESTMENTS. USUALLY, THEY HAVE GROWN SIGNIFICANTLY IN THE PAST 3 TO 5 YEARS AND ARE EXPECTED TO CONTINUE GROWING FOR THE NEXT FEW YEARS. DIVIDENDS, IF ANY, ARE SMALL AND ERRATIC, MOSTLY BECAUSE GROWING COMPANIES PREFER TO REINVEST EARNINGS IN DEVELOPMENT EFFORTS RATHER THAN SET ASIDE A PERCENTAGE FOR SHAREHOLDERS. GROWTH STOCKS ARE USUALLY PURCHASED AS A LONG-TERM HOLDING, WITH THE EXPECTATION THAT THEY WILL PAY DIVIDENDS (AS WELL AS APPRECIATE IN PRICE PER SHARE) IN THE FUTURE, THUS PROVIDING INCOME AT A LATER TIME.
GUARDIANSHIP PROVISIONS
CLAUSES TYPICALLY FOUND IN A WILL, USED TO DESIGNATE WHO WILL PHYSICALLY CARE FOR A MINOR CHILD SHOULD THE PARENTS DIE. IT IS CRITICAL TO THINK THIS THROUGH CAREFULLY, TO INCLUDE SUCCESSOR GUARDIANS SHOULD THE ONE YOU DESIGNATE BE UNABLE TO OR REFUSE TO BECOME THE GUARDIAN.
HEALTH MAINTENANCE ORGANIZATION (HMO)
A TYPE OF HEALTH CARE PLAN THAT OFFERS PATIENTS A LOW DEDUCTIBLE AND LITTLE OR NO COPAYMENTS FOR VISITS TO APPROVED PHYSICIANS AND HOSPITALS. "PURE" HMOS REQUIRE MEMBERS TO USE DOCTORS AND HOSPITALS THAT BELONG TO THAT HMO NETWORK.
HEDGE FUND
A TYPE OF INVESTMENT FUND THAT POOLS MONEY FROM INVESTORS AND INVESTS IN A VARIETY OF MARKETS. MANAGERS OFTEN USE DERIVATIVES AND OTHER ESOTERIC INVESTMENT TOOLS IN THE HOPES OF EARNING LARGE RETURNS. HEDGE FUNDS GENERALLY REQUIRE A VERY HIGH INITIAL INVESTMENT, CHARGE A MANAGEMENT FEE OF 1-2%, AND TAKE THE FIRST 20% OF PROFITS FOR THEMSELVES. HEDGE FUNDS ARE NOT CURRENTLY REGULATED BY THE SEC.
HOME EQUITY LOAN
ALSO CALLED AN "EQUITY LOAN" OR A "SECOND MORTGAGE," A HOME EQUITY LOAN IS A LINE OF CREDIT SECURED BY YOUR HOME. WHEN YOU USE THIS CREDIT LINE TO BUY SOMETHING, THE FINANCIAL INSTITUTION GIVING YOU THE LINE OF CREDIT PLACES A SECOND MORTGAGE LOAN ON YOUR HOME UNTIL THE DEBT IS PAID OFF, AFTER WHICH THE CREDIT LINE MAY AGAIN BE USED TO BUY SOMETHING ELSE. THE INTEREST RATE ON SUCH LOANS IS USUALLY LOWER THAN ON STANDARD SECOND MORTGAGES OR CREDIT CARDS. MOST INTEREST ON HOME EQUITY LOANS IS TAX DEDUCTIBLE. LIKE ANY MORTGAGE, IF A HOME EQUITY LOAN IS NOT PAID OFF, YOUR HOME MAY BE SOLD TO PAY THE DEBT.
HOMEOWNER'S POLICY
A HOMEOWNER'S POLICY BUNDLES DIFFERENT INSURANCE COVERAGES, PROVIDING A BROAD RANGE OF PERSONAL PROPERTY, DWELLING AND LIABILITY PROTECTION FOR HOMEOWNERS AND RENTERS. IT'S CALLED A PACKAGE POLICY BECAUSE IT COVERS BOTH LOSSES TO YOUR OWN PROPERTY AND DAMAGE DONE TO OTHERS.
HOUSEHOLD GOODS POLICY
A HOUSEHOLD GOODS POLICY COVERS PERSONAL PROPERTY ONLY. IT EXCLUDES LIABILITY COVERAGE - - INSURANCE THAT PAYS FOR DAMAGES YOU CAUSE TO ANOTHER PERSON. LIABILITY INSURANCE IS INCLUDED IN THE STANDARD HOMEOWNER'S POLICY.
HOUSEHOLD INCOME
THE COMBINATION OF INCOME FROM ALL WORKERS IN YOUR HOUSEHOLD.
HYBRID FUND
A MUTUAL FUND THAT INVESTS IN A MIX OF STOCKS AND BONDS. THESE FUNDS--OFTEN REFERRED TO AS BALANCED FUNDS-- ARE ATTRACTIVE TO INVESTORS WHO WANT TO ALLOCATE THEIR ASSETS IN ONE INVESTMENT VEHICLE. MANY OF THESE FUNDS BUY BLUE-CHIP STOCKS AND HIGH-QUALITY BONDS. RISKS AND RETURNS TYPICALLY ARE MODERATE, AND EXPENSES CAN BE HIGH. INVESTORS CAN ACHIEVE SIMILAR RESULTS BY BUYING SEPARATE STOCK AND BOND FUNDS. MORNINGSTAR SEPARATES HYBRID FUNDS INTO DOMESTIC HYBRID AND INTERNATIONAL HYBRID CATEGORIES. FUNDS IN THE INTERNATIONAL CATEGORY MUST HAVE AT LEAST 40% OF THEIR PORTFOLIO IN FOREIGN STOCKS AND BONDS. HYBRID FUNDS ALSO ARE CALLED BALANCED FUNDS IF THEY SPLIT HOLDINGS TO ABOUT 60% STOCKS AND 40% BONDS.
IPO LOCKUP PERIOD
THE PERIOD AFTER AN INITIAL PUBLIC OFFERING WHEN COMPANY INSIDERS ARE PROHIBITED FROM SELLING THEIR SHARES. LOCKUP PERIODS TYPICALLY LAST 180 DAYS, BUT THEY CAN BE AS SHORT AS 120 DAYS AND AS LONG AS 365 DAYS. UNDERWRITERS INSIST THAT INSIDERS SUCH AS MANAGERS, EMPLOYEES, AND VENTURE CAPITALISTS SIGN LOCKUP AGREEMENTS TO SHORE UP THE STOCK PRICE RIGHT AFTER THE IPO. SINCE INSIDERS USUALLY STILL OWN A MAJORITY OF THE SHARES, THE STOCK PRICE COULD PLUMMET IF A NUMBER OF INSIDERS DECIDED TO DUMP THEIR SHARES AT THE SAME TIME FOR A QUICK PROFIT. IN FACT, A STOCKS PRICE OFTEN TUMBLES 10% OR MORE IN THE DAYS AFTER A LOCKUP AGREEMENT EXPIRES.
ILLIQUID INVESTMENT
ANY INVESTMENT THAT MAY BE DIFFICULT TO SELL QUICKLY AT A PRICE CLOSE TO ITS MARKET VALUE. EXAMPLES INCLUDE COMMERCIAL REAL ESTATE AND LIMITED PARTNERSHIPS.
INCOME DISABILITY BENEFITS
COVERAGE THAT PAYS A MONTHLY BENEFIT TO REPLACE A PERCENTAGE OF THE EARNINGS LOST BY A PERSON WHO IS UNABLE TO WORK BECAUSE OF ILLNESS OR INJURY RESULTING FROM A COVERED AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT INCOME DISABILITY BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
INCOME STATEMENT
A FINANCIAL STATEMENT OF A COMPANYS OPERATIONS. THE INCOME STATEMENTSHOWS A COMPANYS REVENUES, EXPENSES, AND INCOME FOR A PERIOD OF TIME SUCH AS A YEAR OR A QUARTER. FIGURES FOR THE SAME PERIOD IN THE PREVIOUS YEAR USUALLY ARE INCLUDED FOR EASY COMPARISON. INVESTORS CAN FIND AN INCOME STATEMENT IN A COMPANYS ANNUAL AND QUARTERLY REPORTS OR IN DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, SUCH AS THE 10-K OR 10-Q.
INCOME FUND
A FUND THAT INVESTS IN SECURITIES THAT PROVIDE ITS INVESTORS WITH CURRENT INCOME. TYPICALLY, THESE FUNDS INVEST IN DIFFERENT TYPES OF BONDS OR POSSIBLY UTILITY STOCKS THAT PROVIDE HIGH DIVIDENDS. YOU ARE TAXED FOR THE INCOME FUND'S DISTRIBUTIONS IN THE YEAR THAT YOU RECEIVE THEM (UNLESS YOU HOLD THE INCOME FUND IN A TAX-DEFERRED ACCOUNT SUCH AS AN IRA OR KEOGH).
INCOME PER EMPLOYEE
A COMPANY'S NET INCOME DIVIDED BY THE NUMBER OF EMPLOYEES. IN GENERAL, THE HIGHER THE NUMBER, THE MORE EFFICIENT THE COMPANY USES ITS EMPLOYEES. THE BEST USE OF THIS NUMBER IS WHEN COMPARING COMPANIES OF A VERY SIMILAR NATURE. THERE ARE NO RULES ABOUT WHAT CONSTITUTES A "GOOD" LEVEL OF INCOME PER EMPLOYEE, OR A "BAD" LEVEL.
INCOME STOCKS
STOCKS OF STABLE COMPANIES, HAVING RELATIVELY LOW TO MODERATE RISK AND REPRESENTING RELATIVELY CONSERVATIVE INVESTMENTS. IF YOU WANT TO INVEST FOR BOTH GROWTH AND CURRENT INCOME, BUY INCOME STOCKS BECAUSE OF THEIR POTENTIAL FOR REGULAR DIVIDEND PAYMENTS. INCOME STOCKS TEND TO BE IN STABLE SERVICE INDUSTRIES, SUCH AS TELECOMMUNICATIONS AND UTILITIES, AND CAN OFFER BOTH HIGHER-THAN-AVERAGE DIVIDEND PAYMENTS AND THE POSSIBILITY OF CAPITAL APPRECIATION.
INDEPENDENT CONTRACTOR
A PERSON WHO IS HIRED TO PERFORM CERTAIN DUTIES OR DELIVER CERTAIN GOODS. AN INDEPENDENT CONTRACTOR DIFFERS FROM A REGULAR EMPLOYEE IN THAT AN INDEPENDENT CONTRACTOR IS NOT UNDER THE DIRECT CONTROL OF THE EMPLOYER AND DOES NOT RECEIVE EMPLOYEE BENEFITS SUCH AS HEALTH INSURANCE. THE EMPLOYER HAS THE RIGHT TO ACCEPT OR REJECT THE INDEPENDENT CONTRACTOR'S FINAL GOODS OR SERVICES, AS WELL AS TO APPROVE WORK AT SPECIFIED STAGES. THE IRS AND OTHER GOVERNMENT AGENCIES USE DIFFERENT FACTORS TO DETERMINE WHETHER A WORKER IS AN INDEPENDENT CONTRACTOR OR AN EMPLOYEE; EMPLOYERS CAN FACE TAX PENALTIES IF THEY MISCLASSIFY A WORKER.
INDEX FUND
A MUTUAL FUND THAT INVESTS IN THE STOCKS UPON WHICH AN INDEX IS BASED. FOR EXAMPLE, AN INDEX FUND BASED ON THE S&P 500 INVESTS IN ALL THE STOCKS INCLUDED IN THAT INDEX. INDEX FUND PERFORMANCE CLOSELY MIRRORS THE PERFORMANCE OF THE INDEX ITSELF.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
AN INDIVIDUAL TAX-DEFERRED SAVINGS AND INVESTMENT ACCOUNT MEANT TO ACCUMULATE FUNDS FOR RETIREMENT. THE FEDERAL LIMIT FOR IRA CONTRIBUTIONS IS $3,000 PER YEAR, AS OF 2002. FOR WORKERS AGED 50 AND OLDER, THE CONTRIBUTION LIMIT IS $3,500. THE IRA CONTRIBUTION LIMITS ARE SET TO GRADUALLY INCREASE OVER SEVEN YEARS AS A RESULT OF THE TAX RELIEF ACT OF 2001. SINCE 1997, THERE HAVE BEEN TWO TYPES OF IRA: TRADITIONAL IRAS AND ROTH IRAS. IN A TRADITIONAL IRA, THE MONEY GROWS TAX-DEFERRED UNTIL IT IS TAKEN OUT AT RETIREMENT AFTER AGE 59. ANNUAL CONTRIBUTIONS MAY BE TAX-DEDUCTIBLE, DEPENDING ON SPECIFIC IRS RULES. TO QUALIFY, YOU AND YOUR SPOUSE CANT BE COVERED BY AN EMPLOYERS RETIREMENT PLAN UNLESS YOUR INCOME FALLS BELOW CERTAIN LIMITS. THE CONTRIBUTION IS FULLY DEDUCTIBLE FOR A SINGLE TAXPAYER EARNING $31,000 IN 1999 AND IS PHASED OUT AFTER $41,000 IN EARNINGS. MARRIED COUPLES FILING JOINTLY MAY EARN UP TO $51,000 FOR THE FULL DEDUCTION, WHICH IS PHASED OUT AT $61,000. THOSE LIMITS GRADUALLY RISE TO $50,000 TO $60,000 FOR SINGLE TAXPAYERS IN 2005 AND $80,000 TO $100,000 IN 2007 FOR MARRIED COUPLES FILING JOINTLY. IRA WITHDRAWALS BEFORE AGE 59 ARE HIT WITH A 10% PENALTY. THERE ARE SEVERAL EXCEPTIONS TO THAT RULE, HOWEVER. YOU ARE ALLOWED TO USE IRA FUNDS TO PAY FOR EDUCATION EXPENSES OR TO WITHDRAW UP TO $10,000 PENALTY-FREE FOR A FIRST-TIME HOME PURCHASE. YOU ALSO ESCAPE THE PENALTY IF YOU ARE DISABLED OR NEED THE MONEY FOR SUBSTANTIAL MEDICAL EXPENSES OR FOR HEALTH INSURANCE WHILE YOU ARE UNEMPLOYED. ITS GENERALLY A GOOD IDEA, HOWEVER, TO LEAVE YOUR MONEY IN THE IRA AS LONG AS POSSIBLE TO GET THE MOST OUT OF TAX-DEFERRED COMPOUNDING. YOU MUST START WITHDRAWING YOUR MONEY FROM AN IRA AT AGE 70 OR THE IRS WILL HIT YOU WITH ANOTHER PENALTY. IN 1997, CHANGES TO THE TAX LAW CREATED TWO NEW TYPES OF IRAS: THE ROTH IRA AND THE EDUCATION IRA. EACH OF THESE IRAS HAS ITS OWN SPECIFIC RULES. UNLIKE THE TRADITIONAL IRA, CONTRIBUTIONS TO THESE IRAS AREN'T TAX-DEDUCTIBLE, BUT YOU CAN MAKES WITHDRAWALS TAX-FREE.
INDUSTRY CLASS
THE CATEGORIZATION OF ALL PUBLICLY TRADED COMPANIES INTO INDUSTRIES USING A NUMERICAL SYSTEM BASED ON THE NATURE OF THE GOOD OR SERVICE THE COMPANY PRODUCES. EXAMPLES OF INDUSTRIES INCLUDE: AEROSPACE, COMPUTER SOFTWARE, AND FOOD & BEVERAGE. SIMILAR INDUSTRIES ARE SOMETIMES GROUPED TOGETHER AND REFERRED TO AS SECTORS SUCH AS: TECHNOLOGY, UTILITIES, AND FINANCIAL SERVICES. INVESTMENT ADVISORS GENERALLY RECOMMEND THAT AN INVESTOR DIVERSIFY HIS OR HER PORTFOLIO BY HOLDING SEVERAL CLASSES OF INVESTMENTS. THIS TENDS TO REDUCE OVERALL RISK, ALTHOUGH IT DOES NOT PROTECT AGAINST A LOSS.
INFLATION
A RISE IN THE PRICE OF COMMODITIES AND SERVICES. INFLATION OCCURS WHEN SPENDING INCREASES FASTER THAN SUPPLY. MODERATE INFLATION IS AN EXPECTED RESULT OF ECONOMIC GROWTH.
INITIAL LOAD
A FEE TO PURCHASE SHARES IN A MUTUAL FUND. SEE ALSO BACK-END LOAD AND NO-LOAD MUTUAL FUNDS.
INITIAL PUBLIC OFFERING (IPO)
THE FIRST TIME A COMPANY SELLS SHARES OF ITS STOCK TO THE PUBLIC. ALSO KNOWN AS GOING PUBLIC, AN IPO CAN GENERATE FUNDS FOR WORKING CAPITAL, DEBT REPAYMENT, ACQUISITIONS, AND A HOST OF OTHER USES. THE STOCK PRICES OF MANY INTERNET COMPANIES HAVE SKYROCKETED IMMEDIATELY AFTER THEIR IPOS, MAKING INSTANT MILLIONAIRES OF COMPANY INSIDERS WHO OWN SHARES OR HAVE STOCK OPTIONS. IT IS DIFFICULT FOR OUTSIDERS TO GET SHARES OF HOT ISSUES BEFORE THE IPO AT THE PUBLIC OFFERING PRICE. GENERALLY, THEY MUST WAIT UNTIL THE COMPANY GOES PUBLIC AND PAY A PREMIUM FOR THE SHARES.
INSIDE INFORMATION
MATERIAL INFORMATION ABOUT A PUBLICLY TRADED COMPANY THAT HAS NOT BEEN RELEASED TO THE PUBLIC. INSIDE INFORMATION CAN INCLUDE ANYTHING THAT AFFECTS THE COMPANYS STOCK PRICE, SUCH AS EARNINGS REPORTS AND MERGER AGREEMENTS. IN SOME CASES IT ALSO CAN INCLUDE INFORMATION ABOUT A COMPANY IN A NEWSPAPER COLUMN BEFORE IT IS PUBLISHED. IT IS ILLEGAL TO TRADE ON INSIDE INFORMATION EVEN IF YOU ARE NOT A COMPANY INSIDER. WHILE IT IS COMMON ON WALL STREET TO TRADE ON TIPS AND RUMORS, ANYONE WHO POSSESSES INSIDE INFORMATION AND ACTS ON IT CAN RUN AFOUL OF THE LAW. PEOPLE CLOSE TO COMPANY OFFICIALS, SUCH AS ATTORNEYS, ACCOUNTANTS, FRIENDS, AND FAMILY MEMBERS, CAN SOMETIMES HEAR CONFIDENTIAL INFORMATION. EVEN REPORTERS CAN GET A HOLD OF INSIDE INFORMATION, WHICH IS NOT CONSIDERED PUBLIC UNTIL THE REST OF THE WORLD KNOWS ABOUT IT.
INSIDER
AN EXECUTIVE OR DIRECTOR OF A PUBLIC COMPANY WHO HAS ACCESS TO INFORMATION THAT HAS NOT BEEN RELEASED TO THE PUBLIC. BECAUSE THEY KNOW MORE ABOUT THEIR COMPANYS FORTUNES THAN OTHER PEOPLE DO, INSIDERS MUST OBEY SECURITIES AND EXCHANGE COMMISSION RULES ON WHEN THEY CAN BUY OR SELL STOCK IN THEIR COMPANY. THEY ALSO MUST REPORT TRADES TO THE SEC. SOME INVESTORS CLOSELY FOLLOW INSIDER TRADES ON SEC DOCUMENTS IN AN ATTEMPT TO GAUGE WHAT EXECUTIVES THINK ABOUT THE STOCK'S CURRENT VALUE.
INSIDER HOLDINGS
THE NUMBER OF SHARES (OFTEN EXPRESSED AS A PERCENTAGE OF SHARES OUTSTANDING) HELD BY OWNERS, MANAGERS AND EXECUTIVES AT A COMPANY. INVESTMENT STRATEGISTS LOOK AT THIS NUMBER TO SEE WHETHER MANAGERS ARE WILLING TO BET THEIR OWN MONEY ON THEIR COMPANY'S FUTURE EARNING POWER.
INSIDER TRADING
STOCK TRANSACTION BY AN OFFICER OR DIRECTOR OF THE COMPANY WHOSE STOCK IS BEING TRADED, OR BY ANY INDIVIDUAL OR ENTITY HOLDING 10 PERCENT OR MORE OF ANY CLASS OF THE COMPANY'S SHARES. TYPES OF INSIDER TRADING ACTIVITY INCLUDE PLANNED SALE, SALE, BUY, AND EXERCISE OF OPTIONS. INSIDER TRADING IS NOT A TECHNICAL INDICATOR, BUT CAN BE OF INTEREST TO INVESTORS (AS WELL AS TO THE SEC) BECAUSE OF THE SPECIALIZED KNOWLEDGE INSIDERS HAVE ABOUT THEIR COMPANY'S PROSPECTS.
INSTINET
THE BEST-KNOWN GLOBAL ELECTRONIC TRADING SYSTEM FOR INSTITUTIONAL INVESTORS. INSTINET ALLOWS MUTUAL FUND MANAGERS, PENSION FUND MANAGERS, AND OTHER PROFESSIONAL INVESTORS TO TRADE LARGE BLOCKS OF STOCK WITHOUT A BROKER, 24 HOURS A DAY. INSTINET GUARANTEES CLIENTS ANONYMITY AND PROVIDES EQUAL ACCESS TO WORLDWIDE ORDER FLOW, WHICH INCREASES EFFICIENCY AND CAN LOWER COSTS. OWNED BY REUTERS GROUP PLC, INSTINET IS REGULATED BY THE SECURITIES AND EXCHANGE COMMISSION AS A BROKER-DEALER.
INSTITUTIONAL SHAREHOLDER
ORGANIZATIONS THAT TRADE LARGE VOLUMES OF SECURITIES. THEY INCLUDEMUTUAL FUNDS, HEDGE FUNDS, PENSIONS, INSURANCE COMPANIES, TRUSTS, BANKS, AND GOVERNMENTS. BECAUSE THEY BUY AND SELL MILLIONS OF DOLLARS IN SECURITIES, INSTITUTIONS OFTEN GET REDUCED BROKERAGE COMMISSIONS AND UP-TO-THE-MINUTE NOTICES ON CHANGES IN ANALYST RESEARCH REPORTS. SOME INVESTORS PICK STOCKS THAT HAVE A HIGH DEGREE OF INSTITUTIONALOWNERSHIP. ITS NO GUARANTEE THAT THE STOCK IS A GOOD BET, BUT AT LEAST SOME PROFESSIONALS WHO HAVE CAREFULLY STUDIED THE COMPANY THINK SO. FOR THAT REASON, INSTITUTIONAL OWNERSHIP TENDS TO BOOST A STOCKS PRICE.
INSURANCE
INSURANCE IS A WAY TO MAKE AN INDIVIDUAL'S FINANCIAL LOSSES MORE AFFORDABLE BY TRANSFERRING THEM TO A LARGE GROUP OF PEOPLE THROUGH AN INTERMEDIARY CALLED AN INSURANCE COMPANY AND A LEGAL CONTRACT CALLED A POLICY. THE INSURANCE COMPANY POOLS THE RISKS OF HUNDREDS OF THOUSANDS OF PEOPLE. THE PREMIUM EACH POLICYHOLDER PAYS IS SMALL COMPARED TO THE POTENTIAL LOSS HE OR SHE IS INSURING. THE COST OF A HOMEOWNER'S POLICY, FOR EXAMPLE, IS A FRACTION OF WHAT IT WOULD COST TO REPLACE YOUR HOUSE IF IT BURNS DOWN. THE INSURANCE COMPANY CAN AFFORD TO PAY FOR ALL THE LOSSES THAT OCCUR IN THE COVERED POOL - - AND STILL MAKE ENOUGH TO STAY IN BUSINESS AND KEEP ITS SHAREHOLDERS HAPPY - - ASSUMING 1) THAT IT CHARGES APPROPRIATE PREMIUMS AND 2) THAT EVERY POLICYHOLDER DOESN'T HAVE A LOSS AT THE SAME TIME. THE LARGER AND MORE DIVERSE THE POOL, THE LESS LIKELY THAT IS TO HAPPEN.
INSURED
AN INSURED IS A PERSON (OR AN INSTITUTION) COVERED BY AN INSURANCE POLICY. IF YOU ARE FILLING OUT THESE FORMS FOR YOURSELF, YOU WOULD BE THE NAMED INSURED ON THE POLICY. IN AN AUTO POLICY, OTHER INSUREDS WOULD BE FAMILY MEMBERS WHO LIVE WITH YOU. "ADDITIONAL NAMED INSUREDS" ON THE POLICY MIGHT INCLUDE INSTITUTIONS FROM WHICH YOU'VE BORROWED MONEY TO BUY THE CAR OR THE HOUSE THAT YOU ARE INSURING. (YOUR HOUSE IS COLLATERAL FOR YOUR MORTGAGE. YOUR BANKER WOULD BE VERY UPSET IF IT BURNED DOWN. THAT'S WHY YOU CAN'T GET A MORTGAGE ON A HOUSE THAT ISN'T INSURED AGAINST FIRE.)
INSURER
INSURER IS ANOTHER TERM FOR AN INSURANCE COMPANY. INSURANCE COMPANIES ARE ALSO KNOW AS CARRIERS.
INTEREST
THE COST FOR BORROWING A SUM OF MONEY, USUALLY CALCULATED AT A PERCENTAGE RATE OVER A PERIOD OF TIME. FOR EXAMPLE, IF YOU BORROW $1,000 FOR A YEAR AT AN ANNUAL INTEREST RATE OF 10%, YOU WOULD PAY $100 IN INTEREST FOR A YEAR'S USE OF THE MONEY: $1,000 X .10 = $100. YOU EARN INTEREST ON BONDS. IN THAT CASE, THE BORROWER IS PAYING YOU INTEREST TO USE THE MONEY YOU INVESTED.
INTERNAL RATE OF RETURN (IRR)
THE GROWTH RATE OF YOUR MONEY OVER A TIME PERIOD RELATIVE TO THE AMOUNT INVESTED. IRR, WHICH COMPARES THE PROFIT TO THE AMOUNT INVESTED, IS EXPRESSED AS A PERCENT GAIN OR LOSS FOR EASY COMPARISON WITH OTHER PERCENT CHANGES FOR THE SAME TIME PERIOD. THE IRR CALCULATION IS BASED ON CONTINUOUS COMPOUNDING.
INTERNATIONAL FUND
A MUTUAL FUND THAT INVESTS ONLY IN STOCKS OF COMPANIES BASED OUTSIDE THE USA. SEE ALSO GLOBAL FUND.
INTERNATIONAL STOCKS
PUBLICLY-TRADED STOCKS FOR COMPANIES BASED OUTSIDE THE UNITED STATES.
INTRINSIC STOCK PRICE
THE TRUE VALUE OF A COMPANY DIVIDED BY THE NUMBER OF SHARES OUTSTANDING. IF THE INTRINSIC VALUE OF A STOCK IS HIGHER THAN ITS MARKET PRICE, THEN YOU HAVE AN UNDERVALUED STOCK THAT COULD TURN OUT TO BE A WINNER. THE COMPANY ALSO COULD BE RIPE FOR A TAKEOVER.
INTRINSIC VALUE
WHAT A COMPANY IS REALLY WORTH. TO DETERMINE IT, INVESTORS ANALYZE A NUMBER OF BUSINESS FUNDAMENTALS, INCLUDING EARNINGS, REVENUES, AND ASSETS. A COMPANY'S INTRINSIC VALUE IS USUALLY HIGHER THAN ITS LIQUIDATION VALUE, WHICH IS WHAT A COMPANY WOULD BE WORTH IF IT WERE BROKEN UP AND SOLD TODAY. THE LIQUIDATION VALUE DOESN'T INCLUDE SUCH INTANGIBLES AS THE VALUE OF A BRAND NAME AND OFTEN DOESN'T REFLECT THE TRUE VALUE OF ASSETS, SUCH AS REAL ESTATE, THAT ARE CARRIED ON THE BALANCE SHEET.
INVENTORY
PRODUCTS READY FOR SALE AND THE MATERIALS NEEDED TO MAKE THEM. MANUFACTURERS AND RETAILERS NEED ENOUGH INVENTORY IN STOCK TO SATISFY THEIR CUSTOMERS. SERVICE COMPANIES OFTEN DO NOT NEED ANY INVENTORY AT ALL TO DO BUSINESS. INVENTORIES CAN BE VALUED IN DIFFERENT WAYS, SUCH AS WHETHER THE MATERIALS SOLD WERE THE FIRST OR THE LAST TO GO INTO INVENTORY. THE VALUE IS SOMETIMES OVERSTATED ON BALANCE SHEETS. RETAILERS, FOR EXAMPLE, OFTEN MARK DOWN THEIR GOODS TO CLEAR THEM. A BANKRUPT COMPANY THAT LIQUIDATES ITS INVENTORY MAY GET ONLY A FRACTION OF THE BOOK VALUE. THE LEVEL OF INVENTORY CAN TELL INVESTORS QUITE A BIT ABOUT A COMPANYS PROSPECTS. LOW INVENTORY LEVELS MAY MEAN A COMPANY WILL HAVE TROUBLE FILLING ORDERS. HIGH INVENTORY LEVELS ARE WORRISOME BECAUSE IT TIES UP CAPITAL THAT THE COMPANY COULD USE ELSEWHERE. INVENTORIES THAT ARE RISING FASTER THAN REVENUES CAN BE AN INDICATOR THAT THE COMPANY IS HEADED FOR TROUBLE.
INVENTORY TURNOVER
THE RATE THAT A COMPANYS PRODUCTS ARE PRODUCED AND SOLD. INVENTORY TURNOVER IS DETERMINED BY DIVIDING THE ANNUAL COST OF GOODS SOLD BY THE VALUE OF THE INVENTORY. THE RESULTING NUMBER TELLS HOW MANY TIMES A YEAR A COMPANY CAN COMPLETELY SELL OUT ITS PRODUCTS. THE FASTER A COMPANY CAN TURN OVER ITS INVENTORY, THE BETTER OFF IT IS BECAUSE IT HAS MORE MONEY TO USE ON OTHER THINGS, SUCH AS RESEARCH AND DEVELOPMENT, MARKETING, AND EXPANSION. INVENTORY TURNOVER VARIES FROM INDUSTRY TO INDUSTRY. SO IT IS IMPORTANT TO COMPARE COMPANIES IN THE SAME INDUSTRY. THE ONE THAT HAS THE HIGHEST INVENTORY TURNOVER IS MOST LIKELY TO BE ABLE TO FUND ITS OWN GROWTH.
INVENTORY FINANCING
THE PRACTICE OF OBTAINING A LOAN BY USING MONEY THAT IS OWED TO YOU AS COLLATERAL.
INVESTMENT INCOME
INCOME FROM INVESTMENTS RATHER THAN FROM YOUR SALARY OR WAGES. IT INCLUDES INTEREST, DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, CAPITAL GAINS (AND LOSSES) ON SALES, ETC.
INVESTMENT PORTFOLIO
THE COLLECTION OF ASSETS THAT YOU HAVE THAT ARE NOT USED FOR EVERYDAY LIVING EXPENSES OR SHORT-TERM EXPENDITURES (THOSE TO BE MADE IN LESS THAN ONE YEAR). RETIREMENT ACCOUNTS SUCH AS 401(K)S, IRAS, SEPS, ETC. SHOULD BE INCLUDED. AN INVESTMENT PORTFOLIO MAY CONTAIN CERTIFICATES OF DEPOSITS, MONEY MARKET ACCOUNTS, SAVINGS ACCOUNTS, MUTUAL FUNDS, INDIVIDUAL STOCKS AND BONDS, ANNUITIES, REAL ESTATE (OTHER THAN YOUR PERSONAL RESIDENCES), COLLECTIBLES, PRECIOUS METALS, FUTURES AND COMMODITIES, ETC.
JOHANNESBURG STOCK EXCHANGE GOLD INDEX
AN INDEX OF GOLD-RELATED STOCKS LISTED ON THE JOHANNESBURG STOCK EXCHANGE.
JUNK BONDS
LOW-RATED, HIGH-YIELD SECURITIES ISSUED BY COMPANIES WITH LOW CREDIT RATINGS. JUNK BONDS ARE OFTEN ISSUED FOR USE IN TAKEOVERS AND BUYOUTS.
KEOGH
A TAX-DEFERRED RETIREMENT PLAN FOR THE SELF-EMPLOYED, PARTNERSHIPS, AND SMALL BUSINESSES. A KEOGH IS USUALLY A BETTER BET THAN A SEP FOR A SELF-EMPLOYED INDIVIDUAL WITH HIGH, STABLE EARNINGS. THERE ARE TWO KINDS OF DEFINED-CONTRIBUTION KEOGHS: PROFIT-SHARING PLANS AND MONEY-PURCHASE PLANS. PROFIT-SHARING PLANS GIVE YOU THE MOST FLEXIBILITY. YOU ARE ALLOWED TO CONTRIBUTE UP TO 15% OF SELF-EMPLOYMENT INCOME, AND YOU CAN VARY THE PERCENTAGE OF INCOME YOU WANT TO SOCK AWAY FROM YEAR TO YEAR. SINCE THE EARNINGS CEILING IS $160,000, THE MAXIMUM CONTRIBUTION IS $24,000 ANNUALLY. YOU CAN PUT AWAY MORE MONEY WITH A MONEY-PURCHASE KEOGH; AS MUCH AS 25% OF YOUR INCOME UP TO $30,000 ANNUALLY. BUT YOU MUST CONTRIBUTE THE SAME PERCENTAGE OF INCOME EVERY YEAR. YOU CAN COMBINE BOTH PLANS TO BOOST YOUR CONTRIBUTIONS AND TO RETAIN SOME FLEXIBILITY. ANOTHER TYPE OF KEOGH IS VERY COMPLICATED TO ADMINISTER BECAUSE AN ACTUARY MUST DETERMINE THE DEDUCTION FOR CONTRIBUTIONS EVERY YEAR. THE BENEFIT IS DETERMINED BY AVERAGING THE PARTICIPANTS HIGHEST EARNINGS IN THREE CONSECUTIVE YEARS. THE MAXIMUM PAYOUT IS $130,000 A YEAR. IN ALL CASES, KEOGH CONTRIBUTIONS ARE FULLY DEDUCTIBLE. THE PLANS GENERALLY FOLLOW IRA RULES FOR PENALTIES AND WITHDRAWALS.
LARGE-CAP BLEND FUND
AS DETERMINED BY FUND RESEARCH FIRM MORNINGSTAR, INC., A MUTUAL FUND THAT INVESTS IN STOCKS WITH A MEDIAN MARKET CAPITALIZATION OF $11 BILLION OR MORE, THAT OFFER A BLEND OF GROWTH AND VALUE CHARACTERISTICS. BLEND FUNDS TYPICALLY ARE LESS RISKY THAN GROWTH FUNDS, AND LARGE-CAP FUNDS TYPICALLY ARE LESS VOLATILE THAN MID-CAP AND SMALL-CAP FUNDS. LARGE COMPANIES ALSO ARE MORE LIKELY TO PAY DIVIDENDS.
LARGE-CAP GROWTH FUND
A MUTUAL FUND THAT INVESTS IN LARGE COMPANIES WITH GOOD GROWTH PROSPECTS. ACCORDING TO MORNINGSTAR, LARGE-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATIONS OF MORE THAN $11 BILLION. OTHER ORGANIZATIONS MAY USE DIFFERENT DEFINITIONS. LARGE-CAP FUNDS TYPICALLY ARE LESS VOLATILE THAN MID-CAP AND SMALL-CAP FUNDS BECAUSE LARGE COMPANIES ARE MORE ESTABLISHED AND MORE PREDICTABLY SUCCESSFUL THAN SMALLER COMPANIES. LARGE COMPANIES ALSO ARE MORE LIKELY TO PAY DIVIDENDS. GROWTH FUNDS OFTEN HAVE HIGH P/E RATIOS BECAUSE MANAGERS ARE WILLING TO PAY A PREMIUM FOR STOCKS OF FAST-GROWING COMPANIES.
LARGE-CAP VALUE FUND
A MUTUAL FUND THAT INVESTS IN THE UNDERVALUED STOCKS OF LARGE COMPANIES. ACCORDING TO MORNINGSTAR, LARGE-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATION OF MORE THAN $11 BILLION. OTHER ORGANIZATIONS MAY USE DIFFERENT DEFINITIONS. LARGE-CAP FUNDS TYPICALLY ARE LESS VOLATILE THAN MID-CAP AND SMALL-CAP FUNDS BECAUSE LARGE COMPANIES ARE MORE ESTABLISHED AND MORE PREDICTABLY SUCCESSFUL THAN SMALLER COMPANIES. LARGE COMPANIES ALSO ARE MORE LIKELY TO PAY DIVIDENDS. VALUE FUND MANAGERS BUY STOCKS THAT HAVE RELATIVELY LOW P/E RATIOS OR ARE UNDERVALUED BY OTHER OBJECTIVE MEASURES, SUCH AS PRICE-TO-BOOK RATIOS. THE UNDERLYING COMPANY MUST BE FUNDAMENTALLY STRONG EVEN THOUGH THE STOCK IS LOW.
LARGE-CAP STOCK
FOR QUICKEN.COM PORTFOLIO ANALYSIS, LARGE CAPS ARE STOCKS WITH A TOTAL MARKET CAPITALIZATION OF AT LEAST $3.5 BILLION. THESE ARE ESTABLISHED, SUCCESSFUL COMPANIES THAT ARE MORE LIKELY THAN SMALLER COMPANIES TO PAY DIVIDENDS . FOR MUTUAL FUND DATA AT QUICKEN.COM, MORNINGSTAR DETERMINES MARKET CAP SIZE. ACCORDING TO MORNINGSTAR, FUNDS WITH A MEDIAN MARKET CAP ABOVE $10.74 BILLION ARE DESIGNATED AS LARGE CAP.
LEASE
A CONTRACT THAT GRANTS YOU THE USE OF AUTOMOBILES, EQUIPMENT, REAL ESTATE OR OTHER FIXED ASSETS FOR A PERIOD OF TIME IN EXCHANGE FOR PAYMENT, USUALLY AS RENT.
LEHMAN BROTHERS AGGREGATE BOND INDEX
A POPULAR BENCHMARK INDEX INVESTORS CAN USE TO GAUGE THE PERFORMANCE OF BONDS OR BOND FUNDS. JUST AS STOCK INVESTORS USE THE S&P 500 TO MEASURE THE PERFORMANCE OF STOCKS, BOND INVESTORS TURN TO THE LEHMAN BROS. AGGREGATE BOND INDEX. THE INDEX IS COMPRISED OF THE LEHMAN'S GOVERNMENT/INVESTMENT GRADE CORPORATE INDEX, THE MORTGAGE BACKED SECURITIES INDEX AND ASSET BACKED SECURITIES INDEX.
LEHMAN BROTHERS CORPORATE BOND INDEX
AN INDEX THAT TRACKS ALL PUBLICLY-TRADED INVESTMENT-GRADE CORPORATE BONDS.
LEHMAN BROTHERS GOVERNMENT BOND INDEX
AN INDEX OF U.S. TREASURY BONDS AND NOTES, AND GOVERNMENT-AGENCY BONDS (EXCLUDING MORTGAGE-BACKED SECURITIES).
LEHMAN BROTHERS GOVERNMENTS/CORPORATE INDEX
AN INDEX OF LONG-TERM GOVERNMENT AND CORPORATE BONDS.
LEHMAN BROTHERS INTERMEDIATE-TERM TREASURY INDEX
AN INDEX OF U.S. TREASURY BONDS WITH MATURITIES BETWEEN ONE YEAR AND 10 YEARS.
LEHMAN BROTHERS LONG-TERM TREASURY INDEX
AN INDEX OF U.S. TREASURY BONDS WITH MATURITIES OF AT LEAST 10 YEARS.
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
AN INDEX OF 15-YEAR AND 30-YEAR ISSUES BACKED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA).
LEHMAN BROTHERS MUNICIPAL BOND INDEX
AN INDEX OF LONG-TERM INVESTMENT GRADE MUNICIPAL BONDS.
LIABILITY
LIABILITY IS ANY LEGALLY ENFORCEABLE OBLIGATION. LIABILITY INSURANCE COVERS YOU FOR MONEY YOU'RE LEGALLY OBLIGATED TO PAY BECAUSE A COURT HAS FOUND THAT YOU WERE RESPONSIBLE FOR INJURIES TO ANOTHER PERSON'S PROPERTY.
LIABILITY COVERAGE
IN AN ACCIDENT WHERE YOU ARE CHARGED WITH INJURING ANOTHER PERSON OR DAMAGING HIS OR HER PROPERTY, LIABILITY INSURANCE PAYS THE COST OF YOUR LEGAL DEFENSE, AS WELL AS THE COST OF ANY DAMAGES FOR WHICH YOU ARE FOUND LEGALLY RESPONSIBLE. BECAUSE COVERAGE VARIES, REVIEW YOUR POLICY FOR COVERAGE SPECIFICS.
LIABILITY INSURANCE
LIABILITY INSURANCE PAYS CLAIMS AGAINST YOU AND YOUR LEGAL DEFENSE COSTS, WHEN YOU ARE LEGALLY RESPONSIBLE FOR AN ACCIDENT IN WHICH YOU HAVE INJURED ANOTHER PERSON OR DAMAGED HIS OR HER PROPERTY.
LIABILITY, COLLISION AND COMPREHENSIVE
THESE ARE THE THREE MAIN TYPES OF COVERAGE AVAILABLE IN AN AUTO INSURANCE POLICY. LIABILITY PAYS OTHER PEOPLE IF YOU'VE INJURED THEM OR DAMAGED THEIR PROPERTY. COLLISION PAYS TO REPAIR DAMAGE TO YOUR CAR CAUSED BY (WHAT ELSE?) COLLISIONS. COMPREHENSIVE PAYS YOU FOR YOUR LOSSES DUE TO THEFT AND OTHER CALAMITIES THAT ARE UNRELATED TO COLLISIONS -- LIKE DAMAGE FROM HAIL, FIRE, VANDALISM, FLOODS, ETC. FOR FULL PROTECTION, YOU NEED ALL THREE TYPES OF COVERAGE. BUT IF YOUR CAR IS SO OLD THAT ITS BOOK VALUE IS LESS THAN THE COST OF REPAIRING IT, YOU SHOULD CONSIDER DROPPING COLLISION AND COMPREHENSIVE COVERAGE, BECAUSE NO POLICY PAYS YOU MORE THAN THE CAR'S BOOK VALUE FOR REPAIRS OR REPLACEMENT.
LICENSING
OFFICIAL OR LEGAL PERMISSION TO OWN OR DO SOMETHING, SUCH AS THE PERMISSION TO UTILIZE INTELLECTUAL PROPERTY, PATENTS, TRADE SECRETS, OR COPYRIGHTS UNDER A CONTRACT OR AGREEMENT.
LIEN HOLDER
ANYONE WHO HAS THE LEGAL RIGHT TO TAKE POSSESSION OF YOUR CAR, OR SELL IT, TO SATISFY ANY OBLIGATION OR DEBT. IN OTHER WORDS, THE ORGANIZATION THAT HOLDS THE LOAN ON YOUR VEHICLE.
LIFE EXPECTANCY
A CALCULATION OF THE AVERAGE LENGTH OF LIFE FOR A PERSON BASED ON GENDER AND HEALTH. THIS FIGURE IS DRAWN FROM ACTUARIAL TABLES. TO INCREASE THE CHANCE THAT YOUR MONEY WILL LAST AS LONG AS YOU DO, ADD TEN YEARS TO YOUR LIFE EXPECTANCY.
LIFE INSURANCE
A POLICY AGREEMENT BETWEEN YOU AND AN INSURANCE COMPANY. YOU AGREE TO PAY A SPECIFIED AMOUNT (PREMIUM) TO THE COMPANY FOR A SPECIFIED AMOUNT OF COVERAGE. MOST LIFE INSURANCE IS DESIGNED TO PROVIDE FUNDS TO YOUR HEIRS IN THE EVENT OF YOUR DEATH.
LIMIT
THE MAXIMUM AMOUNT A POLICY WILL PAY FOR A COVERED LOSS. FOR EXAMPLE, IF YOU HAVE A $5,000 LOSS AND THE LIMIT ON YOUR POLICY IS $3,000, THEN THE INSURANCE COMPANY WILL ONLY PAY $3,000. IF YOU HAVE A $3,000 LOSS AND THE POLICY LIMIT IS $5,000, THE COMPANY PAYS THE ENTIRE $3,000.
LIMIT ORDER
AN ORDER TO BUY OR SELL A SECURITY AT A DESIGNATED PRICE OR BETTER. THE TRADE WILL ONLY BE EXECUTED WHEN THE PRICE IS WITHIN THIS RESTRICTION. A SELL LIMIT ORDER DIRECTS THE BROKER TO SELL A SECURITY ONLY AT THE SPECIFIED PRICE OR HIGHER. FOR EXAMPLE, IF YOU PUT IN A LIMIT ORDER TO SELL GO UP CORPORATION AT $55 WHEN THE STOCK IS SELLING FOR $50, THE TRADE WON'T BE EXECUTED UNTIL THE PRICE REACHES $55. A BUY LIMIT ORDER DIRECTS THE BROKER TO PURCHASE A SECURITY ONLY AT THE SPECIFIED PRICE OR LOWER. IF YOU PUT IN A LIMIT ORDER TO BUY GO DOWN CORPORATION AT $50 AND THE STOCK IS SELLING FOR $50 1/8, THE TRADE WON'T BE MADE UNLESS THE PRICE DROPS TO 50.
LIMITED LIABILITY COMPANY (LLC)
A BUSINESS STRUCTURED SO THAT ITS OWNERS ARE NOT PERSONALLY LIABLE FOR DEBTS OR OTHER BUSINESS LIABILITIES SUCH AS DAMAGES FROM LAWSUITS. LLCS ARE TAXED SIMILARLY TO PARTNERSHIPS, THUS AVOIDING DOUBLE TAXATION.
LIMITED PARTNERSHIP
A BUSINESS COMPRISED OF ONE OR MORE GENERAL PARTNERS AND ONE OR MORE LIMITED PARTNERS, WHERE THE LIMITED PARTNERS ARE NOT INVOLVED OR RESPONSIBLE FOR THE MANAGEMENT OF THE COMPANY AND ARE NOT FINANCIALLY LIABLE EXCEPT TO THE EXTENT OF THEIR INVESTMENT IN THE PARTNERSHIP.
LIQUID NET WORTH
YOUR NET WORTH IS THE TOTAL OF ALL OF YOUR ASSETS (STOCKS, BONDS, BANK ACCOUNTS, HOME EQUITY, REAL ESTATE, PERSONAL PROPERTY, BUSINESS RECEIVABLES, NOTES RECEIVABLE, ETC.) MINUS THE TOTAL OF YOUR LIABILITIES (OUTSTANDING LOANS OWED, CREDIT CARD BALANCES, TAXES PAYABLE, BILLS PAYABLE, ETC.) UNFORTUNATELY, MANY OF THESE ASSETS WILL NOT BE READILY ACCESSIBLE IF CASH IS NEEDED IN A HURRY. LIQUID NET WORTH ONLY INCLUDES ASSETS THAT CAN READILY BE TURNED INTO CASH WITHOUT A MAJOR LOSS IN VALUE; THEREFORE, DO NOT INCLUDE REAL ESTATE OR BUSINESS EQUITY, PERSONAL PROPERTY AND AUTOMOBILES, EXPECTED INHERITANCES, OR FUNDS ALREADY EARMARKED FOR OTHER PURPOSES.
LISTED
USED TO DESCRIBE A SECURITY THAT IS TRADED ON AN ORGANIZED STOCK EXCHANGE. SECURITIES MUST MEET CERTAIN REQUIREMENTS TO BE LISTED ON A MAJOR EXCHANGE. FOR EXAMPLE, THE NEW YORK STOCK EXCHANGE, WHICH HAS THE MOST RIGOROUS LISTING REQUIREMENTS, LOOKS AT A COMPANYS FINANCIAL STRENGTH, ITS POSITION IN ITS INDUSTRY, AND THE DIRECTION OF THE INDUSTRY. QUALIFYING COMPANIES MUST PAY A FEE TO LIST THEIR STOCKS AND AN ANNUAL FEE TO KEEP THE LISTING CURRENT. A COMPANY THAT STUMBLES AND NO LONGER MEETS THE REQUIREMENTS CAN BE DELISTED, OR TAKEN OFF THE EXCHANGE.
LITIGATION
SETTLING A LEGAL DISPUTE IN A COURT OF LAW.
LIVING WILL
A DOCUMENT THAT STATES YOUR PREFERENCES IN MEDICAL DECISIONS IF YOU ARE UNABLE TO SPEAK FOR YOURSELF AS A RESULT OF MEDICAL INCAPACITATION. THIS IS USED TO EXPRESS YOUR DESIRES REGARDING "DO NOT RESUSCITATE ORDERS", BEING KEPT ON LIFE SUPPORT DEVICES, ETC.
LOAD
A SALES FEE YOU PAY WHEN INVESTING IN A MUTUAL FUND. A FRONT-END LOAD MEANS YOU PAY THE FEE WHEN YOU BUY SHARES. A BACK-END LOAD MEANS YOU PAY THE FEE WHEN YOU SELL SHARES.
LOCK-UP PERIOD
THE PERIOD AFTER AN INITIAL PUBLIC OFFERING WHEN COMPANY INSIDERS ARE PROHIBITED FROM SELLING THEIR SHARES. LOCK-UP PERIODS TYPICALLY LAST 180 DAYS, BUT THEY CAN BE AS SHORT AS 120 DAYS AND AS LONG AS 365 DAYS. UNDERWRITERS INSIST THAT INSIDERS SUCH AS MANAGERS, EMPLOYEES, AND VENTURE CAPITALISTS SIGN LOCK-UP AGREEMENTS TO SHORE UP THE STOCK PRICE RIGHT AFTER THE IPO. SINCE INSIDERS USUALLY STILL OWN A MAJORITY OF THE SHARES, THE STOCK PRICE COULD PLUMMET IF A NUMBER OF INSIDERS DECIDED TO DUMP THEIR SHARES AT THE SAME TIME FOR A QUICK PROFIT.
LONG-TERM DEBT
CORPORATE DEBT THAT COMES DUE IN MORE THAN A YEAR. LONG-TERM DEBTINCLUDES MORTGAGES, BANKS LOANS, AND BONDS. INVESTORS CAN FIND IT LISTED ON THE BALANCE SHEET IN A COMPANYS ANNUAL REPORT.LONG-TERM DEBT IS AN IMPORTANT COMPONENT IN THE LONG-TERM DEBT-EQUITY RATIO, AN INDICATOR OF A COMPANYS DEBT LEVEL. DEBT CAN BE A GOODTOOL FOR A CORPORATION. IT CAN HELP THE COMPANY INVEST IN NEW PLANTS AND EQUIPMENT THAT WILL INCREASE PROFITABILITY. TOO MUCH DEBT, HOWEVER, IS RISKY. IT LOCKS THE COMPANY INTO REGULAR INTEREST PAYMENTS WHETHER EARNINGS ARE UP OR DOWN. IF A COMPANY STUMBLES, IT MAY HAVE TROUBLE RECOVERING UNDER A HEAVY DEBT LOAD.
LONG-TERM HEALTH CARE OR NURSING HOME INSURANCE
INSURANCE DESIGNED TO PROVIDE THE ELDERLY WITH COVERAGE FOR EXPENSES REALTED TO LONG STAYS IN NURSING HOMES OR EXTENDED HOME HEALTH CARE NEEDS.
LOSS
A LOSS IS THE BASIS FOR AN INSURANCE CLAIM. FOR EXAMPLE, YOU'VE HAD A LOSS IF THE VALUE OF YOUR CAR IS REDUCED BECAUSE ANOTHER CAR SMASHED INTO IT.
LOSS ASSESSMENT
A LOSS ASSESSMENT IS AN EXPENSE YOU MAY INCUR AS A MEMBER OF A CONDOMINIUM OR CO-OP OWNERS' ASSOCIATION. THE ASSOCIATION ITSELF TYPICALLY OWNS AN INSURANCE POLICY, BUT CAN ASSESS ITS MEMBERS FOR DAMAGE OR LIABILITY CLAIMS THAT EXCEED ITS OWN POLICY'S LIMITS. FOR EXAMPLE, YOUR BUILDING'S ROOF NEEDS TO BE REPLACED AFTER A VIOLENT STORM. THE NEW ROOF COSTS $500,000. UNFORTUNATELY, THE ASSOCIATION'S POLICY LIMIT FOR DAMAGE TO THE PROPERTY IS $250,000. THE COST DIFFERENCE WOULD BE SPLIT AMONG THE MEMBERS OF THE ASSOCIATION. YOUR OWN LOSS ASSESSMENT COVERAGE WILL PAY FOR ASSESSMENTS THE ASSOCIATION MAKES AGAINST YOU BECAUSE IT IS UNDERINSURED. THE STANDARD LIMIT IN THE POLICY IS $1,000, BUT YOU CAN PURCHASE AMOUNTS UP TO $50,000.
LOSS OF INCOME BENEFITS
COVERAGE THAT PAY BENEFITS TO REPLACE INCOME LOST BECAUSE THE INSURED PERSON IS UNABLE TO WORK AS A RESULT OF DISABILITY RESULTING FROM A COVERED AUTO ACCIDENT. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT LOSS OF INCOME BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
LOSS OF SERVICES BENEFITS
COVERAGE THAT PAYS BENEFITS TO REPLACE INCOME LOST BECAUSE THE INSURED PERSON IS UNABLE TO WORK AS A RESULT OF DISABILITY RESULTING FROM A COVERED AUTO ACCIDENT. READ YOUR INSURANCE POLICY CAREFULLY TO LEARN THE SPECIFICS ABOUT WHAT YOUR LOSS OF SERVICES BENEFITS COVERAGE INCLUDES AND DOESN'T INCLUDE.
LOTS
GROUPS OF SHARES OF A STOCK OR MUTUAL FUND BOUGHT AND SOLD. ONE ROUND LOT EQUALS 100 SHARES.
LUMP-SUM DISTRIBUTION
A SINGLE PAYMENT OF ALL YOUR RETIREMENT MONEY FROM AN ACCOUNT, USUALLY GIVEN WHEN YOU LEAVE A COMPANY OR WHEN YOU RETIRE. PRIOR TO RETIREMENT, LUMP-SUM DISTRIBUTIONS ARE USUALLY ROLLED OVER INTO ANOTHER RETIREMENT PLAN OR INTO AN IRA. THERE MAY BE TAX CONSEQUENCES WHEN YOU TAKE A LUMP-SUM DISTRIBUTION. YOU SHOULD CONSULT A FINANCIAL PROFESSIONAL TO DISCUSS THE TAXES THAT MAY APPLY TO ANY ACTION YOU TAKE WITH A LUMP-SUM DISTRIBUTION.
MARGIN
WHEN AN INVESTOR BORROWS MONEY FROM A BROKER TO BUY A SECURITY. INVESTORS USUALLY DO THIS WHEN THEY ARE CONFIDENT THAT THE PRICE OF A SECURITY WILL GO UP. FOR EXAMPLE, SUPPOSE YOU WANT TO BUY 200 SHARES OF A STOCK THAT COSTS $20 PER SHARE. NORMALLY, YOU WOULD NEED $4,000 (PLUS COMMISSION) TO PURCHASE THIS SECURITY. BUT IF YOU BUY THE SECURITY ON MARGIN, YOU CAN BORROW UP TO $2,000 (50%) OF THE PURCHASE PRICE AND PAY THE OTHER $2,000 YOURSELF. IF THE VALUE OF THE STOCK GOES UP, YOU EARN ALL THE GAINS ON THE $4,000 INVESTMENT, EVEN THOUGH YOU BORROWED HALF OF THE INITIAL INVESTMENT. AT SOME POINT, OF COURSE, YOU NEED TO PAY BACK THE BORROWED AMOUNT TO THE BROKERAGE, WHICH CHARGES INTEREST FOR THE AMOUNT YOU HAVE BORROWED. IF THE VALUE OF THE STOCK FALLS, HOWEVER, YOU WILL OWE THE BROKERAGE FOR THE LOSSES. IF THE VALUE OF THE STOCK FALLS TOO FAR, THE BROKERAGE MAY GIVE YOU A MARGIN CALL.
MARGIN ACCOUNT
A SPECIAL TYPE OF BROKERAGE ACCOUNT ALLOWING INVESTORS TO BUY CERTAIN SECURITIES WITH MONEY BORROWED FROM THE BROKER. A MARGIN ACCOUNT IS ESTABLISHED WHEN AN INVESTOR WANTS TO BUY SECURITIES ON MARGIN OR SHORT STOCKS. WHEN BUYING ON MARGIN OR SHORTING STOCKS, AN INVESTOR MUST HAVE A MINIMUM AMOUNT OF CASH OR SECURITIES DEPOSITED WITH THE BROKER (THIS AMOUNT IS KNOWN AS THE MARGIN). SINCE 1945, THE INITIAL MARGIN REQUIRED HAS BEEN BETWEEN 50 AND 100 PERCENT OF THE SECURITY'S PURCHASE PRICE. IN THE MID-1990S, THE MINIMUM INITIAL MARGIN REQUIRED WAS 50 PERCENT OF THE PURCHASE OR SHORT SALE PRICE, WITH A MINIMUM OF $2000 FOR CERTAIN SECURITIES. BEYOND THIS, MINIMUM MAINTENANCE REQUIREMENTS ARE IMPOSED BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, THE NEW YORK STOCK EXCHANGE, AND THE BROKERAGE FIRM. QUICKEN BROKERAGE CUSTOMERS MUST APPLY SEPARATELY FOR MARGIN TRADING PRIVILEGES (LEARN MORE); ONCE MARGIN TRADING IS APPROVED, THE QUICKEN BROKERAGE ACCOUNT WILL INCLUDE A MARGIN ACCOUNT SEGMENT THROUGH WHICH MARGIN TRADES ARE TRANSACTED AND A SHORT ACCOUNT SEGEMENT FOR SHORT SALES, IN ADDITION TO THE USUAL CASH ACCOUNT SEGMENT.
MARGIN CALL
WHEN AN INVESTOR HAS BOUGHT STOCKS ON MARGIN AND THE VALUE OF THAT STOCK FALLS TOO LOW, THE BROKER MAY ISSUE A MARGIN CALL TO THE INVESTOR TO OBTAIN MONEY TO COVER THE DECLINE. STOCK EXCHANGES, THE NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD), AND INDIVIDUAL BROKERAGES HAVE ESTABLISHED RULES GOVERNING THE PERCENTAGE OF A PURCHASE THAT CAN BE MADE ON MARGIN.
MARGINAL INCOME TAX BRACKET
TAXPAYERS CAN FALL INTO FIVE MARGINAL TAX BRACKETS: 15%, 28%, 31%, 36% AND 39.6%. THIS MEANS THAT YOUR LAST DOLLAR IS TAXED AT THAT RATE. THIS DOESN'T NECESSARILY MEAN THAT YOUR ENTIRE INCOME IS TAXED AT THAT RATE, THOUGH. INSTEAD, EVERY AMERICAN PAYS THE SAME PERCENT ON THE SAME AMOUNT OF INCOME. FOR INSTANCE, AN INDIVIDUAL MAKING $50,000 A YEAR WOULD PAY 15% ON THE FIRST $25,750, JUST LIKE EVERYONE ELSE, THEN 28% ON THE REST. (YOU CAN FIND YOUR MARGINAL RATE IN OUR TAX RATES AREA.) IT CAN BE IMPORTANT FOR YOU TO KNOW YOUR MARGINAL RATE WHEN MAKING INVESTMENT DECISIONS. FOR INSTANCE, TAXABLE BONDS MAY MAKE SENSE FOR SOMEONE IN A LOWER TAX BRACKET, WHILE TAX-FREE MUNICIPAL BONDS MAY MAKE SENSE FOR PEOPLE IN HIGHER TAX BRACKETS SINCE THEIR TAX SAVINGS MORE THAN OFFSET THE LOWER INTEREST RATES THESE BONDS TEND TO OFFER.
MARKET CLOSE
THE END OF THE TRADING DAY ON THE MAJOR STOCK EXCHANGES, WHICH ARE OPEN FOR BUSINESS ON WEEKDAYS FROM 9:30 A.M. TO 4 P.M. EASTERN TIME. INVESTORS PAY ATTENTION TO THE LEVEL OF THE MARKET WHEN IT CLOSES, AND TO QUANTIFY IT, THEY TURN TO STOCK INDEXES, WHICH MEASURE MARKET TRENDS BY USING FORMULAS TO AVERAGE STOCK PRICES. THE NEW YORK STOCK EXCHANGE COMPOSITE INDEX REFLECTS THE ENTIRE NYSE MARKET ALTHOUGH THE DOW JONES INDUSTRIAL AVERAGE OF 30 STOCKS IS THE MOST WIDELY QUOTED. OTHER MAJOR INDEXES INCLUDE THE S&P 500 AND THE NASDAQ. TRADING OCCURS AFTER HOURS UNDER SPECIAL RULES, BUT THE INDEXES TRACK ACTIVITY ONLY DURING REGULAR BUSINESS HOURS.
MARKET CAPITALIZATION
THE TOTAL NUMBER OF A COMPANY'S SHARES MULTIPLIED BY THE CURRENT PRICE PER SHARE. FOR EXAMPLE, IF A COMPANY HAS 10 MILLION SHARES, AND THE CURRENT PRICE PER SHARE IS $20, THEN THE COMPANY'S MARKET CAPITALIZATION IS $200 MILLION ($20 X 10 MILLION).
MARKET INDEX
A STATISTICAL COMPOSITE OF REPRESENTATIVE STOCKS. THE DOW JONES INDUSTRIAL AVERAGE, THE STANDARD & POOR'S 500, AND THE NASDAQ COMPOSITE ARE THE THREE MOST WIDELY QUOTED MARKET INDEXES.
MARKET ORDER
ORDER FOR A BROKER TO BUY OR SELL A SECURITY IMMEDIATELY AT THE BEST AVAILABLE PRICE. MOST ORDERS EXECUTED ON THE WORLD EXCHANGES ARE OF THIS TYPE.
MARKET OUTPERFORM
AN ANALYSTS RATING THAT INDICATES A STOCK IS EXPECTED TO GROW FASTER THAN THE MARKET AS A WHOLE. THE BENCHMARK INDEX IS USUALLY THE S&P 500.
MARKET PRICE
THE PRICE OR LAST REPORTED PRICE AT WHICH A SECURITY IS CURRENTLY TRADING.
MARKET SHARE
A MEASURE OF HOW DOMINANT A COMPANY IS IN ITS INDUSTRY. MARKET SHARE IS DETERMINED BY EXPRESSING A COMPANYS REVENUES, SOMETIMES FOR A SPECIFIC PRODUCT OR SERVICE, AS A PERCENTAGE OF THE INDUSTRYS OVERALL REVENUES FOR SIMILAR PRODUCTS OR SERVICES. COMPANIES WITH HIGH MARKET SHARE TYPICALLY HAVE LOWER OPERATING COSTS AND ARE MORE PROFITABLE THAN OTHER COMPANIES IN THE INDUSTRY. CHANGES IN MARKET SHARE CAN INDICATE HOW WELL A COMPANY IS LIKELY TO PERFORM. GROWING MARKET SHARE IS A BULLISH SIGN WHILE DECLINING MARKET SHARE CAN BE A SIGN OF TROUBLE.
MARKET VALUE
THE MARKET VALUE OF A SECURITY EQUALS THE MARKET PRICE PER SHARE TIMES THE NUMBER OF SHARES.
MATURITY
THE DATE WHEN A BOND'S PRINCIPAL BECOMES DUE AND PAYABLE.
MEDICAL BENEFITS
INSURANCE THAT REIMBURSES YOU FOR COVERED MEDICAL EXPENSES YOU INCUR AS THE RESULT OF AN AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT MEDICAL BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
MEDICAL EXPENSES
MEDICAL EXPENSES ARE REASONABLE CHARGES FOR MEDICAL, SURGICAL, X-RAY, DENTAL, AMBULANCE, HOSPITAL, PROFESSIONAL NURSING, PROSTHETIC DEVICES, AND FUNERAL EXPENSES. (THE INSURANCE COMPANY DEFINES WHAT'S REASONABLE.)
MEDICAL PAYMENTS INSURANCE - AUTOMOBILE
MEDICAL PAYMENTS INSURANCE IS AN AUTO POLICY THAT REIMBURSES YOU AND YOUR PASSENGERS (WHETHER OR NOT THEY'RE MEMBERS OF YOUR FAMILY) FOR MEDICAL OR FUNERAL EXPENSES STEMMING FROM AN ACCIDENT, REGARDLESS OF WHO WAS RESPONSIBLE FOR THE ACCIDENT.
MEDICAL PAYMENTS INSURANCE-HOMEOWNER
MEDICAL PAYMENTS INSURANCE IS A HOMEOWNER'S POLICY THAT COMPENSATES PEOPLE WHO SUSTAIN AN INJURY WHILE ON YOUR PROPERTY, OR WHOM YOU INJURE ACCIDENTALLY. (LIKE A DELIVERY BOY WHO SLIPS ON A BANANA PEEL IN YOUR KITCHEN, OR A GUEST YOUR CHILD ACCIDENTALLY HITS WITH A BADLY PITCHED BALL.) THIS COVERAGE EXCLUDES THE PEOPLE WHO LIVE IN YOUR HOUSE. IN OTHER WORDS, IT WON'T PAY IF YOU'RE THE ONE WHO SLIPS ON THAT BANANA PEEL.
MEDICAL POWER OF ATTORNEY
A DOCUMENT THAT ALLOWS YOU TO DESIGNATE ANOTHER PERSON TO MAKE MEDICAL DECISIONS ON YOUR BEHALF.
MEDICARE
A GOVERNMENT HEALTH-CARE PLAN FOR ELIGIBLE RECIPIENTS OF SOCIAL SECURITY BENEFITS, OR QUALIFIED DISABLED PERSONS UNDER THE AGE OF 65.
MID-CAP BLEND FUND
AS DETERMINED BY FUND RESEARCH FIRM MORNINGSTAR, INC., A MUTUAL FUND THAT INVESTS IN STOCKS WITH A MEDIAN MARKET CAPITALIZATION BETWEEN $2 BILLION AND $11 BILLION THAT BLEND GROWTH AND VALUE CHARACTERISTICS. BLEND FUNDS TYPICALLY ARE LESS RISKY THAN GROWTH FUNDS.
MID-CAP GROWTH FUND
A MUTUAL FUND THAT INVESTS IN MID-SIZED COMPANIES WITH GOOD GROWTH PROSPECTS. ACCORDING TO MORNINGSTAR, MID-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATIONS BETWEEN $2 BILLION AND $11 BILLION. OTHER ORGANIZATIONS MAY USE DIFFERENT DEFINITIONS. INCOME FROM DIVIDENDS USUALLY IS NOT A GOAL OF THESE FUNDS. GROWTH FUNDS OFTEN HAVE HIGH P/E RATIOS BECAUSE MANAGERS ARE WILLING TO PAY A PREMIUM FOR STOCKS OF FAST-GROWING COMPANIES.
MID-CAP VALUE FUND
A MUTUAL FUND THAT INVESTS IN THE UNDERVALUED STOCKS OF MID-SIZED COMPANIES. ACCORDING TO MORNINGSTAR, MID-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATIONS BETWEEN $2 BILLION AND $11 BILLION. THE DEFINITION FOR MID-CAP FUNDS HAS GONE UP FROM THE RANGE OF $1 BILLION TO $5 BILLION AS THE STOCK MARKET HAS RISEN. FOR THAT REASON, OTHER ORGANIZATIONS MAY USE DIFFERENT DEFINITIONS. VALUE FUND MANAGERS BUY STOCKS THAT HAVE RELATIVELY LOW P/E RATIOS OR ARE UNDERVALUED BY OTHER OBJECTIVE MEASURES, SUCH AS PRICE-TO-BOOK RATIOS. THE UNDERLYING COMPANY MUST BE FUNDAMENTALLY STRONG EVEN THOUGH THE STOCK IS LOW. FUND MANAGERS HOPE THAT OVER TIME THE STOCK PRICE WILL RISE AS A BETTER REFLECTION OF THE COMPANYS PERFORMANCE.
MID-CAP STOCK
A COMPANY WITH A MARKET CAPITALIZATION OF BETWEEN $1 BILLION AND $5 BILLION.
MINIMUM INITIAL INVESTMENT
WHEN REFERRING TO A MUTUAL FUND, IT IS THE SMALLEST AMOUNT A FUND WILL ACCEPT AS AN INITIAL INVESTMENT. MOST FUNDS HAVE MINIMUM INITIAL INVESTMENTS; THE SPECIFIC AMOUNT VARIES FROM ONE FUND TO THE NEXT.
MINIMUM WAGE
THE MINIMUM COMPENSATION THAT MUST BE PAID TO MOST HOURLY WORKERS. THE FEDERAL MINIMUM WAGE, WHICH WAS RAISED TO $5.15 AN HOUR IN 1997, APPLIES TO HOURLY EMPLOYEES AT BUSINESSES THAT HAVE MORE THAN $500,000 IN REVENUES OR THAT ARE ENGAGED IN INTERSTATE COMMERCE. THE LAW ALSO APPLIES TO STATE AND LOCAL GOVERNMENT AGENCIES, HOSPITALS, SCHOOLS, AND DOMESTIC WORKERS. IT DOES NOT AFFECT THE YOUTH MINIMUM WAGE OF $4.25 AN HOUR, WHICH MAY BE PAID TO EMPLOYEES UNDER AGE 20, WHO WORK FOR 90 DAYS OR LESS. STATES CAN SET THEIR OWN MINIMUM WAGE. IF IT IS HIGHER THAN THE FEDERAL STANDARD, ALL COMPANIES IN THE STATE MUST COMPLY.
MONEY MARKET
A MARKET FOR SHORT-TERM DEBT INSTRUMENTS (GENERALLY OF LESS THAN ONE YEAR) SUCH AS CERTIFICATES OF DEPOSIT, COMMERCIAL PAPER, BANKER'S ACCEPTANCES, TREASURY BILLS, AND DISCOUNT NOTES OF THE FEDERAL HOME LOAN BANK AND THE FEDERAL NATIONAL MORTGAGE ASSOCIATION. MONEY MARKETS OFFER SAFETY AND LIQUIDITY. A MONEY MARKET FUND IS A MUTUAL FUND THAT INVESTS ONLY IN MONEY MARKET INVESTMENTS. MOST MONEY FUNDS ALLOW LIMITED CHECK WRITING. AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL MAINTAIN A $1 SHARE PRICE.
MONTHLY WORK LOSS
AVERAGE FOR THE AMOUNT OF MONTHLY INCOME LOST BECAUSE OF YOUR INABILITY TO WORK DUE TO A DISABILITY ARISING FROM A COVERED AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY CAREFULLY TO LEARN THE SPECIFICS ABOUT WHAT YOUR MONTHLY WORK LOSS COVERAGE INCLUDES AND DOESN'T INCLUDE.
MORGAN STANLEY CAPITAL INTERNATIONAL ALL COUNTRY INDEX
A MARKET-WEIGHTED INDEX OF STOCKS FROM 45 COUNTRIES.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE EX-JAPAN INDEX
AN AGGREGATE OF 21 INDIVIDUAL COUNTRY INDEXES (EXCLUDING JAPAN). THIS INDEX IS CONSIDERED A GENERAL BENCHMARK FOR INTERNATIONAL STOCKS.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX
AN INDEX OF STOCKS IN 15 DEVELOPED EUROPEAN MARKETS.
MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC EX-JAPAN INDEX
AN INDEX OF STOCK MARKETS IN AUSTRALIA, HONG KONG, NEW ZEALAND, SINGAPORE AND MALAYSIA.
MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX
AN INDEX OF STOCK MARKETS IN AUSTRALIA, HONG KONG, JAPAN, NEW ZEALAND, SINGAPORE AND MALAYSIA.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX-U.S. INDEX
AN INDEX OF STOCKS FROM 21 DEVELOPED-COUNTRY MARKETS, EXCLUDING THE UNITED STATES.
MORNINGSTAR
ONE OF THE LEADING MUTUAL FUND RATING SERVICES. A FIVE STAR RATING IS MORNINGSTAR'S TOP RATING. MORNINGSTAR'S RATING HAS TWO DISTINCT PARTS: A RISK-ASSESSMENT MEASURE AND A LOAD-ADJUSTED PERFORMANCE (RETURN) MEASURE. MORNINGSTAR CALCULATES EACH RATING FOR THREE TIME PERIODS: THREE, FIVE, AND TEN YEARS, WHEN AVAILABLE. (A FUND MUST HAVE AT LEAST A THREE-YEAR TRACK RECORD BEFORE MORNINGSTAR WILL RATE IT.) TO CALCULATE THE RISK SCORE, MORNINGSTAR PLOTS MONTHLY FUND RETURNS IN RELATION TO TREASURY-BILL, OR T-BILL, RETURNS. MORNINGSTAR ADDS THE AMOUNTS BY WHICH THE FUND TRAILS THE T-BILL RETURN AND DIVIDES THAT TOTAL BY THE PERIOD'S TOTAL NUMBER OF MONTHS. THIS NUMBER IS THEN COMPARED WITH THOSE OF OTHER FUNDS IN THE SAME BROAD INVESTMENT CLASS. THE RESULTING RATING EXPRESSES HOW RISKY THE FUND IS RELATIVE TO THE AVERAGE FUND IN ITS CLASS. MORNINGSTAR CATEGORIZES FUNDS IN TERMS OF INVESTMENT PHILOSOPHY. THE VARIOUS CLASSES ARE DEVELOPED BY MORNINGSTAR AND RANGE FROM CLASSES WITH HUNDREDS OF FUNDS, SUCH AS "GROWTH" AND "FOREIGN STOCK" TO THOSE WITH LESS THAN TWO DOZEN FUNDS, SUCH AS "SPECIALTY-COMMUNICATIONS" OR "SPECIALTY-HEALTH." MORNINGSTAR DETERMINES A FUND'S EXTENDED ASSET CLASS BY REVIEWING INFORMATION IN THE FUND'S PROSPECTUS OR STUDYING HOW A FUND IS MARKETED.
MORTGAGE DEBTS
INCLUDES FIRST MORTGAGES, HOME EQUITY LOANS, AND ANY OTHER LOANS SECURED BY YOUR REAL ESTATE. INCLUDE INVESTMENT PROPERTIES AND SECOND HOMES.
MORTGAGE LOAN
SHORT-TERM OR LONG-TERM USE OF PROPERTY OR MONEY WITH THE CONSENT OF THE OWNER OF THE PROPERTY OR MONEY (THE LENDER). USUALLY THE LOAN OF MONEY HAS AN AGREED-TO REPAYMENT SCHEDULE. NORMALLY THERE IS AN INTEREST CHARGE FOR THE USE OF THE MONEY.
MOVING AVERAGE
IN SECURITY CHARTS, THE AVERAGE PRICE FLUCTUATIONS OVER 50-DAY OR 200-DAY INTERVALS. EACH POINT ON A 50-DAY (OR 200-DAY) MOVING AVERAGE CURVE IS CALCULATED BY AVERAGING THE CLOSING PRICES FROM THE PREVIOUS 50 (OR 200) DAYS OF TRADING. THE MOVING AVERAGE IS A WAY TO COMPARE LONG-TERM PRICE TRENDS WITH RECENT PRICE CHANGES. WHEN THESE LINES CROSS, IT INDICATES A CHANGE AWAY FROM TREND. THE 50-DAY MOVING AVERAGE IS CONSIDERED AN APPROPRIATE GAUGE FOR INTERMEDIATE-TERM TRADING, WHILE INVESTORS TEND TO PREFER THE 200-DAY AVERAGE FOR LONG-TERM TREND ANALYSIS.
MUNICIPAL BONDS
BONDS ISSUED BY A STATE OR LOCAL GOVERNMENT ENTITY. THEY ARE OFTEN TAX-EXEMPT IF THEY ARE PUBLIC PURPOSE BONDS. PRIVATE PURPOSE MUNICIPAL BONDS, HOWEVER, ARE TAXABLE UNLESS SPECIFICALLY EXEMPTED. ALSO KNOWN AS "MUNIS."
MUTUAL FUND
A GROUP OF SECURITIES OWNED BY A GROUP OF INVESTORS. IT IS MANAGED BY INVESTMENT PROFESSIONALS WHO MAKE BUY AND SELL DECISIONS FOR THE GROUP. INVESTORS CHOOSE TO PURCHASE SHARES IN MUTUAL FUNDS FOR A COUPLE OF REASONS: THEY CAN DIVERSIFY THEIR HOLDINGS MORE EASILY WITH A SMALLER AMOUNT OF MONEY (BECAUSE THE MUTUAL FUND HAS THE MONEY TO BUY SHARES IN MANY DIFFERENT TYPES OF SECURITIES); AND THEY CAN RELY ON INVESTMENT PROFESSIONALS TO MAKE TRADING DECISIONS FOR THEM.
NASDAQ STOCK MARKET
THE SECOND LARGEST STOCK MARKET IN THE UNITED STATES. LAUNCHED IN 1971, THE NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION (NASDAQ) MARKET IS THE NATION'S FIRST ELECTRONIC STOCK MARKET, LINKING BUYERS AND SELLERS VIA A COMPUTER NETWORK. BROKERS AND DEALERS MAKE A MARKET IN INDIVIDUAL STOCKS BY MAINTAINING AN INVENTORY IN THEIR OWN ACCOUNTS. THEY BUY OR SELL WHEN THEY RECEIVE ORDERS FROM INVESTORS. START-UP COMPANIES ISSUING STOCK IN INITIAL PUBLIC OFFERINGS FREQUENTLY LIST ON THE NASDAQ. IT IS ALSO KNOWN AS A HOME TO MANY MAJOR TECHNOLOGY STOCKS, INCLUDING MICROSOFT AND INTEL. THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, NASDAQ'S PARENT, MERGED WITH THE AMERICAN STOCK EXCHANGE IN 1998. BUT NASDAQ STILL OPERATES SEPARATELY UNDER THE NEWLY FORMED NASDAQ-AMEX MARKET GROUP, A NASD SUBSIDIARY.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD)
THE NONPROFIT ORGANIZATION THAT RUNS THE NASDAQ STOCK MARKET AND THE AMERICAN STOCK EXCHANGE UNDER ITS NASDAQ-AMEX MARKET GROUP SUBSIDIARY. THE SECURITIES AND EXCHANGE COMMISSION MUST APPROVE ANY RULE CHANGES AFFECTING TRADING OR LISTING QUALIFICATIONS.
NEEDS
THE INCOME YOU WILL NEED TO COVER YOUR EXPENSES IN RETIREMENT. YOUR EXPENSES MAY DROP IN RETIREMENT IF YOU STOP COMMUTING, PAY OFF YOUR MORTGAGE, OR REDUCE YOUR ENTERTAINING. NOT EVERYONE SEES THEIR EXPENSES DROP, HOWEVER. YOU MAY DECIDE TO TRAVEL MORE WIDELY AND YOUR HEALTH COSTS MAY RISE. ON AVERAGE, YOU CAN EXPECT TO GET BY ON 70-80% OF YOUR PRE-RETIREMENT INCOME.
NET ASSET VALUE (NAV)
THE VALUE OF ONE SHARE OF A MUTUAL FUND. EXCEPT FOR MONEY-MARKET FUNDS, THE VALUE OF A MUTUAL FUND SHARE USUALLY CHANGES DAILY. THE NET ASSET VALUE COMES FROM DIVIDING THE VALUE OF ALL THE FUND'S HOLDINGS BY THE NUMBER OF SHARES IN THE FUND.
NET ASSETS
THE DIFFERENCE BETWEEN THE TOTAL VALUE OF YOUR ASSETS AND POSSESSIONS (SUCH AS YOUR HOME, SAVINGS ACCOUNTS, AND INVESTMENTS) AND YOUR LIABILITIES (SUCH AS YOUR MORTGAGES, CREDIT CARDS, AND SCHOOL LOANS). FOR A CORPORATION, NET WORTH (OR STOCKHOLDER'S EQUITY) IS THE AMOUNT BY WHICH THE CORPORATION'S TOTAL ASSETS EXCEED ITS TOTAL LIABILITIES ON THE BALANCE SHEET.
NET EARNINGS PER SHARE (NET EPS)
A COMPANY'S LATEST YEARLY EARNINGS DIVIDED BY THE NUMBER OF SHARES OUTSTANDING AT THAT TIME.
NET INCOME
THE AMOUNT OF A COMPANY'S TOTAL SALES (REVENUE) REMAINING AFTER SUBTRACTING ALL OF ITS COSTS, IN A GIVEN PERIOD OF TIME (ALSO REFERRED TO AS "NET EARNINGS"). THIS VERY IMPORTANT FIGURE (LITERALLY THE SOURCE OF THE TERM "THE BOTTOM LINE" FOR WHERE YOU FIND IT ON AN INCOME STATEMENT) IS THE BEST MEASURE OF THE CURRENT OPERATING STATE OF A COMPANY. EARNINGS PER SHARE (OR "EPS") IS FOUND BY DIVIDING THIS FIGURE BY THE NUMBER OF SHARE OF COMMON STOCK OUTSTANDING.
NET PRESENT VALUE (NPV)
A METHOD OF EVALUATING INVESTMENTS WHEREBY THE COST OF THE INITIAL INVESTMENT IS SUBTRACTED FROM THE PRESENT VALUE OF EXPECTED FUTURE CASH FLOWS. GENERALLY, IF THE NPV IS POSITIVE, THE INVESTMENT IS ADVANTAGEOUS.
NET SALES
A COMPANY'S TOTAL SALES MINUS CERTAIN TYPES OF RETURNS, ALLOWANCES AND DISCOUNTS.
NET WORTH
ALSO CALLED NET ASSETS. THE DIFFERENCE BETWEEN THE TOTAL VALUE OF YOUR ASSETS AND POSSESSIONS (SUCH AS YOUR HOME, SAVINGS ACCOUNTS, AND INVESTMENTS) AND YOUR LIABILITIES (SUCH AS YOUR MORTGAGES, CREDIT CARDS, AND SCHOOL LOANS). FOR A CORPORATION, NET WORTH (OR STOCKHOLDER'S EQUITY) IS THE AMOUNT BY WHICH THE CORPORATION'S TOTAL ASSETS EXCEED ITS TOTAL LIABILITIES ON THE BALANCE SHEET.
NEW YORK STOCK EXCHANGE (NYSE)
THE LARGEST STOCK EXCHANGE IN THE WORLD AND ONE OF THE OLDEST. THE NYSE TRACES ITS BEGINNINGS TO 1792 WHEN BROKERS AND MERCHANTS ON WALL STREET SIGNED THE BUTTONWOOD AGREEMENT, DETAILING HOW THEY WOULD TRADE SECURITIES. AS A CENTRAL AUCTION MARKET, THE NYSE CONDUCTS BUSINESS ON A TRADING FLOOR WHERE TRADERS BUY AND SELL SECURITIES FROM SPECIALISTS, OR MARKET MAKERS IN A SPECIFIC STOCK. IT HAS THE MOST RIGOROUS LISTING REQUIREMENTS OF ANY U.S. MARKET, LOOKING AT A COMPANY'S FINANCIAL STRENGTH, ITS POSITION IN ITS INDUSTRY, AND THE DIRECTION OF THE INDUSTRY. QUALIFYING COMPANIES MUST PAY A FEE TO LIST THEIR STOCKS AND AN ANNUAL FEE TO KEEP THE LISTING CURRENT.
NIKKEI STOCK AVERAGE
THE MOST WIDELY QUOTED JAPANESE STOCK MARKET INDEX. THE NIKKEI IS CALCULATED BY NIHON KEIZAI SHIMBUN, PARENT OF THE MAJOR BUSINESS NEWSPAPER OF THE SAME NAME. (NIKKEI IS SHORT FOR NIHON KEIZAI, WHICH MEANS JAPAN BUSINESS.) THE NIKKEI SHOWS THE AVERAGE PRICE FOR 225 ISSUES, WEIGHTED IN MUCH THE SAME WAY AS THE DOW JONES INDUSTRIAL AVERAGE. THE COMPANIES THAT MAKE UP THE NIKKEI ARE CHOSEN TO REFLECT THE OVERALL PERFORMANCE OF THE JAPANESE STOCK MARKET.
NO-LOAD MUTUAL FUND
A FUND THAT HAS NO SALES FEES TO PURCHASE OR SELL SHARES OF THE FUND. SEE ALSO FRONT-END LOAD AND BACK-END LOAD.
NON-MEDICAL BENEFITS
INSURANCE THAT REIMBURSES YOU FOR COVERED NON-MEDICAL EXPENSES YOU INCURRED BECAUSE OF AN AUTO ACCIDENT (SUCH AS LOSS OF INCOME) DUE TO YOUR INABILITY TO WORK BECAUSE OF INJURIES SUFFERED FROM A COVERED AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT NON-MEDICAL BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
NON-DEDUCTIBLE IRAS
ANYONE CAN CONTRIBUTE UP TO $2,000 OF EARNED INCOME YEARLY TO A NON-DEDUCTIBLE IRA. EARNINGS GROW TAX-DEFERRED. ITS A GOOD IDEA TO MAX OUT ON FULLY DEDUCTIBLE TAX-DEFERRED PLANS, SUCH AS YOUR 401(K), BEFORE FUNDING A NON-DEDUCTIBLE IRA. NON-DEDUCTIBLE IRA EARNINGS ARE TAXED AS INCOME UPON WITHDRAWAL. SEE ALSO DEDUCTIBLE IRA.
NON-INVESTMENT ACCOUNT
BANK ACCOUNTS, CASH, CREDIT CARDS, OTHER ASSETS, AND OTHER LIABILITY ACCOUNTS.
NONDISCLOSURE AGREEMENT
A LEGAL DOCUMENT IN WHICH THE PERSON SIGNING AGREES TO REFRAIN FROM DISCLOSING PROPRIETARY AND CONFIDENTIAL INFORMATION.
NONPROFIT CORPORATION
A BUSINESS ENTITY FORMED FOR CIVIL, SOCIAL, OR CHARITABLE PURPOSES FOR WHICH THE GENERATION OF PROFIT IS NOT PART OF ITS FUNCTION. NONPROFIT CORPORATIONS ARE TAXED DIFFERENTLY AND ARE INCORPORATED DIFFERENTLY THAN FOR-PROFIT BUSINESS ORGANIZATIONS.
OTC BULLETIN BOARD
AN ELECTRONIC, REGULATED QUOTATION SERVICE FOR NATIONAL ASSOCIATION OF SECURITIES DEALERS MARKET MAKERS. THE SERVICE DISPLAYS REAL-TIME QUOTES, LAST-SALE PRICES, AND VOLUME INFORMATION FOR MORE THAN 6,500 NATIONAL, REGIONAL, AND FOREIGN SECURITIES THAT ARE NOT TRADED ON AN ORGANIZED STOCK EXCHANGE. SOMETIMES CALLED PENNY STOCKS AS A RESULT OF THEIR OFTEN LOW PRICES, THESE THINLY TRADED SECURITIES ARE CONSIDERED HIGHLY SPECULATIVE BECAUSE THEY ARE OFTEN ISSUED BY SMALL, UNTESTED COMPANIES.
OPEN
A SECURITYS PRICE WHEN THE MARKET OPENS FOR BUSINESS. THE OPENING PRICE IS NOT NECESSARILY THE SAME AS THE PREVIOUS DAYS CLOSE. NEWS RELEASED AFTER HOURS, TRADING ON FOREIGN EXCHANGES, AND CHANGES IN BUY AND SELL ORDERS ALL CAN AFFECT THE PRICE. ON THE NEW YORK STOCK EXCHANGE AND THE AMERICAN STOCK EXCHANGE A SPECIALIST SELECTS THE OPENING PRICE THAT CLEARS THE MOST ORDERS. ON THE NASDAQ, FIRMS POST BID AND ASK PRICES ON COMPUTER TO DETERMINE THE OPENING PRICE.
OPEN-END FUND
THE MOST TYPICAL TYPE OF MUTUAL FUND, WITH THE NUMBER OF SHARES AVAILABLE TO INVESTORS LIMITED ONLY BY THE FUND MANAGER'S DISCRETION AND THE AMOUNT OF MONEY COMING IN TO THE FUND FROM INVESTORS. YOU BUY AND SELL OPEN-END MUTUAL FUNDS DIRECTLY THROUGH MUTUAL FUND COMPANIES (OR THROUGH BROKERS), UNLIKE CLOSED-END MUTUAL FUNDS, WHICH YOU BUY AND SELL LIKE A STOCK, THROUGH AN EXCHANGE. THE NET ASSET VALUE (NAV) FOR AN OPEN-END MUTUAL FUND DETERMINES ITS PRICE.
OPTION
THE RIGHT TO BUY OR SELL AN INVESTMENT INSTRUMENT, USUALLY A SECURITY, AT A PREVIOUSLY AGREED PRICE KNOWN AS THE STRIKE PRICE. THE OPTION BUYER OR SELLER PAYS A PREMIUM TO LOCK IN THE PRICE OF THE UNDERLYING INVESTMENT WITHOUT INITIALLY HAVING TO BUY OR SELL THE INVESTMENT. THE ADVANTAGE OF THIS TYPE OF INVESTING IS THAT YOU CAN LEVERAGE THE SMALL COST OF THE PREMIUM INTO A LARGE PROFIT (ASSUMING YOUR GAMBLE IS CORRECT). FOR EXAMPLE, SUPPOSE THAT ABC STOCK IS CURRENTLY TRADING AT $20, BUT YOU BELIEVE ABC IS GOING TO GO UP IN A FEW MONTHS. YOU COULD PURCHASE AN OPTION CONTRACT TO BUY 100 SHARES OF ABC WITHIN 6 MONTHS AT $25. YOU WOULD PAY A PREMIUM, SAY, OF $250, FOR THE RIGHT TO TRADE THE STOCK AT $25 WITHIN THE NEXT 6 MONTHS. IF THE PRICE OF THE STOCK GOES ABOVE THE STRIKE PRICE OF $25 WITHIN THE NEXT 6 MONTHS AND YOU TRADE THE STOCK, YOU MAKE A PROFIT (MINUS THE $250 PREMIUM). IF THE PRICE OF THE STOCK DOES NOT GO ABOVE THE STRIKE PRICE WITHIN THE 6-MONTH TIME PERIOD, YOU ARE NOT REQUIRED TO TRADE THE UNDERLYING STOCK; YOU CAN LET IT EXPIRE. BUT IN THIS CASE, YOU WOULD LOSE THE $250 PREMIUM.
ORAL CONTRACTS
A SPOKEN AGREEMENT BETWEEN TWO OR MORE PARTIES TO PERFORM OR NOT PERFORM CERTAIN ACTIONS. ORAL CONTRACTS MAY NOT BE LEGALLY BINDING UNLESS THEY ARE CORRECTLY EXECUTED.
ORDER TYPE
THE KIND OF ORDER YOU WISH TO PLACE FOR A SECURITIES TRADE. QUICKEN BROKERAGE POWERED BY SIEBERT SUPPORTS THE FOLLOWING ORDER TYPES: MARKET: MARKET ORDERS ARE ORDERS TO BUY OR SELL AT THE BEST AVAILABLE PRICE AT THE TIME THE ORDER IS PLACED. IF YOU PLACE A MARKET ORDER OUTSIDE MARKET HOURS, THE ORDER WILL BE EXECUTED AT THE BEST AVAILABLE PRICE WHEN THE MARKET OPENS. LIMIT: WHEN YOU PLACE A LIMIT ORDER, YOU SPECIFY A PRICE AT WHICH YOU WANT YOUR ORDER TO BE EXECUTED. YOUR ORDER WILL BE EXECUTED IF AND ONLY IF THAT PRICE (OR BETTER) BECOMES AVAILABLE. FOR A LIMIT ORDER ON A BUY, THIS MEANS THAT THE ORDER WILL BE EXECUTED IF YOUR PRICE OR LOWER BECOMES AVAILABLE; A LIMIT ORDER FOR A SELL WILL BE EXECUTED AT YOUR PRICE OR HIGHER. A LIMIT ORDER REMAINS OPEN FOR THE REMAINDER OF THE DAY OR UNTIL IT IS CANCELLED (MAXIMUM 90 DAYS), DEPENDING ON THE DURATION YOU SPECIFY. STOP: WHEN YOU PLACE A STOP ORDER, YOU SPECIFY A PRICE (CALLED THE "STOP PRICE") AT WHICH THE STOCK MUST TRADE. YOUR ORDER WILL BE EXECUTED AT THE MARKET PRICE ONCE THE SECURITY HAS TRADED AT THE STOP PRICE. UNLIKE A LIMIT ORDER, A STOP ORDER OFFERS NO GUARANTEE THAT THE TRADE PRICE WILL BE AS GOOD AS OR BETTER THAN THE STOP PRICE. A STOP ORDER ALSO REMAINS OPEN FOR THE REMAINDER OF THE DAY OR UNTIL CANCELLED (MAXIMUM 90 DAYS), DEPENDING ON THE DURATION YOU SET. ALL OR NONE: AN ALL OR NONE ORDER ENSURES COMPLETE EXECUTION; THE ORDER IS NOT EXECUTED UNLESS IT CAN BE EXECUTED IN FULL.* THIS ORDER REMAINS OPEN THROUGH THE END OF THE DAY OR UNTIL CANCELLED (MAXIMUM 90 DAYS), DEPENDING ON THE DURATION YOU SPECIFY. FILL OR KILL: A FILL OR KILL IS AN ORDER TO PLACE A TRADE AT A PRICE YOU SPECIFIY, IMMEDIATELY AND IN ENTIRETY.* IF THE FILL OR KILL CANNOT BE EXECUTED IMMEDIATELY AND COMPLETELY, IT IS AUTOMATICALLY CANCELLED. *NOTE: ALL OTHER ORDERS HAVE PRIORITY OVER ALL OR NONE AND FILL OR KILL ORDERS WITH EXCHANGES OR MARKET MAKERS. THEREFORE, THESE ORDERS MAY NOT BE EXECUTED EVEN IF THE BID PRICE REACHES YOUR SELL PRICE OR THE ASK PRICE REACHES YOUR BUY PRICE.
OTHER VEHICLES
THE TERM 'OTHER VEHICLES' REFERS TO ANY OTHER VEHICLES YOU BUY OVER THE NEXT YEAR. (JUST MAKE SURE YOU REGISTER THEM WITHIN 30 DAYS OF PURCHASE.) YOU DON'T NEED TO BUY A NEW POLICY TO INSURE OTHER VEHICLES YOU MAY OWN; YOU CAN ADD THEM TO YOUR EXISTING POLICY WITH A POLICY ENDORSEMENT.
OUTSOURCE
TO HAVE A SERVICE PERFORMED OR A FUNCTION COMPLETED BY OTHERS OUTSIDE OF YOUR COMPANY.
OUTSTANDING SHARES
SHARES OF STOCK THAT ARE OWNED BY INVESTORS.
OVER-THE-COUNTER (OTC)
A STOCK THAT IS NOT LISTED ON THE NASDAQ STOCK MARKET OR ANY OTHER NATIONAL STOCK EXCHANGE. OTC STOCKS ARE OFTEN FROM YOUNG, UNTESTED COMPANIES THAT ARE UNABLE TO MEET NASDAQ OR EXCHANGE LISTING REQUIREMENTS. WHILE INVESTING IN THEM IS CONSIDERED RISKY, THE SHARES ARE USUALLY CHEAP. PRICE QUOTES CAN BE FOUND ON THE OTC BULLETIN BOARD OR IN THE PINK SHEETS, A PUBLICATION OF THE NATIONAL QUOTATION BUREAU.
OVERVALUED
A STOCK THAT MAY BE WORTH LESS THAN ITS CURRENT MARKET VALUE. AN OVERVALUED STOCK TYPICALLY HAS A HIGHER PRICE-EARNINGS RATIO THAN OTHER STOCKS IN ITS INDUSTRY OR THE MARKET AS A WHOLE. THE STOCK ALSO MAY BE OVERVALUED BY OTHER OBJECTIVE MEASURES, SUCH AS THE PEG RATIO. STOCKS THAT ARE OVERVALUED BY SUCH TRADITIONAL MEASURES MAY STILL APPRECIATE IN PRICE. MOMENTUM INVESTORS OFTEN BUY STOCKS THAT ARE OVERVALUED, PARTICULARLY ONES THAT ARE RISING ON HEAVY VOLUME, BECAUSE THEY THINK THE PRICE WILL GO EVEN HIGHER.
OWNER IF OTHER THAN INSURED
AN INSURED IS A PERSON (OR AN INSTITUTION) COVERED BY AN INSURANCE POLICY. IF YOU ARE FILLING A FORM FOR YOURSELF, YOU WOULD BE THE NAMED INSURED ON THE POLICY. AN OWNER OTHER THAN INSURED WOULD BE SOMEONE (EITHER AN INDIVIDUAL OR A COMPANY) WHO IS PURCHASING THE POLICY FOR YOU, OR YOU IF YOU ARE PURCHASING THE POLICY FOR SOMEONE ELSE.
PEG RATIO
AN INDICATOR OF WHETHER A STOCK IS UNDERVALUED OR OVERVALUED. TO OBTAIN THE PEG RATIO, A STOCK'S PRICE/EARNINGS RATIO (P/E) IS DIVIDED BY ITS FORECASTED EARNINGS GROWTH RATE. A FAIRLY VALUED STOCK WOULD HAVE A PEG RATIO OF 1; ITS CURRENT P/E AND FUTURE EARNINGS GROWTH RATE BEING EQUAL. A RATIO OF LESS THAN 1.0 CAN BE AN INDICATION THAT THE STOCK IS UNDERVALUED, AND POISED TO GROW. THE USEFULNESS OF THIS CALCULATION DEPENDS ON THE ACCURACY OF THE STOCK'S EARNINGS ESTIMATES, WHICH YOU CAN FIND AT QUOTES PLUS.
PAR VALUE
THE FACE VALUE OF A BOND (TYPICALLY $1,000) BEFORE FLUCTUATIONS IN THE MARKET CAUSE IT TO BE SOLD FOR MORE OR LESS THAN ITS PAR VALUE.
PARTNERSHIP
A BUSINESS ENTERPRISE COMPRISED OF TWO OR MORE INDIVIDUALS. LIABILITY IS SHARED BETWEEN PARTNERS. INCOME AND EXPENSES RELATED TO THE PARTNERSHIP MUST BE REPORTED ON EACH PARTNERS' INDIVIDUAL PERSONAL INCOME TAX.
PAYOUT RATIO
THE PERCENTAGE OF NET INCOME PAID OUT TO SHAREHOLDERS IN THE FORM OF DIVIDENDS. ANALYSTS EVALUATING INCOME STOCKS OFTEN LOOK AT A COMPANY'S PAYOUT RATIO TO SEE IF THERE IS STILL ROOM FOR A COMPANY TO INCREASE DIVIDENDS IN THE FUTURE. FOR EXAMPLE, A COMPANY WITH AN 85% PAYOUT RATIO MIGHT FIND IT DIFFICULT TO INCREASE DIVIDENDS. A COMPANY WITH A 50% PAYOUT RATIO HAS MORE FLEXIBILITY.
PAYROLL
THE ACCOUNTING RECORDS OF EMPLOYEES' WAGES, SALARY, BONUSES, TAXES, AND NET PAY.
PENSION PLAN
A RETIREMENT PLAN OFFERED BY SOME EMPLOYERS THAT PAYS A SET AMOUNT EACH YEAR DURING RETIREMENT.
PERCENT HELD BY INSIDERS
THE PERCENT OF SHARES IN A COMPANY'S STOCK THAT IS OWNED BY THE FIRM'S DIRECTORS, OFFICERS, AND OTHER KEY EXECUTIVES.
PERCENT UNREALIZED GAIN OR LOSS
A SECURITY'S CURRENT PRICE PER SHARE MINUS ITS AVERAGE COST PER SHARE DIVIDED BY ITS AVERAGE COST PER SHARE, THEN MULTIPLIED BY 100. FOR EXAMPLE, IF YOU BOUGHT STOCK WORTH $23.83 PER SHARE THAT IS NOW WORTH $40.00 PER SHARE, THE PERCENT UNREALIZED GAIN IS 67.9 PERCENT ($16.17 DIVIDED BY $23.83 MULTIPLIED BY 100).
PERCENTAGE HELD BY INSTITUTIONS
THE PERCENTAGE OF A STOCK'S TRADED SHARES THAT ARE HELD BY INSTITUTIONS (SUCH AS PENSION FUNDS, ENDOWMENTS, AND FOUNDATIONS). IT IS DETERMINED BY DIVIDING THE NUMBER OF SHARES OWNED BY INSTITUTIONS BY THE TOTAL NUMBER OF SHARES OUTSTANDING. MOST STOCKS ARE 30-60% HELD BY INSTITUTIONS. THIS FIGURE IS MOST TELLING AT THE EXTREMES. STOCKS WITH LITTLE OR NO INSTITUTIONAL OWNERSHIP MAY BE "UNKNOWN" TO LARGE INVESTORS OR JUST THOUGHT POORLY OF.
PERMIT
A LEGAL AUTHORIZATION TO PERFORM CERTAIN TRANSACTIONS OR ACTIVITIES.
PERSONAL INJURY PROTECTION (PIP)
THIS IS A SPECIAL FORM OF INSURANCE THAT PAYS FOR YOUR MEDICAL EXPENSES AND LOSS OF INCOME BECAUSE OF AN AUTOMOBILE ACCIDENT. PIP PAYS FOR EXPENSES YOU'VE ACTUALLY INCURRED, UP TO A SPECIFIC, PER-PERSON DOLLAR AMOUNT. PIP IS A BROADER FORM OF MEDICAL PAYMENTS INSURANCE. IT'S ALSO AN INTEGRAL PART OF THE NO-FAULT INSURANCE CONCEPT. IN FACT, STATES THAT HAVE NO-FAULT LAWS REQUIRE DRIVERS TO BUY PIP. IT'S ALSO OFFERED AS AN OPTIONAL COVERAGE IN SOME STATES WITHOUT NO-FAULT LAWS. THIS COVERAGE VARIES GREATLY FROM STATE TO STATE.
PERSONAL INJURY PROTECTION DEDUCTIBLE
THE AMOUNT YOU MUST PAY OUT OF YOUR OWN POCKET BEFORE YOUR PERSONAL INJURY PROTECTION COVERAGE KICKS IN.
PERSONAL PROPERTY COVERAGE
THIS PART OF YOUR HOMEOWNER'S POLICY PROTECTS YOUR BELONGINGS ANYWHERE IN THE WORLD, BUT THERE ARE A FEW LIMITATIONS YOU SHOULD KNOW ABOUT: 1) THERE ARE RESTRICTIONS ON THE AMOUNT A STANDARD HOMEOWNER'S POLICY WILL PAY ON SOME ITEMS - - JEWELRY OR FURS, FOR EXAMPLE (YOU CAN BUY ADDITIONAL COVERAGE FOR THEM SEPARATELY). 2) THE STANDARD REIMBURSEMENT FOR ITEMS THAT ARE DAMAGED, LOST, OR STOLEN IS THEIR ACTUAL CASH VALUE - - (ORIGINAL VALUE MINUS DEPRECIATION). IF YOU WANT TO BE REIMBURSED FOR WHAT IT WILL COST TO REPLACE THEM, SELECT THE REPLACEMENT COST OPTION. 3) ALTHOUGH THE POLICY COVERS YOUR POSSESSIONS EVERYWHERE, IT PAYS LESS FOR LOSSES INCURRED OFF YOUR PROPERTY. FOR EXAMPLE, A HOMEOWNER'S POLICY MIGHT PAY ONLY 10% OF ITS USUAL LIMIT FOR LOSS ON AN ITEM THAT YOUR CHILD TOOK AWAY TO COLLEGE.
PERSONAL UNSECURED LOANS
THESE ARE LOANS, OFTEN OBTAINED FROM A BANK, SAVINGS AND LOAN, OR CREDIT UNION THAT REQUIRES NO COLLATERAL AND ARE NOT "SECURED" BY ANY REAL ASSETS.
PHYSICAL DAMAGE COVERAGE
PHYSICAL DAMAGE COVERAGE INSURES YOU AGAINST DAMAGE TO YOUR CAR. THE PHYSICAL DAMAGE SECTION OF AN AUTOMOBILE POLICY CAN INCLUDE BOTH COMPREHENSIVE COVERAGE - - WHICH PROTECTS YOU AGAINST THEFT AND VANDALISM, AMONG OTHER THINGS - - AND COLLISION COVERAGE.
POINTS
THE PERCENTAGE OF A LOAN AMOUNT THAT MORTGAGE LENDERS CHARGE AS A FEE. ONE POINT EQUALS 1%.
POLICY
A POLICY IS A CONTRACT THAT SETS FORTH THE RIGHTS AND OBLIGATIONS OF BOTH A POLICYHOLDER AND AN INSURANCE COMPANY. THE POLICYHOLDER PAYS A PREMIUM AND IN EXCHANGE, THE INSURANCE COMPANY PROMISES TO PAY FOR LOSSES COVERED IN THE POLICY. LIKE ALL CONTRACTS, AN INSURANCE POLICY IS VALID ONLY IF BOTH PARTIES ARE COMPETENT TO SIGN IT - - YOU'RE NOT LEGALLY COMPETENT IF YOU'RE A MINOR, FOR EXAMPLE - - AND IT DOESN'T COVER ANYTHING THAT'S ILLEGAL; YOU CAN'T INSURE A SHIPMENT OF NARCOTICS.
POLICYHOLDER
A POLICYHOLDER IS A PERSON WHO PAYS A PREMIUM TO AN INSURANCE COMPANY IN EXCHANGE FOR THE PROTECTION DETAILED IN AN INSURANCE POLICY.
PREFERRED PROVIDER ORGANIZATION (PPO)
A TYPE OF HEALTH CARE PLAN THAT OFFERS A TWO-TIERED APPROACH. PATIENTS PAY A LOW DEDUCTIBLE AND LITTLE OR NO COPAYMENTS FOR VISITS TO APPROVED PHYSICIANS AND HOSPITALS. PATIENTS CAN ALSO CHOOSE TO VISIT NON-APPROVED PHYSICIANS AND HOSPITALS IN WHICH CASE THEY MUST PAY HIGHER COPAYMENTS.
PREFERRED STOCK
A STOCK WITH A FIXED DIVIDEND THAT IS PAID BEFORE COMMON STOCK DIVIDENDS. GENERALLY, THE PREFERRED DIVIDEND IS HIGHER THAN THE COMMON STOCK DIVIDEND. AND IT IS USUALLY CUMULATIVE, WHICH MEANS THAT THE COMPANY WILL MAKE UP ANY MISSED PAYMENTS. PREFERRED STOCKHOLDERS DO NOT HAVE VOTING RIGHTS. IN THE EVENT THAT A COMPANY LIQUIDATES ITS ASSETS THROUGH BANKRUPTCY, PREFERRED STOCKHOLDERS STAND IN LINE AHEAD OF COMMON STOCKHOLDERS TO RECEIVE PAYMENT. HOLDERS OF CORPORATE BONDS AND SECURED DEBT, HOWEVER, ARE ENTITLED TO SOME KIND OF RECOVERY BEFORE PREFERRED STOCKHOLDERS. PREFERRED STOCKS ARE LISTED IN THE STOCK TABLES WITH THE AMOUNT OF THE DIVIDEND. PRICES OF THESE STOCKS ARE VOLATILE BECAUSE THESE SHARES ARE THINLY TRADED COMPARED TO COMMON STOCK.
PREMIUM
THE FEE YOU PAY FOR INSURANCE, USUALLY A RECURRING EXPENSE PAID AT FIXED INTERVALS.
PRESENT VALUE
THE AMOUNT OF CASH IN TODAY'S DOLLARS THAT IS EQUIVALENT IN VALUE TO FUTURE PAYMENTS, DISCOUNTED AT AN APPROPRIATE COMPOUNDED INTEREST RATE.
PREVIOUS CLOSE
THE PRICE OF A STOCK AT THE END OF THE PREVIOUS TRADING DAY. BY COMPARING THE STOCK'S CLOSING PRICE WITH THE PREVIOUS CLOSE, AN INVESTOR CAN DETERMINE WHETHER THE STOCK GAINED OR LOST MONEY AT THE END OF THE TRADING SESSION. THE TERM ALSO CAN REFER TO THE LEVEL OF THE ENTIRE STOCK MARKET ACCORDING TO ONE OF THE MAJOR STOCK INDEXES. COMPARING THE CURRENT DAY'S CLOSE WITH THE PREVIOUS CLOSE DETERMINES WHETHER THE OVERALL MARKET ROSE OR FELL THAT DAY.
PRICE-VOLUME CHART
LINE CHARTS THAT PLOT THE PRICE OF A SINGLE STOCK OR MUTUAL FUND AND ITS TRADING VOLUME OVER ANY TIME PERIOD.
PRICE/BOOK RATIO (P/B)
AN INDICATOR OF WHETHER A STOCK IS FAIRLY VALUED. THE PRICE-BOOK RATIO COMPARES A STOCK'S MARKET VALUE (OR CURRENT PRICE) TO ITS PER SHARE BOOK VALUE (TOTAL ASSETS MINUS INTANGIBLE ASSETS AND TOTAL LIABILITIES). IN EVALUATING STOCKS, COMPARING PRICE-BOOK RATIOS OFTEN WORKS WELL IN SITUATIONS WHERE PRICE-EARNINGS RATIOS DO NOT BECAUSE P/B IS STABLE OVER TIME AND IS ALWAYS A POSITIVE NUMBER. PRICE-BOOK RATIOS ARE BEST USED FOR COMPARISONS WITHIN AN INDUSTRY RATHER THAN BETWEEN INDUSTRIES. SOME INDUSTRY SECTORS CONTAIN ONLY COMPANIES WITH A HIGH (OR LOW) RATIO. APPLIED TO MUTUAL FUNDS, THE P/B RATIO IS THE WEIGHTED AVERAGE OF ALL THE STOCKS IN THE MUTUAL FUND'S PORTFOLIO. LARGER HOLDINGS HAVE A GREATER INFLUENCE ON A FUND'S OVERALL P/B. IT'S A GOOD IDEA TO LOOK BEYOND THE P/B RATIO BECAUSE THE ASSET VALUES CAN BE UNDERSTATED ON A COMPANY'S BALANCE SHEET. REAL ESTATE CARRIED ON THE BOOKS FOR A NUMBER OF YEARS, FOR EXAMPLE, IS OFTEN LISTED AT THE PURCHASE PRICE RATHER THAN THE USUALLY MUCH HIGHER MARKET PRICE. WHEN THAT HAPPENS, THE BOOK VALUE IS ACTUALLY HIGHER THAN REPORTED, AND THE P/B RATIO WILL BE INACCURATE. BOOK VALUE ALSO DOES NOT INCLUDE SUCH INTANGIBLES AS GOODWILL, COPYRIGHTS, AND PATENTS.
PRICE/CASH FLOW
AN IMPORTANT RATIO IN DETERMINING THE VALUE OF CERTAIN TYPES OF STOCKS. THE RATIO IS DETERMINED BY DIVIDING THE STOCK'S PRICE BY THE CASH FLOW CASH FLOW PER SHARE OF THE MOST RECENT FISCAL YEAR. INVESTMENT BANKERS OFTEN USE THIS MEASURE TO DETERMINE WHETHER A COMPANY IS PRICED FAIRLY IN AN ACQUISITION. IT IS ALSO A USEFUL TOOL WHEN EARNINGS ARE NOT A GOOD INDICATOR, SUCH AS WHEN A COMPANY HAS LARGE UP-FRONT EXPENSES THAT HIDE ITS ABILITY TO GENERATE CASH. IN ADDITION, IT IS A MEANINGFUL NUMBER IN VALUING INTERNATIONAL STOCKS BECAUSE EARNINGS ARE REPORTED IN DIFFERENT WAYS AROUND THE WORLD. LOOKING AT CASH FLOW SMOOTHES OUT VARIATIONS IN ACCOUNTING METHODS.
PRICE/EARNINGS RATIO (P/E)
AN INDICATOR OF A STOCK'S VALUE. TO FIGURE OUT THE PRICE-EARNINGS RATIO, YOU DIVIDE THE STOCK'S PRICE BY ITS EARNINGS PER SHARE FOR A 12-MONTH PERIOD. FOR EXAMPLE, IF A STOCK IS SELLING FOR $30 AND IS EARNING $3 A SHARE, ITS P/E RATIO IS 10 (30/3). APPLIED TO MUTUAL FUNDS, THE P/E RATIO IS THE WEIGHTED AVERAGE OF ALL THE STOCKS' P/E RATIOS IN THE MUTUAL FUND'S PORTFOLIO. LARGER POSITIONS HAVE GREATER INFLUENCE ON THE FUND'S OVERALL P/E, AN INDICATOR OF THE TYPE OF STOCKS THE FUND HOLDS. THE P/E RATIO PROVIDES INSIGHT INTO VALUATION USING AN EASILY UNDERSTOOD YARDSTICK: EARNINGS. STOCKS WITH HIGH P/ES COMPARED TO THE OVERALL MARKET ARE TYPICALLY GROWTH STOCKS. INVESTORS ARE WILLING TO PAY A PREMIUM BECAUSE THEY EXPECT THE COMPANY'S EARNINGS AND STOCK PRICE TO RISE. STOCKS WITH LOW P/ES ARE SOMETIMES CONSIDERED OVERLOOKED VALUE STOCKS. BECAUSE EARNINGS ARE VOLATILE, AND SOMETIMES "NEGATIVE," THE P/E HAS ITS LIMITATIONS AND MAY FAIL AS A MEASURE FOR A SIGNIFICANT NUMBER OF STOCKS AT ANY GIVEN TIME.
PRICE/SALES RATIO (P/S)
COMPARES THE PRICE-PER-SHARE OF A STOCK TO ITS SALES-PER-SHARE (SALES-PER-SHARE IS ARRIVED AT BY DIVIDING TOTAL REVENUE BY SHARES OUTSTANDING). ALTERNATIVELY, THE PRICE-SALES RATIO CAN BE CALCULATED BY DIVIDING A STOCK'S MARKET CAPITALIZATION BY ITS TOTAL REVENUE. THE PRICE-SALES RATIO IS OFTEN USED TO VALUE COMPANIES THAT LACK A STABLE HISTORY OF POSITIVE EARNINGS. THE PRICE-SALES RATIO IS NEVER A NEGATIVE NUMBER. IT WILL TEND TO ACT AS A PROXY FOR EARNINGS MARGIN (I.E. LOW PRICE-SALES RATIO COMPANIES OFTEN HAVE LOW MARGINS.)
PRIMARY CARE PHYSICIAN
A PHYSICIAN WHO PERFORMS BASIC CHECKUPS AND ACTS AS A GATEKEEPER WITHIN AN HMO TO APPROVE VISITS TO OTHER PHYSICIANS.
PRIME RATE
THE INTEREST RATE THAT BANKS USE IN PRICING LOANS TO THEIR MOST CREDITWORTHY CUSTOMERS.
PRINCIPAL
THE AMOUNT OF MONEY YOU PUT INTO AN INVESTMENT.
PRINCIPAL ACCOUNT
THE LIABILITY OR ASSET ACCOUNT ASSOCIATED WITH A LOAN. IF YOU'RE BORROWING MONEY, THE PRINCIPAL ACCOUNT IS A LIABILITY ACCOUNT. IF YOU'RE LENDING MONEY, THE PRINCIPAL ACCOUNT IS AN ASSET ACCOUNT.
PROFIT MARGIN
DETERMINED BY DIVIDING NET INCOME BY NET SALES DURING A TIME PERIOD (USUALLY THE PAST FOUR QUARTERS) AND IS EXPRESSED AS A PERCENTAGE. NET PROFIT MARGIN IS A MEASURE OF EFFICIENCY AND THE HIGHER THE MARGIN, THE BETTER. TRENDS IN MARGIN CAN BE ATTRIBUTED TO RISING/FALLING PRODUCTION COSTS OR RISING/FALLING PRICE OF THE GOODS SOLD.
PROFIT SHARING
AN EMPLOYER-SPONSORED TAX-DEFERRED RETIREMENT PLAN THAT ALLOWS EMPLOYEES TO SHARE IN COMPANY PROFITS. THE EMPLOYER MAKES CONTRIBUTIONS IN PROFITABLE YEARS TO INDIVIDUAL EMPLOYEE ACCOUNTS. THE ACCOUNT GROWS TAX-DEFERRED UNTIL THE EMPLOYEE RETIRES OR LEAVES THE COMPANY.
PROPERTY DAMAGE
PROPERTY DAMAGE LIABILITY IS INSURANCE COVERAGE THAT PAYS TO REPAIR OR REPLACE OTHER PEOPLE'S PROPERTY THAT HAS BEEN DAMAGED BY YOU OR SOMEONE ELSE WHO IS COVERED IN YOUR POLICY. KEEP IN MIND, PROPERTY DAMAGE LIABILITY COVERAGE DOES NOT PAY FOR DAMAGE TO YOUR VEHICLES. LIABILITY (BI) AND PROPERTY DAMAGE (PD) TOGETHER ARE OFTEN REFERRED TO SIMPLY AS LIABILITY INSURANCE. MOST STATE LAWS REQUIRE THAT ALL DRIVERS CARRY LIABILITY INSURANCE OR OFFER OTHER PROOF THAT THEY ARE FINANCIALLY ABLE TO PAY ANY DAMAGES FOR WHICH THEY MIGHT BE FOUND LIABLE.
PROPERTY DAMAGE - LIABILITY
PROPERTY DAMAGE - LIABILITY IS INSURANCE COVERAGE THAT PAYS FOR YOUR FINANCIAL LOSS IF YOU ARE FOUND LIABLE FOR DAMAGES TO A THIRD PARTY - - I.E., ANYBODY WHO ISN'T ALSO COVERED BY YOUR POLICY. MEMBERS OF YOUR FAMILY WHO ARE COVERED BY YOUR INSURANCE POLICY ARE NOT CONSIDERED THIRD PARTIES.
PROPERTY DAMAGE - UNINSURED MOTORIST
PROPERTY DAMAGE UNINSURED OR UNDERINSURED COVERAGE PROTECTS YOU IN SITUATIONS WHERE YOUR VEHICLE HAS BEEN DAMAGED BY ANOTHER DRIVER WHO DOESN'T HAVE ADEQUATE COVERAGE OR NO INSURANCE AT ALL, AND CAN'T PAY FOR YOUR LOSSES. WITH THIS COVERAGE, YOUR OWN INSURANCE COMPANY WOULD PAY UP TO THE LIMIT OF YOUR POLICY, TO HAVE YOUR CAR FIXED OR REPLACED.
PROPRIETARY FUND
FUND OFFERED ONLY IN-HOUSE BY A PARTICULAR BROKERAGE. WHEN YOU TRANSFER AN ACCOUNT FROM ONE BROKERAGE TO ANOTHER, ANY PROPRIETARY FUNDS ARE SOLD AND THE RESULTING CASH IS TRANSFERRED.
PROSPECTUS
A DOCUMENT THAT MUST BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WHEN A COMPANY ISSUES STOCKS OR BONDS TO THE PUBLIC. IN ADDITION TO TELLING HOW THE DEAL IS STRUCTURED, THE PROSPECTUS PROVIDES INFORMATION ON THE COMPANYS MANAGEMENT AND OPERATIONS. TRADITIONALLY THE PROSPECTUS HAS BEEN FULL OF LEGALESE, BUT RECENTLY SOME COMPANIES ARE ISSUING THE DOCUMENT IN PLAIN LANGUAGE IN HOPES OF ATTRACTING MORE INDIVIDUAL INVESTORS. A MUTUAL FUND PROSPECTUS PROVIDES INFORMATION ABOUT A SPECIFIC FUND AND INCLUDES INFORMATION ON INVESTMENTS AND REDEMPTION POLICIES. WHEN AN INVESTOR REQUESTS AN APPLICATION FOR A MUTUAL FUND INVESTMENT, THE PROSPECTUS MUST BE SENT OUT AS WELL.
PUT
IN OPTIONS TRADING, THE RIGHT TO SELL A SPECIFIED NUMBER OF SHARES OF AN INVESTMENT INSTRUMENT AT A SET PRICE BY A CERTAIN DATE. INVESTORS BUY PUTS WHEN THEY BELIEVE THE PRICE OF A SECURITY IS GOING TO GO DOWN (PRESUMABLY BELOW THE STRIKE PRICE).
QUALIFIED RETIREMENT PLANS
PLANS APPROVED BY THE IRS FOR FAVORABLE TAX TREATMENT, SUCH AS TAX DEDUCTIONS FOR CONTRIBUTIONS AND TAX-DEFERRED EARNINGS. THE LIST OF PLANS INCLUDES 401(K)S, SEPS, IRAS, KEOGHS, SIMPLES, AND DEFINED BENEFIT PENSION PLANS. EACH PLAN HAS DIFFERENT CONTRIBUTION LIMITS AND OTHER RULES.
QUICK RATIO
A MEASURE OF A COMPANY'S ABILITY TO MEET ITS SHORT-TERM FINANCIAL OBLIGATIONS WITH ITS LIQUID ASSETS. TO DETERMINE THE QUICK RATIO, THE COMPANY'S LIQUID CURRENT ASSETS (CASH, ACCOUNTS RECEIVABLE, MARKETABLE SECURITIES) IS DIVIDED BY ITS CURRENT LIABILITIES. THE QUICK RATIO IS SIMILAR TO THE CURRENT RATIO, BUT DOES NOT INCLUDE INVENTORY AS A CURRENT ASSET. IN GENERAL, A HEALTHY COMPANY SHOULD HAVE A QUICK RATIO OF AT LEAST 1.0.
REAL ESTATE INVESTMENT TRUST (REIT)
A FUND THAT HOLDS REAL ESTATE OR MORTGAGES. REITS ISSUE SHARES THAT TRADE ON STOCK EXCHANGES LIKE SHARES OF COMMON STOCK. THERE ARE THREE TYPES OF REITS: MORTGAGE REITS THAT INVEST PRIMARILY IN REAL ESTATE DEBT SUCH AS MORTGAGES; EQUITY REITS THAT PRIMARILY OWN REAL ESTATE; AND HYBRID REITS THAT ARE A COMBINATION OF THE TWO. EQUITY REITS RAISE MONEY AND INVEST IN VARIOUS REAL ESTATE ENDEAVORS, SUCH AS SHOPPING CENTERS, APARTMENTS, INDUSTRIAL BUILDINGS, OR COMBINATIONS OF DIFFERENT TYPES OF PROPERTY. REITS PAY QUARTERLY DIVIDENDS (CASH FLOW PASSED ON FROM THE PROPERTIES), AND ARE NOT HIGHLY CORRELATED WITH STOCKS.
REALIZED AND UNREALIZED GAINS
A GAIN IS REALIZED WHEN AN INVESTMENT IS SOLD. AN INVESTMENT THAT HAS INCREASED IN VALUE, BUT HAS NOT YET BEEN SOLD, HAS AN "UNREALIZED" GAIN.
REDEMPTION FEE
TO PROMOTE LONG-TERM INVESTING AND KEEP OUT QUICK-TRADING MARKET TIMERS, SOME MUTUAL FUNDS IMPOSE A REDEMPTION FEE IF YOU DECIDE TO SELL SHARES LESS THAN A YEAR OR SO AFTER YOUR INITIAL INVESTMENT. REDEMPTION FEES TYPICALLY RANGE BETWEEN 1% AND 2%.
REGIONAL FUND
AN INTERNATIONAL MUTUAL FUND THAT INVESTS IN SECURITIES FROM ONE PARTICULAR AREA, SUCH AS LATIN AMERICA OR THE FAR EAST.
REHABILITATION BENEFITS
INSURANCE BENEFITS COVERING A PORTION OF THE COST OF RETRAINING AND REHABILITATING A DISABLED WAGE EARNER (AS A RESULT OF A COVERED AUTO ACCIDENT) TO RETURN TO WORK. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY CAREFULLY TO LEARN THE SPECIFICS ABOUT WHAT YOUR REHABILITATION BENEFITS COVERAGE INCLUDES AND DOESN'T INCLUDE.
RELATIVE STRENGTH
A STOCK'S PRICE MOVEMENT, COMPARED TO THE CHANGE IN A RELEVANT MARKET INDEX, SUCH AS THE S&P 500. THE TYPICAL TIMEFRAME IS 12 MONTHS. MOMENTUM INVESTORS LIKE TO BUY STOCKS WITH HIGH RELATIVE STRENGTH BECAUSE THEY BELIEVE A STOCK THAT HAS A STRONG RELATIVE STRENGTH RATING WILL CONTINUE TO MOVE HIGHER. THE STRATEGY HAS WORKED WELL IN BULL MARKETS, BUT IT IS A HIGH-RISK APPROACH BECAUSE THESE STOCKS ARE ALSO LIKELY TO FALL HARD WHEN THE MARKET TUMBLES.
RENEWAL
A RENEWAL IS A NEW POLICY OR A STANDARD CERTIFICATE FROM AN INSURANCE COMPANY, STATING THAT THE CONDITIONS OF YOUR OLD POLICY WILL STAY IN EFFECT FOR A SPECIFIED PERIOD OF TIME.
REPLACEMENT COST FOR CONTENTS
REPLACEMENT COST IS AN ESSENTIAL CONCEPT TO UNDERSTAND. A POLICY COVERING YOUR BELONGINGS FOR ACTUAL CASH VALUE ONLY COVERS THE DEPRECIATED VALUE OF AN ITEM. LET'S SAY YOU BOUGHT A NEW TELEVISION FIVE YEARS AGO FOR $600. COULD YOU SELL IT FOR THE SAME $600 TODAY? OF COURSE NOT. IF YOUR TELEVISION WAS STOLEN OR DAMAGED, THAT $150 IS ALL YOU WOULD GET FROM THE INSURANCE COMPANY WITH AN ACTUAL CASH VALUE POLICY. IF YOU WANT ENOUGH MONEY TO BE ABLE TO REPLACE YOUR TELEVISION WITH A NEW SET, YOU NEED REPLACEMENT COST COVERAGE.
REPLACEMENT VALUE
HOW MUCH IT WOULD COST YOU TODAY TO REPLACE AN ITEM THAT WAS STOLEN OR DESTROYED. ANY ITEM HAS THREE BASIC VALUES: ORIGINAL COST, ACTUAL CASH VALUE, AND REPLACEMENT VALUE. WHEN YOU BUY A HOMEOWNERS OR RENTERS POLICY, YOU WANT YOUR POSSESSIONS TO BE COVERED FOR REPLACEMENT VALUE. MAYBE YOU ORIGINALLY PAID $400 FOR YOUR LIVING ROOM COUCH, FOR EXAMPLE, BUT ITS ACTUAL CASH VALUE -- WHAT YOU'D GET IF YOU SOLD IT TODAY -- IS $175. IF THE COUCH IS DESTROYED IN A FIRE, REPLACING IT WILL COST YOU $800. THEREFORE THE REPLACEMENT VALUE IS $800.
REPLACEMENT VALUE HOMEOWNERS OR RENTERS INSURANCE
COVERAGE THAT PAYS THE FULL REPLACEMENT VALUE FOR A COVERED LOSS RATHER THAN JUST THE INITIAL COST LESS "WEAR AND TEAR" OR DEPRECIATION. IT IS AN ESSENTIAL FEATURE OF A GOOD POLICY.
REQUIRED MINIMUM DISTRIBUTION (RMD)
THE MINIMUM AMOUNTS THAT THE IRS SAYS YOU MUST WITHDRAW FROM TRADITIONAL IRA, SEP-IRA, SIMPLE IRA, KEOGH, 401(K), 403(B), AND OTHER ACCOUNTS--OR BE SUBJECT TO PENALTIES. THE MINIMUM DISTRIBUTION THAT YOU ARE REQUIRED TO TAKE IS BASED ON YOUR LIFE EXPECTANCY OR THE JOINT LIFE EXPECTANCY OF YOU AND YOUR BENEFICIARY. THE YOUNGER YOUR BENEFICIARY, THE LESS YOU WILL BE REQUIRED TO TAKE FROM YOUR RETIREMENT PLANS, BUT THERE ARE LIMITS TO THE LIFE EXPECTANCY YOU CAN USE FOR A BENEFICIARY OTHER THAN YOUR SPOUSE.
RESEARCH REPORT (OR BROKER REPORT)
A DOCUMENT SUMMARIZING A STOCKS INVESTMENT POTENTIAL. WRITTEN BY SECURITIES ANALYSTS AT BROKERAGE FIRMS AND OTHER INVESTMENT COMPANIES, RESEARCH REPORTS ADVISE CLIENTS ON WHETHER THEY SHOULD BUY, HOLD, OR SELL A STOCK. TYPICALLY, A REPORT ANALYZES A COMPANYS FUNDAMENTALS, SUCH AS EARNINGS AND REVENUES. IT LOOKS AT THE COMPANYS MARKET SHARE FOR ITS PRODUCTS AND DISCUSSES PROSPECTS FOR GROWTH. IT ALSO PROJECTS EARNINGS, REVENUES, AND EARNINGS PER SHARE FOR SUBSEQUENT QUARTERS AND YEARS. AT ONE TIME ONLY CUSTOMERS OF BROKERAGE FIRMS COULD GET RESEARCH REPORTS. BUT THE INTERNET HAS MADE IT MUCH EASIER FOR INDEPENDENT INVESTORS TO FIND ANALYSTS STOCK RECOMMENDATIONS. WHILE SOME REPORTS ARE COSTLY, OTHERS ARE FREE. INVESTORS SHOULD NOT TAKE THE CONCLUSIONS IN RESEARCH REPORTS AS GOSPEL. SECURITIES ANALYSTS SOMETIMES HAVE NOTABLE CONFLICTS OF INTEREST THAT CAN COLOR THEIR OPINIONS. THEY MAY GO EASY ON THEIR FIRMS INVESTMENT BANKING CLIENTS, FOR EXAMPLE. INVESTORS SHOULD THEREFORE TRY TO GET INFORMATION FROM MULTIPLE SOURCES.
RESIDENT
A RESIDENT ISN'T NECESSARILY LIMITED TO THE PEOPLE CURRENTLY LIVING IN YOUR HOUSE. A SON OR DAUGHTER AWAY AT SCHOOL OR IN THE MILITARY MAY STILL BE CONSIDERED A RESIDENT OF THE HOUSEHOLD, IF HE OR SHE INTENDS TO RETURN AND CONSIDERS IT HOME.
RETURN
THE PROFIT EARNED ON AN INVESTMENT, USUALLY EXPRESSED AS AN ANNUAL PERCENTAGE RATE.
RETURN OF CAPITAL
MONEY PAID TO YOU AS TOTAL OR PARTIAL REPAYMENT OF THE MONEY YOU INVESTED. RETURN OF CAPITAL DIFFERS FROM A SALE IN THAT YOU ARE NOT THE ONE WHO INITIATES THE RETURN OF CAPITAL. FOR EXAMPLE, A MORTGAGE-BACKED SECURITY, SUCH AS A GINNIE MAE, RETURNS CAPITAL WHEN THE UNDERLYING MORTGAGES PAY OFF PRINCIPAL, WHICH IS PASSED ON TO YOU. A UNIT TRUST RETURNS CAPITAL AS IT SELLS THE BONDS WITHIN THE TRUST.
RETURN ON ASSETS (ROA)
THE AMOUNT OF PROFITS EARNED (BEFORE INTEREST AND TAXES), EXPRESSED AS A PERCENTAGE OF TOTAL ASSETS. THIS IS A WIDELY FOLLOWED MEASURE OF PROFITABILITY, THUS THE HIGHER THE NUMBER THE BETTER. AS LONG AS A COMPANY'S ROA EXCEEDS ITS INTEREST RATE ON BORROWING, IT'S SAID TO HAVE POSITIVE FINANCIAL LEVERAGE.
RETURN ON EQUITY (ROE)
A PERCENTAGE THAT INDICATES HOW WELL COMMON STOCKHOLDERS' INVESTED MONEY IS BEING USED. THE PERCENTAGE IS THE RESULT OF DIVIDING NET EARNINGS BY COMMON STOCKHOLDERS' EQUITY. THE ROE IS USED FOR MEASURING GROWTH AND PROFITABILITY. YOU CAN COMPARE A COMPANY'S ROE TO THE ROE OF ITS INDUSTRY TO DETERMINE HOW A COMPANY IS DOING COMPARED TO ITS COMPETITION.
RETURN ON INVESTMENT (ROI)
ALSO KNOWN AS RETURN ON INVESTED CAPITAL (ROIC). A MEASURE OF HOW WELL A COMPANY'S MANAGEMENT IS PERFORMING. ROI IS CALCULATED BY DIVIDING EARNINGS BY TOTAL ASSETS. IT IS A BROADER MEASURE THAN RETURN ON EQUITY (ROE) BECAUSE ASSETS INCLUDE DEBT AS WELL AS EQUITY. COMPANIES SOMETIMES DEFINE TERMS DIFFERENTLY, BUT IN GENERAL THEY USE EARNINGS BEFORE TAXES AND THE BOOK VALUE OF ASSETS AT THE END OF THE YEAR. SOME INVESTORS THINK THAT ROI IS THE MOST IMPORTANT FINANCIAL INDICATOR BECAUSE IT SHOWS HOW WELL MANAGEMENT HAS USED THE COMPANY'S RESOURCES. COMPANIES WITH THE SAME SALES AND EARNINGS MAY LOOK AS IF THEY PERFORMED THE SAME. BUT A COMPANY THAT NEEDED LESS INVESTMENT CAPITAL TO ACHIEVE THE SAME RESULT WOULD ACTUALLY BE THE BETTER-RUN COMPANY. IT IS USEFUL TO COMPARE A COMPANY'S ROI WITH OTHERS IN THE SAME INDUSTRY.
REVENUE
THE DOLLAR AMOUNT OF ANNUAL SALES, NET OF ALLOWANCES (DISCOUNTS, RETURNED MERCHANDISE). IT IS THE "TOP LINE" FIGURE FROM WHICH COSTS ARE SUBTRACTED TO DETERMINE NET INCOME. IN EVALUATING STOCKS, REVENUE GROWTH IS OFTEN AN INDICATION OF A HEALTHY COMPANY. HOWEVER, ACQUISITIONS AND DIVESTITURES WILL SKEW REVENUE GROWTH FIGURES. FOR ALL BUT THE MOST SUCCESSFUL COMPANIES, THE GROWTH RATES CHANGE QUARTERLY, SO THESE VALUES SHOULD BE CHECKED OFTEN.
REVENUE GROWTH
A USEFUL MEASURE OF HOW FAST A COMPANY'S BUSINESS IS EXPANDING. THIS FIGURE SHOWS THE ANNUALIZED RATE OF INCREASE (OR DECREASE) IN A COMPANY'S REVENUE OR SALES GROWTH.
REVENUE PER EMPLOYEE
A COMPANY'S TOTAL REVENUE DIVIDED BY THE NUMBER OF ITS EMPLOYEES. IN GENERAL, THE HIGHER THE NUMBER, THE MORE EFFICIENT THE COMPANY USES ITS EMPLOYEES.
REVERSE SPLIT
A REDUCTION IN THE NUMBER OF SHARES OF STOCK. THE OPPOSITE OF A STOCK SPLIT, A REVERSE SPLIT MEANS THAT SHAREHOLDERS WILL HOLD FEWER SHARES ALTHOUGH THE VALUE OF THEIR INVESTMENT REMAINS THE SAME. COMPANIES USE VARIOUS FORMULAS TO DETERMINE HOW MUCH STOCK EACH SHAREHOLDER SHOULD HAVE, SUCH AS 1-FOR-2 OR 1-FOR-5. IF YOU OWN 100 SHARES OF THE STOCK YUP, VALUED AT $5 PER SHARE, A 1-FOR-2 SPLIT MEANS YOU WILL HAVE 50 SHARES VALUED AT $10 A SHARE. IN EACH CASE YOUR STAKE IS WORTH $500. COMPANIES OFTEN ANNOUNCE REVERSE STOCK SPLITS TO MAKE THEIR STOCK MORE ATTRACTIVE TO INSTITUTIONAL INVESTORS. SOME FUNDS HAVE PROHIBITIONS AGAINST BUYING STOCKS THAT ARE PRICED TOO LOW, WHICH ARE CONSIDERED VERY SPECULATIVE. STOCK PRICES OFTEN SAG FOR SOME TIME AFTER THE ANNOUNCEMENT OF A REVERSE SPLIT.
RISK
FROM YOUR POINT OF VIEW, RISK IS THE CHANCE OF INJURY, DAMAGE OR LOSS. BUT INSURANCE COMPANIES SOMETIMES REFER TO THEIR POLICYHOLDERS AS RISKS - - AS IN, "BECAUSE OF HER GOOD DRIVING RECORD, SHE'S A GOOD RISK."
RISK-ADJUSTED PERFORMANCE
A METHOD OF EVALUATING AND COMPARING MUTUAL FUNDS. IT TAKES THE PERFORMANCE OF THE FUND AND FACTORS IN THE RISK LEVEL (OR VOLATILITY) OF THE STOCKS AND BONDS IN WHICH THE FUND IS INVESTED. THUS YOU CAN BETTER COMPARE FUNDS WITHIN CATEGORIES.
ROLLOVER
TRANSFER OF FUNDS FROM ONE TAX-DEFERRED RETIREMENT SAVINGS PLAN TO ANOTHER. ONCE A YEAR YOU ARE ALLOWED TO TAKE YOUR MONEY OUT OF ONE IRA TAX-FREE AND PUT IT INTO ANOTHER. YOU HAVE 60 DAYS TO COMPLETE THE ROLLOVER, WHICH MEANS YOU CAN TAP YOUR NEST EGG FOR A SHORT-TERM LOAN. BUT BE SURE TO PUT THE MONEY INTO A NEW FUND ON TIME OR YOU WILL BE LIABLE FOR INCOME TAXES -- AND A 10% PENALTY IF YOU ARE UNDER 59. YOU CAN USUALLY ROLL OVER FUNDS TAX-FREE FROM YOUR 401(K) OR OTHER EMPLOYER-SPONSORED PLAN WHEN YOU CHANGE JOBS. YOU MUST PUT IT INTO ANOTHER QUALIFIED RETIREMENT PLAN SUCH AS YOUR NEW COMPANY'S PLAN OR AN IRA. MAKE SURE THE CHECK IS MADE OUT TO THE NEW PLAN CUSTODIAN. OTHERWISE, YOUR PREVIOUS EMPLOYER IS REQUIRED TO WITHHOLD 20% FOR PRE-PAYMENT OF FEDERAL INCOME TAXES. YOU MAY ALSO HAVE TO PAY A 10% PENALTY. YOU CAN AVOID THE TAXES AND PENALTY IF THE FUNDS ARE TRANSFERRED DIRECTLY TO THE NEW PLAN. BEFORE LEAVING YOUR COMPANY, ASK FOR INSTRUCTIONS ON HOW TO HANDLE A ROLLOVER (EVEN IF YOU DO NOT YET HAVE A NEW EMPLOYER) IN A WAY THAT WILL NOT TRIGGER AUTOMATIC WITHHOLDING. IF YOUR 401(K) BALANCE IS GREATER THAN $5,000, YOU ALSO CAN LEAVE YOUR MONEY TO GROW TAX-FREE IN YOUR ACCOUNT.
ROTH IRA
A TAX-DEFERRED RETIREMENT ACCOUNT. UNLIKE A TRADITIONAL IRA, CONTRIBUTIONS TO A ROTH IRA AREN'T TAX-DEDUCTIBLE, BUT THERE IS NO TAX ON WITHDRAWALS AS LONG AS THE TAXPAYER IS AGE 59 AND THE ACCOUNT HAS BEEN OPEN FOR FIVE YEARS. FINANCIAL PLANNERS RECOMMEND CONTRIBUTING TO A ROTH IRA IF ALL FULLY DEDUCTIBLE TAX-DEFERRED PLANS, SUCH AS A 401(K), HAVE BEEN FUNDED AND THE TAXPAYER WILL BE IN A HIGHER TAX BRACKET AFTER RETIREMENT. THE MAXIMUM YEARLY CONTRIBUTION IS $2,000 PER PERSON. TO QUALIFY FOR A FULL CONTRIBUTION, A MARRIED COUPLE FILING JOINTLY MUST HAVE AN ADJUSTED GROSS INCOME (AGI) OF LESS THAN $150,000, AND AN INDIVIDUAL MUST MAKE LESS THAN $95,000. PARTIAL CONTRIBUTIONS ARE STILL ALLOWED FOR A MARRIED COUPLE FILING JOINTLY EARNING BETWEEN $150,000 AND $160,000 AND FOR AN INDIVIDUAL EARNING BETWEEN $95,000 AND $110,000. FIRST-TIME HOME BUYERS MAY WITHDRAW $10,000 FROM A ROTH IRA FREE OF TAXES OR PENALTIES. YOU MAY ALSO AVOID THE 10% EARLY WITHDRAWAL PENALTY IF YOU USE THE MONEY FOR EDUCATIONAL EXPENSES FOR YOURSELF OR FAMILY MEMBERS OR IF YOU ARE PAYING FOR MEDICAL EXPENSES THAT EXCEED 7.5% OF YOUR AGI. UNLIKE MANY OTHER RETIREMENT VEHICLES, ROTH IRAS LET YOU CONTINUE CONTRIBUTING AFTER AGE 70  IF YOU ARE STILL WORKING. THERE ARE NO MINIMUM DISTRIBUTION REQUIREMENTS. WHEN YOU DIE, ANY MONEY LEFT IN YOUR ROTH IRA WILL PASS TO YOUR HEIRS INCOME-TAX FREE.
RUSSELL 2000
A MARKET INDEX CONSIDERED TO REPRESENT THE MARKET OF SMALL CAP STOCKS. IF YOU INVEST IN SMALL CAP STOCKS, YOU CAN COMPARE THE PERFORMANCE OF YOUR STOCKS TO THE RUSSELL 2000 INDEX.
S&P 500
AN INDEX OF 500 LARGE CAPITALIZATION DOMESTIC STOCKS THAT REPRESENTS THE OVERALL STOCK MARKET. ALSO KNOWN AS THE STANDARD & POORS 500, THE INDEX IS MARKET-VALUE WEIGHTED, WHICH MEANS THAT STOCK PRICES ARE MULTIPLIED BY THE NUMBER OF SHARES OUTSTANDING. A STANDARD & POORS CORP. COMMITTEE CHOOSES STOCKS FROM LEADING COMPANIES IN LEADING INDUSTRIES TO REFLECT THE U.S. STOCK MARKET. THE S&P 500 IS THE MOST WIDELY FOLLOWED BENCHMARK FOR PORTFOLIO PERFORMANCE. WHEN INVESTORS REFER TO THEIR PORTFOLIO OR MUTUAL FUND BEATING THE S&P, THEY MEAN THAT THEIR INVESTMENTS ARE EARNING A BETTER RETURN THAN THE S&P 500 INDEX. THE U.S. COMPONENT OF THE S&P GLOBAL INDEX, THE S&P 500 IS DIVIDED INTO FOUR INDUSTRY GROUPS: INDUSTRIALS, FINANCIAL, TRANSPORTATION, AND UTILITIES. STANDARD & POORS TRACKS ALL FOUR INDUSTRY GROUPS IN SEPARATE INDEXES. BY FAR THE LARGEST GROUP IS THE INDUSTRIALS WITH 376 COMPANIES IN THE S&P 500. NEXT IS FINANCIALS WITH 72 BANKS, BROKERAGES, AND OTHER FINANCIAL SERVICES COMPANIES. UTILITIES HAS 41 COMPANIES, AND TRANSPORTATION HAS 11 AIRLINES AND OTHER COMPANIES. STANDARD & POORS DOES NOT MANDATE THE NUMBER OF COMPANIES IN EACH GROUP, BUT ALL TOGETHER THEY MUST ADD UP TO 500.
S&P INDEX
THE STANDARD & POOR'S CORP. CALCULATES A NUMBER OF INDEXES DESIGNED TO TRACK DAILY CHANGES IN THE ENTIRE MARKET OR A SEGMENT OF IT. S&P INDEXES ARE MARKET-VALUE WEIGHTED, WHICH MEANS THAT STOCK PRICES OF THE COMPANIES WITHIN AN INDEX ARE MULTIPLIED BY THE NUMBER OF SHARES OUTSTANDING TO CALCULATE THE INDEX. CONSEQUENTLY, THE LARGEST COMPANIES HAVE THE GREATEST INFLUENCE ON AN INDEXS MOVEMENT. A STANDARD & POOR'S CORP. COMMITTEE DETERMINES THE ACTUAL COMPANIES THAT MAKE UP THE S&P INDEXES. THE BEST KNOWN STANDARD & POORS INDEX IS THE S&P 500, A LARGE-CAP INDEX OF 500 WIDELY HELD DOMESTIC STOCKS, DESIGNED TO EMULATE THE MARKET AS A WHOLE. IT IS A POPULAR BENCHMARK FOR MEASURING PORTFOLIO PERFORMANCE AND A MODEL FOR A GROWING NUMBER OF INDEX MUTUAL FUNDS. THE S&P 500 IS DIVIDED INTO FOUR INDUSTRY GROUPS: INDUSTRIALS, FINANCIAL, TRANSPORTATION, AND UTILITIES. STANDARD & POORS TRACKS ALL FOUR INDUSTRY GROUPS IN SEPARATE INDEXES. BY FAR THE LARGEST GROUP IS THE INDUSTRIALS WITH 376 COMPANIES IN THE S&P 500. NEXT IS FINANCIALS WITH 72 BANKS, BROKERAGES, AND OTHER FINANCIAL SERVICES COMPANIES. UTILITIES HAS 41 COMPANIES, AND TRANSPORTATION HAS 11 AIRLINES AND OTHER COMPANIES. STANDARD & POORS DOES NOT MANDATE THE NUMBER OF COMPANIES IN EACH GROUP, BUT ALL TOGETHER THEY MUST ADD UP TO 500. OTHER S&P INDEXES INCLUDE THE MIDCAP 400, AN INDEX OF 400 DOMESTIC COMPANIES WITH AN AVERAGE MARKET CAPITALIZATION OF $2 BILLION, AND THE SMALLCAP 600, AN INDEX OF 600 WIDELY HELD COMPANIES WITH AN AVERAGE MARKET CAPITALIZATION OF JUST OVER $500 MILLION.
S&P INDUSTRY CLASS
THE CATEGORIZATION OF ALL PUBLICLY TRADED COMPANIES INTO INDUSTRIES USING A NUMERICAL SYSTEM BASED ON THE NATURE OF THE GOOD OR SERVICE THE COMPANY PRODUCES. EXAMPLES OF INDUSTRIES INCLUDE: AEROSPACE, COMPUTER SOFTWARE, AND FOOD & BEVERAGE. SIMILAR INDUSTRIES ARE SOMETIMES GROUPED TOGETHER AND REFERRED TO AS SECTORS SUCH AS: TECHNOLOGY, UTILITIES, AND FINANCIAL SERVICES. INVESTMENT ADVISORS GENERALLY RECOMMEND THAT AN INVESTOR DIVERSIFY HIS OR HER PORTFOLIO BY HOLDING SEVERAL CLASSES OF INVESTMENTS. THIS TENDS TO REDUCE OVERALL RISK, ALTHOUGH IT DOES NOT PROTECT AGAINST A LOSS.
S&P MIDCAP 400
INTRODUCED BY THE STANDARD & POOR'S CORP. IN 1991, THE S&P MIDCAP 400 IS THE FIRST INDEX TO TRACK STOCKS FROM MEDIUM-SIZED COMPANIES, WHICH NOW HAVE AN AVERAGE MARKET CAPITALIZATION OF $2 BILLION. LIKE THE S&P 500, THE INDEX IS MARKET-VALUE WEIGHTED, WHICH MEANS THAT STOCK PRICES ARE MULTIPLIED BY THE NUMBER OF SHARES OUTSTANDING.
S&P SMALLCAP 600
AN INDEX OF 600 SMALL CAPITALIZATION DOMESTIC STOCKS. INTRODUCED BY THE STANDARD & POOR'S CORP. IN 1994, THE S&P SMALLCAP 600 HELPS TRADERS, ANALYSTS, AND PORTFOLIO MANAGERS FOLLOW THE PERFORMANCE OF STOCKS ISSUED BY RELATIVELY SMALL COMPANIES, WHICH NOW HAVE AN AVERAGE MARKET CAPITALIZATION OF JUST OVER $500 MILLION. LIKE THE S&P 500, THE INDEX IS MARKET-VALUE WEIGHTED, WHICH MEANS THAT STOCK PRICES ARE MULTIPLIED BY THE NUMBER OF SHARES OUTSTANDING. SMALL-CAP STOCKS OFTEN ARE ISSUED BY YOUNG, GROWING COMPANIES. THEY ARE CONSIDERED RISKIER THAN STOCKS FROM LARGER COMPANIES WITH LONGER TRACK RECORDS, BUT THE POTENTIAL PAYOFF MAY BE HIGHER.
S-CORPORATION, OR SUB-CHAPTER S CORPORATION
A BUSINESS THAT IS TAXED UNDER THE SUB-CHAPTER S PROVISION OF THE INTERNAL REVENUE CODE, WHICH ALLOWS THE SHAREHOLDERS OR INTEREST HOLDERS TO BE TAXED FOR THE CORPORATION'S INCOME.
SEP-IRA
A TAX-DEFERRED RETIREMENT PLAN FOR SMALL BUSINESSES WITH FEWER THAN 25 EMPLOYEES AND THE SELF-EMPLOYED. EMPLOYERS MAY CONTRIBUTE 15% OF AN EMPLOYEES COMPENSATION TO AN IRA, AND A SELF-EMPLOYED PERSON MAY CONTRIBUTE 13.04% OF INCOME. THE IRS SAYS THE MAXIMUM CONTRIBUTION IS $30,000 IN 1999, BUT SINCE THE EARNINGS CAP IS $160,000, EFFECTIVE CONTRIBUTION LIMITS ARE $24,000 FOR EMPLOYERS AND $20,870 FOR THE SELF-EMPLOYED. OTHER THAN THE HIGHER CONTRIBUTION LIMITS, SEPS GENERALLY FOLLOW THE RULES FOR IRAS. ALSO KNOWN AS A SEP.
SIMPLE IRA
A TAX-DEFERRED RETIREMENT PLAN FOR BUSINESSES WITH FEWER THAN 100 EMPLOYEES AND THE SELF-EMPLOYED. IN A SIMPLE IRA, OR SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES, PLAN PARTICIPANTS MAY DEFER UP TO $6,000 A YEAR IN SALARY TO GO INTO THEIR IRAS. EMPLOYERS MUST MATCH UP TO 3% OF PAY FOR PARTICIPANTS OR 2% FOR ALL EMPLOYEES EVEN IF THEY ALL DO NOT CONTRIBUTE. EMPLOYEES ARE IMMEDIATELY VESTED. THE CEILING ON ANNUAL CONTRIBUTIONS FROM EMPLOYERS AND EMPLOYEES IS $12,000. IN GENERAL, SIMPLE IRAS FOLLOW THE RULES FOR TRADITIONAL IRAS. BUT THERE IS AN IMPORTANT EXCEPTION. IF YOU WITHDRAW FUNDS WITHIN TWO YEARS OF STARTING TO PARTICIPATE AND YOU ARE UNDER 59, YOU FACE A 25% PENALTY. AFTER THAT EARLY WITHDRAWALS ARE HIT WITH A 10% PENALTY. EMPLOYERS MUST NOT HAVE ANY OTHER RETIREMENT PLAN TO ESTABLISH A SIMPLE IRA, WHICH REPLACED THE SARSEP FOR NEW PLANS ESTABLISHED AFTER 1996.
SS-4
THE IRS APPLICATION FORM FOR AN EMPLOYER IDENTIFICATION NUMBER.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN (SARSEP)
A TAX-DEFERRED RETIREMENT PLAN FOR SOLE PROPRIETORS OR BUSINESSES WITH FEWER THAN 25 EMPLOYEES. EMPLOYEES ELECT TO DEFER PORTIONS OF THEIR SALARIES, WHICH THE EMPLOYER DEPOSITS INTO THE SARSEP. EMPLOYEE CONTRIBUTION LIMITS FOR 1999 ARE 15% OF COMPENSATION TO A MAXIMUM OF $10,000. GOING FORWARD THAT AMOUNT IS INDEXED FOR INFLATION. OTHER THAN THE HIGHER CONTRIBUTION LIMITS, THESE PLANS FOLLOW IRA RULES. PLAN PARTICIPANTS ARE ALSO ELIGIBLE FOR SEP-IRAS AND IRAS. REPLACED BY SIMPLE-IRAS, SARSEPS COULD NOT BE ESTABLISHED AFTER 1996.
SALOMON BROTHERS NON-DOLLAR WORLD GOVERNMENT INDEX
AN INDEX OF 13 GOVERNMENT BOND MARKETS.
SECTION 125 PLAN
ALSO KNOWN AS A FLEXIBLE BENEFITS PLAN. A PLAN THAT ALLOWS EMPLOYEES TO CONTRIBUTE PRE-TAX INCOME TO A FLEXIBLE SPENDING ACCOUNT. THEY CAN THEN USE THE MONEY IN THE ACCOUNT TO PAY FOR TAX-DEDUCTIBLE EXPENSES, SUCH AS MEDICAL EXPENSES AND CHILDCARE, EVEN IF THEY DON'T ITEMIZE DEDUCTIONS ON THEIR TAX RETURNS.
SECTOR
A COMMON WAY TO GROUP A BROAD ARRAY OF COMPANIES THAT ARE IN THE SAME LINE OF BUSINESS. WITHIN A SECTOR YOU CAN HAVE MANY INDUSTRIES. AND EACH INDUSTRY CONSISTS OF WELL-DEFINED INDUSTRY GROUPS. FOR EXAMPLE, TECHNOLOGY IS A SECTOR. INTERNET IS AN INDUSTRY SUBSET OF TECHNOLOGY, AND INTERNET SERVICE PROVIDERS IS A SPECIFIC INDUSTRY GROUP WITHIN THE INTERNET CATEGORY. AT QUICKEN.COM YOU CAN USE THE STOCK SEARCH TOOL TO FIND STOCKS WITHIN SPECIFIC INDUSTRY GROUPS.
SECTOR FUND
A STOCK MUTUAL FUND THAT INVESTS IN ONLY ONE INDUSTRY.
SECURITIES
A GENERAL TERM FOR PUBLICLY TRADED STOCKS, BONDS, AND OTHER FINANCIAL INSTRUMENTS.
SECURITIES AND EXCHANGE COMMISSION (SEC)
A FEDERAL AGENCY THAT REGULATES FEDERAL SECURITIES LAWS, INCLUDING THE TRADING OF PUBLIC COMPANY SECURITIES, THE FIRMS THAT HANDLE THESE TRANSACTIONS, AND MOST PROFESSIONALS WHO PROVIDE INVESTMENT ADVICE.
SHARE PRICE
THE PRICE OF A UNIT OF OWNERSHIP IN A COMPANY (A SHARE). THE MOST RECENT TRADE IN THE STOCK IS TYPICALLY USED AS THE "QUOTED" SHARE PRICE. YOU CAN ARRIVE AT MARKET CAPITALIZATION BY MULTIPLYING SHARE PRICE TIMES TOTAL SHARES OUTSTANDING FOR A PARTICULAR COMPANY. WHILE OF LITTLE ANALYTICAL VALUE IN AND OF ITSELF, SHARE PRICE IS WORTH CONSIDERATION IN TWO WAYS. IF A STOCK'S PRICE IS TOO HIGH, IT MAY PREVENT INDIVIDUALS FROM BEING ABLE TO PURCHASE ENOUGH SHARES TO MAKE UP A ROUND LOT (100 SHARES). ALSO, THERE IS A GENERAL RULE THAT STOCKS BELOW $5/SHARE ARE DEEMED TO BE "SPECULATIVE," MANY OF WHICH ARE REFERRED TO AS "PENNY STOCKS."
SHARE REPURCHASE PROGRAMS
A PROGRAM IN WHICH A COMPANY GOES INTO THE OPEN MARKET TO REPURCHASE A FRACTION OF ITS CURRENT SHARES OUTSTANDING. THIS IS GENERALLY VIEWED AS A POSITIVE SIGN BY INVESTORS AS THE COMPANY IS RETURNING EXCESS CASH THAT IT CAN NOT INVEST AT ABOVE-MARKET RATES TO SHAREHOLDERS. BY REDUCING THE NUMBER OF SHARES OUTSTANDING, EARNINGS PER SHARE WILL RISE (ASSUMING THAT THE COMPANY'S EARNINGS REMAIN AT THE SAME LEVEL OR INCREASE).
SHARES OUTSTANDING
THE SHARES OF STOCK THAT ARE OWNED BY INVESTORS. THE NUMBER OF SHARES OUTSTANDING IS USED IN EARNINGS-PER-SHARE CALCULATIONS. THAT NUMBER CAN BE DILUTED IN SEVERAL WAYS, WHICH CAN CAUSE EPS AND THE STOCK PRICE TO FALL. THE COMPANY CAN ISSUE MORE STOCK UP TO THE AMOUNT THAT THE BOARD OF DIRECTORS HAS AUTHORIZED. HOLDERS OF OPTIONS AND WARRANTS ALSO CAN EXERCISE THEIR SHARES. A COMPANY CAN REDUCE THE NUMBER OF SHARES OUTSTANDING BY BUYING BACK SHARES. SUCH AN EVENT OFTEN CAUSES THE STOCK PRICE TO RISE BECAUSE THERE ARE FEWER SHARES TO BUY. A BUYBACK ALSO SIGNALS THAT A COMPANYS MANAGEMENT THINKS THE STOCK IS A GOOD INVESTMENT.
SHARPE RATIO
A MEASURE OF PERFORMANCE THAT TAKES RISK INTO ACCOUNT. DEVELOPED BY WILLIAM F. SHARPE, THIS RATIO DIVIDES AN INVESTMENT'S EXCESS RETURN (ABOVE THE GUARANTEED RETURN OF THE 90-DAY TREASURY BILL RATE) BY ITS STANDARD DEVIATION, WHICH IS AN INDICATOR OF VOLATILITY. THE RESULT IS A RAW NUMBER, AND THE HIGHER THE BETTER BECAUSE IT MEANS THAT AN INVESTMENT HAD A HIGH RETURN RELATIVE TO ITS RISK. THE RATIO GIVES INVESTORS AN IDEA WHETHER AN INVESTMENT IS WORTH THE RISK AND ALLOWS INVESTORS TO COMPARE THE RISK-ADJUSTED PERFORMANCE OF A VARIETY OF INVESTMENTS, EVEN ONES AS DIFFERENT AS STOCK AND BOND FUNDS.
SHORT ACCOUNT
ACCOUNT IN WHICH SHORT SALES AND SUBSEQUENT BUYS TO COVER ARE TRANSACTED. QUICKEN BROKERAGE CUSTOMERS WHO HAVE BEEN APPROVED FOR MARGIN TRADING (LEARN MORE) WILL HAVE A SHORT ACCOUNT SEGMENT AS WELL AS A MARGIN ACCOUNT SEGMENT ESTABLISHED WITHIN A SINGLE QUICKEN BROKERAGE ACCOUNT.
SHORT VALUE
THE CURRENT MARKET VALUE OF SHARES YOU HAVE SOLD SHORT. THIS IS THE AMOUNT YOU WOULD HAVE TO PAY TO BUY THE SHARES BACK TO COVER YOUR SHORT SALE.
SHORTING STOCKS
A METHOD OF GAMBLING ON A STOCK WHOSE PRICE YOU THINK WILL DECLINE. INSTEAD OF PURCHASING SHARES OF A STOCK YOU THINK IS GOING UP IN PRICE, YOU INSTEAD BORROW SHARES, SELL THEM IMMEDIATELY, WAIT FOR THE PRICE TO GO DOWN, AND THEN BUY THEM AT THE LOWER PRICE AND RETURN THE SHARES TO THE BROKER. THE ADVANTAGE OF SHORTING STOCKS IS THAT YOU CAN MAKE A PROFIT WITHOUT AN INITIAL CASH INVESTMENT. SHORTING STOCKS IS CONSIDERED RISKIER THAN BUYING STOCKS BECAUSE THE PRICE OF THE STOCK COULD RISE, RESULTING IN UNLIMITED LOSSES. BECAUSE SHORTING STOCKS INVOLVES AN UNLIMITED RISK, THE SEC HAS SPECIAL REGULATIONS REQUIRING BROKERS TO ISSUE A MARGIN CALL WHEN AN INVESTOR'S LOSSES REACH A CERTAIN AMOUNT.
SIMPLIFIED EMPLOYEE PENSIONS (SEP)
A TAX-DEFERRED RETIREMENT PLAN FOR SMALL BUSINESSES WITH FEWER THAN 25 EMPLOYEES AND THE SELF-EMPLOYED. EMPLOYERS MAY CONTRIBUTE 15% OF AN EMPLOYEES COMPENSATION TO AN IRA, AND A SELF-EMPLOYED PERSON MAY CONTRIBUTE 13.04% OF INCOME. THE IRS SAYS THE MAXIMUM CONTRIBUTION IS $30,000 IN 1999, BUT SINCE THE EARNINGS CAP IS $160,000, EFFECTIVE CONTRIBUTION LIMITS ARE $24,000 FOR EMPLOYERS AND $20,870 FOR THE SELF-EMPLOYED. OTHER THAN THE HIGHER CONTRIBUTION LIMITS, SEPS GENERALLY FOLLOW THE RULES FOR IRAS. ALSO KNOWN AS A SEP-IRA.
SMALL BUSINESS ADMINISTRATION (SBA)
A FEDERAL AGENCY CHARGED WITH CREATING AND ADMINISTERING FINANCING, EDUCATIONAL, AND ADVOCACY PROGRAMS FOR SMALL BUSINESSES.
SMALL CAP
FOR QUICKEN.COM PORTFOLIO ANALYSIS, SMALL CAPS ARE STOCKS WITH A TOTAL MARKET CAPITALIZATION OF LESS THAN $3.5 BILLION. INVESTMENT ADVISERS SOMETIMES RECOMMEND THAT INVESTORS INTERESTED IN LONG-TERM GROWTH INVEST IN SMALL CAP STOCKS BECAUSE THEY OFTEN HAVE THE GREATEST POTENTIAL FOR GROWTH. HOWEVER, THESE STOCKS ARE TYPICALLY MORE VOLATILE THAN STOCKS OF LARGER COMPANIES AND ARE LESS LIKELY TO PAY DIVIDENDS. FOR MUTUAL FUND DATA AT QUICKEN.COM, MORNINGSTAR DETERMINES MARKET CAP SIZE. ACCORDING TO MORNINGSTAR, FUNDS WITH A MEDIAN MARKET CAP OF LESS THAN $1.7 BILLION ARE DESIGNATED AS SMALL CAP.
SMALL-CAP BLEND FUND
AS DETERMINED BY FUND RESEARCH FIRM MORNINGSTAR, INC., A MUTUAL FUND THAT INVESTS IN STOCKS WITH A MARKET CAPITALIZATIONS OF LESS THAN $2 BILLION THAT OFFER A BLEND OF GROWTH AND VALUE CHARACTERISTICS. BLEND FUNDS TYPICALLY ARE LESS RISKY THAN GROWTH FUNDS. SMALL-CAP FUNDS GENERALLY DO NOT SEEK INCOME FROM DIVIDENDS.
SMALL-CAP GROWTH FUND
A MUTUAL FUND THAT INVESTS IN SMALL COMPANIES WITH GOOD GROWTH PROSPECTS. ACCORDING TO MORNINGSTAR, SMALL-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATIONS OF LESS THAN $2 BILLION. OTHER ORGANIZATIONS MAY ADHERE TO DIFFERENT VALUATIONS. SMALL-CAP FUNDS ARE MORE VOLATILE THAN MID-CAP AND LARGE-CAP FUNDS AND GENERALLY DO NOT SEEK INCOME FROM DIVIDENDS. GROWTH FUNDS OFTEN HAVE HIGH P/E RATIOS BECAUSE MANAGERS ARE WILLING TO PAY A PREMIUM FOR STOCKS OF FAST-GROWING COMPANIES.
SMALL-CAP VALUE FUND
A MUTUAL FUND THAT INVESTS IN THE UNDERVALUED STOCKS OF SMALL COMPANIES. ACCORDING TO MORNINGSTAR, SMALL-CAP FUNDS INVEST IN COMPANIES WITH MARKET CAPITALIZATIONS OF LESS THAN $2 BILLION. OTHER ORGANIZATIONS MAY ADHERE TO DIFFERENT VALUATIONS. SMALL-CAP FUNDS ARE MORE VOLATILE THAN MID-CAP AND LARGE-CAP FUNDS. VALUE FUND MANAGERS BUY STOCKS THAT HAVE RELATIVELY LOW P/E RATIOS OR ARE UNDERVALUED BY OTHER OBJECTIVE MEASURES, SUCH AS PRICE-TO-BOOK RATIOS. THE UNDERLYING COMPANY MUST BE FUNDAMENTALLY STRONG EVEN THOUGH THE STOCK IS LOW.
SOCIAL SECURITY
THE U.S. FEDERAL GOVERNMENT'S RETIREMENT SAFETY NET. IF YOU ARE EMPLOYED, YOU PROBABLY CONTRIBUTE TO THE SOCIAL SECURITY SYSTEM THROUGH PAYROLL TAXES. NORMALLY, YOUR FIRST CHANCE TO GET A SOCIAL SECURITY RETIREMENT CHECK IS AT AGE 62. STARTING THIS EARLY, HOWEVER, WILL REDUCE YOUR BENEFITS BY 20% TO 30% FOR THE REST OF YOUR LIFE. THE CURRENT AGE FOR FULL RETIREMENT BENEFITS -- AS WELL AS MEDICARE HEALTH CARE INSURANCE -- IS 65. THE RETIREMENT AGE IS GRADUALLY GOING UP, HOWEVER, FOR PEOPLE BORN IN 1938 AND LATER. ANYONE BORN AFTER 1959 WILL HAVE TO WORK ANOTHER TWO YEARS UNTIL AGE 67. THE GOOD NEWS IS THAT THERE WILL BE EVEN BIGGER INCENTIVES TO WAIT UNTIL 70 TO RETIRE. RIGHT NOW PEOPLE GET A 3.5% INCREASE IN THEIR FULL RETIREMENT BENEFITS FOR EACH YEAR THEY DELAY FILING. THAT BONUS GRADUALLY INCREASES FROM 6% FOR PEOPLE BORN IN 1935 TO 8% FOR PEOPLE BORN IN 1943 OR LATER. IN ADDITION TO RETIREMENT INCOME, SOCIAL SECURITY ALSO PROVIDES DISABILITY AND SURVIVORS' BENEFITS. IT'S DIFFICULT TO QUALIFY FOR SOCIAL SECURITY DISABILITY. YOU MUST BE UNABLE TO DO ANY KIND OF SUBSTANTIAL WORK, AND YOUR DISABILITY MUST BE EXPECTED TO LAST AT LEAST A YEAR OR RESULT IN DEATH. ONCE YOU QUALIFY, HOWEVER, PAYMENTS WILL CONTINUE FOR AS LONG AS YOU ARE DISABLED. MOST EMPLOYED PEOPLE WILL QUALIFY FOR SOCIAL SECURITY SURVIVORS' BENEFITS, A TYPE OF LIFE INSURANCE. IF YOU DIE, YOUR SPOUSE AND YOUR DEPENDENTS MAY BE ELIGIBLE TO RECEIVE A MONTHLY CHECK FROM THE GOVERNMENT. THIS PROGRAM IS PARTICULARLY IMPORTANT IF YOU DIE PREMATURELY AND LEAVE A SPOUSE WITH SCHOOL-AGE CHILDREN.
SOCIALLY RESPONSIBLE INVESTING
THE PRACTICE OF INVESTING ACCORDING TO YOUR PRINCIPLES. SOCIALLY RESPONSIBLE INVESTORS USUALLY AVOID INVESTING IN COMPANIES THAT THEY BELIEVE HARM SOCIETY OR THE ENVIRONMENT.
SOLE PROPRIETORSHIP
A BUSINESS OWNED BY AN INDIVIDUAL WHO IS COMPLETELY LIABLE FOR ITS ACTIONS AND INCOME.
SPLIT
THE ISSUANCE OF MORE STOCK TO SHAREHOLDERS. COMPANIES USE VARIOUS FORMULAS TO DETERMINE HOW MUCH STOCK EACH SHAREHOLDER SHOULD GET, SUCH AS 2-FOR-1 OR 3-FOR-2. IF YOU OWN 100 SHARES OF THE STOCK YUP, VALUED AT $20 PER SHARE, A 2-FOR-1 SPLIT MEANS YOU WILL HAVE 200 SHARES VALUED AT $10 A SHARE. IN EACH CASE YOUR STAKE IS WORTH $2,000. ALTHOUGH A STOCK SPLIT DOES NOT INCREASE A STOCKS PRICE PER SE, IT IS GENERALLY REGARDED AS A POSITIVE MOVE. IN MANY CASES THE STOCK HAS JUST ENJOYED A RUN-UP, AND THE COMPANY DECIDES TO SPLIT THE STOCK IN ANTICIPATION OF FURTHER GAINS. MANY COMPANIES LIKE THEIR STOCKS TO TRADE IN THE $20- TO $45-A-SHARE RANGE, WHICH IS MOST ACCESSIBLE TO INVESTORS. STOCK PRICES OFTEN JUMP AFTER THE ANNOUNCEMENT OF A STOCK SPLIT AND THEN FALL AFTER THE SPLIT OCCURS AS SPECULATORS CASH IN THEIR PROFITS.
SPLIT LIMIT
SPLIT LIMITS RESTRICT THE MAXIMUM AMOUNT THAT A POLICY WILL PAY FOR A SPECIFIC TYPE OF LOSS, SUCH AS PROPERTY DAMAGE AND BODILY INJURY. A SPLIT LIMITS AUTO INSURANCE POLICY, FOR EXAMPLE, MIGHT PAY $50,000 PER PERSON AND $150,000 PER ACCIDENT IN BODILY INJURY BENEFITS, AND $50,000 IN PROPERTY DAMAGE PER ACCIDENT. BY CONTRAST, A SINGLE LIMIT POLICY MIGHT PAY UP TO $200,000 FOR ALL PROPERTY DAMAGE AND BODILY INJURY RESULTING FROM A SINGLE ACCIDENT. ALTHOUGH THE TOTAL AMOUNT OF COVERAGE IS THE SAME, THE SINGLE LIMIT POLICY IS MORE FLEXIBLE, BECAUSE IT DOESN'T CAP THE AMOUNT THAT CAN BE PAID FOR ANY TYPE OF LOSS.
SPOUSAL IRA
A TAX-DEFERRED RETIREMENT ACCOUNT FOR SPOUSES WHO DO NOT WORK FOR PAY. THE IRS ALLOWS YOU TO CONTRIBUTE $2,000 A YEAR ON BEHALF OF YOUR STAY-AT-HOME SPOUSE IF YOU ARE EMPLOYED AND FILE A JOINT RETURN. YOU MAY ALSO CONTRIBUTE $2,000 A YEAR TO A TRADITIONAL IRA FOR YOURSELF. YOUR CONTRIBUTION TO A SPOUSAL IRA, WHICH FOLLOWS TRADITIONAL IRA RULES, IS FULLY DEDUCTIBLE IF YOU DID NOT PARTICIPATE IN A COMPANY-SPONSORED RETIREMENT PLAN OR IF YOUR INCOME FALLS BELOW $31,000 IN 1999 FOR SINGLE FILERS AND $51,000 FOR MARRIED COUPLES. THE DEDUCTION PHASES OUT AT $41,000 FOR SINGLES AND $61,000 FOR MARRIED COUPLES. THOSE LIMITS GRADUALLY RISE TO $50,000 TO $60,000 FOR SINGLE TAXPAYERS IN 2005 AND $80,000 TO $100,000 IN 2007 FOR MARRIED COUPLES.
SPREAD
THE DIFFERENCE BETWEEN THE ASK AND BID PRICE FOR AN INVESTMENT INSTRUMENT.
STACKED COVERAGE
DIFFERENT COVERAGE LIMITS WITHIN ONE POLICY.
STANDARD & POOR'S MIDCAP INDEX
AN INDEX OF 400 MID-SIZED U.S. STOCKS.
STANDARD DEVIATION
STANDARD DEVIATION IS A COMMON STATISTICAL TOOL USED TO MEASURE THE VOLATILITY IN THE PERFORMANCE OF A SINGLE SECURITY OR AN ENTIRE PORTFOLIO, TYPICALLY BY CALCULATING MONTHLY RETURNS OVER A PERIOD OF 36 MONTHS. THE RESULT IS USUALLY REPORTED ON AN ANNUALIZED BASIS. A SECURITY WITH A HIGH STANDARD DEVIATION HAS A LOT OF VARIATION IN ITS MONTHLY RETURNS. SUCH VOLATILITY GENERALLY INDICATES THAT THERE IS A SIGNIFICANT DOWNSIDE RISK. SHORT-TERM BONDS OFTEN HAVE STANDARD DEVIATIONS OF LESS THAN 1 WHILE PRECIOUS METALS STOCKS AND FUNDS CAN HAVE STANDARD DEVIATIONS OF 25 OR HIGHER.
STARTUP
A BUSINESS THAT HAS RECENTLY BEGUN OPERATION.
STOCK
A SHARE OF OWNERSHIP, OR EQUITY, IN A CORPORATION. FOR EXAMPLE, IF YOU BUY 10,000 SHARES IN A COMPANY WITH 1 MILLION SHARES OUTSTANDING, YOU OWN 1% OF THE COMPANY.
STOCK BUYBACK
CORPORATE REPURCHASE OF STOCK FROM SHAREHOLDERS. INVESTORS TYPICALLY VIEW A STOCK BUYBACK AS A POSITIVE SIGNAL. COMPANIES OFTEN BUY BACK THEIR OWN SHARES BECAUSE MANAGEMENT BELIEVES THE STOCK IS UNDERVALUED. CASH FLOW MAYBE INCREASING, AND PUTTING MONEY INTO THEIR OWN STOCK MAY BE A BETTER INVESTMENT THAN OTHER ALTERNATIVES. AND BECAUSE THERE ARE FEWER SHARES OUTSTANDING, EARNINGS PER SHARE GO UP EVEN IF THE ACTUAL DOLLAR AMOUNT OF EARNINGS DOES NOT CHANGE.
STOCK EXCHANGE
A MARKET WITH A TRADING FLOOR WHERE SECURITIES ARE BOUGHT AND SOLD. IN THE UNITED STATES THE MAJOR EXCHANGES ARE THE NEW YORK STOCK EXCHANGE (NYSE) AND THE AMERICAN STOCK EXCHANGE (AMEX). THERE ARE SEVERAL REGIONAL STOCK EXCHANGES IN LOS ANGELES, SAN FRANCISCO, CHICAGO, BOSTON, PHILADELPHIA, AND CINCINNATI. STOCK EXCHANGES ALSO OPERATE IN TOKYO, LONDON, AND DOZENS OF CITIES WORLDWIDE. THE NASDAQ STOCK MARKET IS LOOSELY CALLED AN EXCHANGE, BUT TECHNICALLY IT IS NOT BECAUSE IT HAS NO PHYSICAL LOCATION. INSTEAD, TRADES ARE EXECUTED VIA COMPUTER.
STOCK-OPTION PLAN
THIS PLAN ALLOWS EMPLOYEES TO BUY A SET NUMBER OF SHARES OF THEIR COMPANY'S STOCK AT A FUTURE DATE AND AT A SET PRICE (AT OR BELOW THE MARKET PRICE AT THE TIME THE OPTION IS GRANTED) FOR A SPECIFIED PERIOD OF YEARS. THERE ARE TWO TYPES OF STOCK OPTIONS GRANTED TO EMPLOYEES: NON-QUALIFYING STOCK OPTIONS AND INCENTIVE STOCK OPTIONS. NON-QUALIFYING STOCK OPTIONS ARE EMPLOYEE STOCK OPTIONS THAT DO NOT MEET THE IRS CRITERIA FOR INCENTIVE STOCK OPTIONS AND TRIGGER A TAX WHEN THEY ARE EXERCISED. GAINS REALIZED ON THE EXERCISE OF NON-QUALIFYING OPTIONS ARE TAXED AS ORDINARY INCOME IN THE YEAR IN WHICH THE OPTIONS ARE EXERCISED. INCENTIVE STOCK OPTIONS ARE EMPLOYEE STOCK OPTIONS THAT ALLOW THE EMPLOYEE TO PURCHASE SHARES OF COMPANY STOCK UNDER CONDITIONS THAT MEET THE IRS CRITERIA FOR INCENTIVE STOCK OPTIONS. THE EMPLOYEE DOES NOT PAY INCOME TAX WHEN THE OPTIONS ARE GRANTED OR EXERCISED. PROFITS FROM THE SALE OF STOCK HELD AT LEAST TWO YEARS FROM THE DATE OF THE OPTION GRANT OR ONE YEAR FROM THE DATE OF TRANSFER TO THE EMPLOYEE ARE TAXED AS CAPITAL GAINS.
STOCK-ORIENTED MUTUAL FUNDS
MUTUAL FUNDS THAT ARE INVESTED PRIMARILY IN STOCKS (ALSO KNOWN AS "EQUITIES"), INCLUDING DOMESTIC, GLOBAL, AND INTERNATIONAL COMMON STOCK, PREFERRED STOCK, CONVERTIBLE STOCK, ETC. BALANCED FUNDS HAVE BOTH STOCKS AND BONDS IN THEIR PORTFOLIOS.
STOCKHOLDERS EQUITY
WHAT SHAREHOLDERS OWN AFTER A COMPANY PAYS OFF ITS LIABILITIES. STOCKHOLDERS' EQUITY APPEARS AS A SECTION ON CORPORATE BALANCE SHEET AND INCLUDES CAPITAL STOCK, PAID-IN CAPITAL, AND RETAINED EARNINGS. THIS SECTION ALSO USUALLY INDICATES HOW MANY SHARES OF STOCK ARE OUTSTANDING AND HOW MANY ARE AUTHORIZED FOR ISSUE. TOTAL LIABILITIES PLUS STOCKHOLDER EQUITY EQUALS A COMPANYS TOTAL ASSETS. ALSO CALLED SHAREHOLDERS EQUITY.
STOP ORDER
AN ORDER TO BUY OR SELL A SECURITY AT A DESIGNATED PRICE, CALLED THE STOP PRICE, AFTER THE SECURITY HAS TRADED AT THAT PRICE. A STOP ORDER CAN BE A DAY ORDER OR A GOOD-TILL-CANCELLED (GTC) ORDER. A DAY ORDER EXPIRES IF IT ISN'T EXECUTED THE DAY IT'S PLACED, WHEREAS A GTC ORDER EXPIRES WHEN THE TRADER CANCELS IT. BUY STOP ORDERS ARE ALWAYS EXECUTED AT A PRICE AT OR ABOVE THE STOP PRICE. CONVERSELY, SELL STOP ORDERS ARE ALWAYS EXECUTED AT A PRICE AT OR BELOW THE STOP PRICE.
STRIKE PRICE
IN OPTIONS TRADING, THE EXERCISE PRICE IS THE SPECIFIED PRICE FOR THE INVESTMENT INSTRUMENT UNDERLYING A CALL OR PUT. IF OPTIONS ARE EXERCISED, THE UNDERLYING SECURITIES ARE TRADED AT THIS EXERCISE PRICE.
SUBSTITUTIVE SERVICES EXPENSES OR LOSS/SERVICES BENEFITS
THE EXPENSES YOU INCURRED BECAUSE YOU HAD TO HIRE SOMEONE TO PERFORM TASKS CUSTOMARILY DONE FREE OF CHARGE BY A FAMILY MEMBER WHO IS UNABLE TO PERFORM THEM BECAUSE OF INJURY OR ILLNESS ARISING FROM A COVERED AUTO ACCIDENT. COVERAGE VARIES BY STATE. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT SUBSTITUTIVE SERVICES COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
SUPPLEMENTAL UN-INSURED/UNDER-INSURED MOTORIST COVERAGE
IN NEW YORK, SUPPLEMENTAL UN-INSURED/UNDER-INSURED MOTORIST BODILY INJURY COVERAGE COVERS INCIDENTS IN ANY STATE OR CANADIAN PROVINCE.
SURVIVORS BENEFITS
BENEFITS AVAILABLE TO PAY SURVIVING FAMILY MEMBERS FOR A PORTION OF INCOME THEY WOULD HAVE RECEIVED FROM THE DECEASED WAGE EARNER. READ YOUR INSURANCE POLICY TO LEARN THE SPECIFICS ABOUT WHAT SURVIVORS BENEFITS COVERAGE INCLUDES AND WHAT IT DOESN'T INCLUDE.
TARGET PRICE
A PROJECTION OF A STOCKS PRICE. ANALYSTS INCLUDE TARGET PRICES FOR STOCKS THEY FOLLOW IN THEIR RESEARCH REPORTS. TYPICALLY, THE TARGET PRICE IS FOR A SPECIFIC PERIOD OF TIME, SUCH AS A YEAR. BY COMPARING THE CURRENT MARKET PRICE WITH THE TARGET PRICE, INVESTORS CAN GET AN IDEA OF A STOCKS EXPECTED GROWTH RATE.
TAX BASIS
THE ORIGINAL COST YOU PAID FOR AN INVESTMENT (PLUS EXPENSES) THAT MUST BE REPORTED TO THE IRS WHEN YOU SELL THE INVESTMENT. THE BASIS IS USED FOR CALCULATING CAPITAL GAINS OR LOSSES. FOR EXAMPLE, IF YOU BOUGHT A STOCK FOR $1,000 TWO YEARS AGO AND SOLD IT TODAY FOR $1,500, YOUR INCOME TAX RETURN WOULD SHOW A BASIS OF $1,000 AND A TAXABLE CAPITAL GAINS PROFIT OF $500. TAX BASIS OF A SPECIAL ASSET: THIS USUALLY APPLIES TO REAL ESTATE. IT EQUALS THE PURCHASE PRICE YOU PAID FOR THE SPECIAL ASSET, PLUS IMPROVEMENTS TO IT, MINUS DEPRECIATION (IF APPLICABLE) OF THE ASSET. TAX BASIS FOR ASSETS: THE VALUE ASSIGNED TO AN ASSET FOR INCOME TAX AND DEPRECIATION PURPOSES IS THE TAX BASIS FOR ASSETS. THIS VALUE IS THE BASE AMOUNT FROM WHICH TO FIGURE THE CAPITAL GAINS EARNED ON AN ASSET. THE BASIS IS THE PRICE YOU PAID, PLUS A NY IMPROVEMENTS (LIKE HOME IMPROVEMENTS THAT PERMANENTLY INCREASE THE HOME'S VALUE), MINUS DEPRECIATION.
TAX DEFERRED
AN INVESTMENT WITH EARNINGS AND SOMETIMES CONTRIBUTIONS THAT ARE TAXED AT A LATER DATE. FOR EXAMPLE, YOU PAY NO TAXES ON YOUR IRAS ACCUMULATED EARNINGS UNTIL YOU TAKE THEM OUT, AT WHICH TIME THEY ARE SUBJECT TO INCOME TAX. TAX DEFERRAL GIVES INVESTORS A BIG BOOST BECAUSE EARNINGS COMPOUND AT A FASTER RATE THAN WITH INVESTMENTS THAT ARE TAXED EVERY YEAR. TAX DEFERRAL ALSO CAN COST YOU LESS IF YOU ANTICIPATE BEING IN A LOWER TAX BRACKET WHEN YOU WITHDRAW YOUR MONEY, SUCH AS DURING RETIREMENT.
TAX FREE
INVESTMENTS WHOSE EARNINGS ARE NEVER TAXED. FOR EXAMPLE, MUNICIPAL BOND FUND DIVIDENDS ARE NEVER TAXED AT THE FEDERAL LEVEL. HOWEVER, YOU MAY STILL HAVE TO PAY CAPITAL GAINS TAXES IF YOU SELL THEM AT A PROFIT.
TAX-DEFERRED ANNUITY
AN INVESTMENT THAT POSTPONES (BUT DOESN'T ELIMINATE) TAXES ON EARNINGS UNTIL YOU DIP INTO THE SAVINGS, USUALLY FOR RETIREMENT. A FIXED ANNUITY PAYS A SET AMOUNT AT REGULAR INTERVALS. PAYOUTS FROM VARIABLE ANNUITIES CHANGE, BECAUSE THEY DEPEND ON THE SUCCESS OF THE INVESTMENTS THAT MAKE UP THE ANNUITY. YOU USUALLY HAVE NO RESTRICTIONS ON HOW MUCH YOU CAN SAVE, BUT YOU CAN'T DIP INTO THE SAVINGS UNTIL YOU ARE 59 YEARS OLD (OR ELSE YOU FACE SIGNIFICANT TAXES, TAX PENALTIES, AND PENALTIES FROM THE COMPANY ISSUING THE ANNUITY.)
TAX-DEFERRED SAVINGS
INVESTMENTS THAT POSTPONE TAXES ON EARNINGS AND SOMETIMES CONTRIBUTIONS. UNLIKE TAXABLE SAVINGS, THE TAXES ON THE INTEREST, DIVIDENDS AND ANY ASSOCIATED CAPITAL GAINS ARE POSTPONED UNTIL YOU DIP INTO THE SAVINGS. YOU USUALLY HAVE RESTRICTIONS ON HOW MUCH YOU CAN SAVE, AND YOU CAN'T DIP INTO THE SAVINGS WITHOUT SIGNIFICANT TAXES AND PENALTIES UNTIL YOU ARE 59. TAX DEFERRAL GIVES INVESTORS A BIG BOOST BECAUSE EARNINGS COMPOUND AT A FASTER RATE THAN WITH INVESTMENTS THAT ARE TAXED EVERY YEAR. TAX DEFERRAL ALSO CAN COST YOUR LESS IF YOU ANTICIPATE BEING IN A LOWER TAX BRACKET WHEN YOU WITHDRAW YOUR MONEY, SUCH AS DURING RETIREMENT.
TAX-FREE BONDS
INCOME ON SOME SECURITIES ISSUED BY GOVERNMENT BODIES (FEDERAL, STATE, OR LOCAL) IS NOT SUBJECT TO FEDERAL, STATE, AND/OR LOCAL TAXES. SUCH SECURITIES ARE OFTEN CALLED "MUNICIPAL BONDS", OR JUST "MUNICIPALS." MUNICIPAL BONDS MAY BE BOUGHT INDIVIDUALLY OR BY BUYING SHARES OF MUTUAL FUNDS THAT INVEST IN THEM. SINCE THEY ARE ALREADY TAX-FREE, MUNICIPALS USUALLY ARE NOT PURCHASED FOR TAX-DEFERRED RETIREMENT SAVINGS PLANS. EVEN THOUGH MUNICIPALS OFFER A LOWER RATE OF RETURN THAN CORPORATE BONDS, THEY ARE OFTEN ADVANTAGEOUS FOR INVESTORS IN HIGH TAX BRACKETS.
TAXES, MEDICARE
PAYROLL TAXES THAT FUND THE FEDERAL GOVERNMENT'S MEDICARE HEALTH CARE INSURANCE PROGRAM FOR PEOPLE 65 AND OLDER. UNLIKE THE PORTION OF PAYROLL TAXES THAT GO TO SOCIAL SECURITY, MEDICARE TAXES ARE LEVIED ON YOUR FULL INCOME. EMPLOYEES AND EMPLOYERS MUST EACH PAY 1.45% OF COMPENSATION. THE SELF-EMPLOYED MUST PAY THE ENTIRE 2.9% BUT CAN DEDUCT HALF OF THE TAX AS A BUSINESS EXPENSE ON THEIR TAX RETURN.
TAXES, SOCIAL SECURITY
PAYROLL TAXES THAT FUND THE FEDERAL GOVERNMENT'S SOCIAL SECURITY RETIREMENT PROGRAM. EMPLOYEES AND EMPLOYERS EACH PAY 6.2% OF THE FIRST $72,600 OF INCOME IN 1999. (THE INCOME CEILING RISES EACH YEAR.) SELF-EMPLOYED PEOPLE ARE RESPONSIBLE FOR THE ENTIRE 12.4% BUT CAN DEDUCT HALF OF THE TAX AS A BUSINESS EXPENSE ON THEIR INCOME TAX RETURN. REMEMBER, YOU'LL CONTINUE TO PAY SOCIAL SECURITY TAXES AFTER YOU RETIRE IF YOU WORK PART-TIME FOR A WAGE OR OWN A BUSINESS. BENEFITS ARE TAX-FREE TO MOST RECIPIENTS, BUT AFFLUENT RETIREES MAY BE TAXED ON UP TO 85% OF THEIR SOCIAL SECURITY INCOME. A COMPLICATED FORMULA THAT INCLUDES YOUR INCOME, INTEREST ON TAX-FREE INVESTMENTS, AND 50% OF YOUR SOCIAL SECURITY INCOME DETERMINES HOW MUCH OF YOUR BENEFITS ARE SUBJECT TO INCOME TAX. SEE ALSO SOCIAL SECURITY.
TENURE
WHEN REFERRING TO A MUTUAL FUND, THE NUMBER OF YEARS A MANAGER HAS RUN A FUND.
TERM LIFE INSURANCE
USUALLY THE LEAST EXPENSIVE FORM OF LIFE INSURANCE, TERM LIFE INSURANCE COVERS YOU FOR A FIXED PERIOD (TERM) OF TIME THAT YOU SELECT. PEOPLE YOU NAME AS BENEFICIARIES COLLECT A DEATH BENEFIT IF YOU DIE WHILE COVERED. UNLIKE WHOLE, UNIVERSAL, AND VARIABLE LIFE INSURANCE, THERE IS NO SAVINGS COMPONENT IN A TERM POLICY. IN THIS RESPECT, IT IS "PURE" INSURANCE.
TICK
A SMALL PRICE MOVEMENT OF A STOCK, USUALLY 1/8 OF A POINT. TICKS CAN SHOW WHETHER A TREND IS CONTINUING OR REVERSING. FOR EXAMPLE, A SERIES OF UPTICKS MAY SIGNAL THAT A STOCK PRICE THAT HAS FALLEN MAY BE BOUNCING BACK. 
TICKER SYMBOL
A LETTER COMBINATION THAT IDENTIFIES A STOCK-EXCHANGE SECURITY. OFTEN, IT IS THE TRUNCATED OR ABBREVIATED NAME OF THE COMPANY OR GROUP ISSUING THE SECURITY, LIKE INTU (INTUIT) OR DJ30 (DOW JONES 30).
TIME THE MARKET
SOME PEOPLE ATTEMPT TO INVEST BY TIMING MARKET HIGHS ("SELL" POINTS) AND MARKET LOWS ("BUY" POINTS). FEW DO THIS WELL, AND THE TRACK RECORDS OF MARKET TIMING FIRMS HAS BEEN LESS THAN STELLAR.
TOP-LINE COVERAGE
IN THE CONTEXT OF HEALTH INSURANCE, TOP-LINE COVERAGE PROVIDES FOR MAJOR MEDICAL EXPENSES (HOSPITALIZATION AND PHYSICIANS' CHARGES), AND TYPICALLY HAS LOW DEDUCTIBLES, HIGH LIFETIME LIMITS, LOW CO-INSURANCE, FREEDOM OF CHOICE IN DOCTORS, AND MANY EXTRAS SUCH AS DENTAL, VISION CARE, AND PRESCRIPTION DRUG COVERAGE.
TORT
TORT IS A LEGAL TERM MEANING A WRONGFUL ACT, RESULTING IN INJURY OR DAMAGE, ON WHICH A CIVIL ACTION MAY BE BASED.
TOTAL ASSETS
ALL THE PROPERTY OWNED BY A CORPORATION. TOTAL ASSETS INCLUDE CURRENT ASSETS; FIXED ASSETS SUCH AS BUILDINGS AND EQUIPMENT, AND OTHER ASSETS SUCH AS LICENSES AND GOOD WILL. SINCE MANY ARE DEPRECIATED OR CARRIED ON THE BOOKS AT THE PURCHASE PRICE RATHER THAN MARKET VALUE, ASSET VALUES CAN BE UNDERSTATED ON BALANCE SHEETS.
TOTAL DEBT
EVERYTHING A COMPANY OWES. TOTAL DEBT INCLUDES LONG-TERM DEBT AND CURRENT LIABILITIES. INVESTORS CAN FIND IT LISTED ON THE BALANCE SHEET IN A COMPANYS ANNUAL REPORT. A COMPANYS TOTAL DEBT IS AN IMPORTANT COMPONENT IN THE TOTAL DEBT-EQUITY RATIO, AN INDICATOR OF A COMPANYS DEBT LEVEL. DEBT CAN BE A GOOD TOOL FOR A CORPORATION. IT CAN HELP THE COMPANY INVEST IN NEW PLANTS AND EQUIPMENT THAT WILL INCREASE PROFITABILITY. TOO MUCH DEBT, HOWEVER, IS RISKY. IT LOCKS THE COMPANY INTO REGULAR INTEREST PAYMENTS WHETHER EARNINGS ARE UP OR DOWN. IF A COMPANY STUMBLES, IT MAY HAVE TROUBLE RECOVERING UNDER A HEAVY DEBT LOAD.
TOTAL NET WORTH
YOUR TOTAL NET WORTH IS THE TOTAL OF ALL OF YOUR ASSETS (STOCKS, BONDS, BANK ACCOUNTS, HOME EQUITY, REAL ESTATE, PERSONAL PROPERTY, BUSINESS RECEIVABLES, NOTES RECEIVABLE, ETC.) MINUS THE TOTAL OF YOUR LIABILITIES (OUTSTANDING LOANS OWED, CREDIT CARD BALANCES, TAXES PAYABLE, BILLS PAYABLE, ETC.)
TOTAL RETURN
THE AVERAGE ANNUALIZED RATE-OF-RETURN OVER A SPECIFIED TIME PERIOD.
TOTAL REVENUE
THE DOLLAR AMOUNT OF ANNUAL SALES, NET OF ALLOWANCES (DISCOUNTS, RETURNED MERCHANDISE). IT IS THE "TOP LINE" FIGURE FROM WHICH COSTS ARE SUBTRACTED TO DETERMINE NET INCOME. IN EVALUATING STOCKS, REVENUE GROWTH IS OFTEN AN INDICATION OF A HEALTHY COMPANY. HOWEVER, ACQUISITIONS AND DIVESTITURES WILL SKEW REVENUE GROWTH FIGURES. FOR ALL BUT THE MOST SUCCESSFUL COMPANIES, THE GROWTH RATES CHANGE QUARTERLY, SO THESE VALUES SHOULD BE CHECKED OFTEN.
TRADEMARK
A WORD OR SYMBOL OWNED BY A BUSINESS USED TO DISTINGUISH ITS IDENTITY, PRODUCTS, OR SERVICES. INFRINGEMENT UPON A COMPANY'S TRADEMARK IS AN ILLEGAL ACT.
TREASURY INFLATION-PROTECTED SECURITIES (TIPS)
U.S. TREASURY BONDS THAT ARE INDEXED TO THE CONSUMER PRICE INDEX. TIPS ARE A GUARANTEED HEDGE AGAINST INFLATION BECAUSE THE PRINCIPAL GROWS AT THE SAME RATE AS INFLATION. ON THE OTHER HAND, IF THERE IS DEFLATION, THE PRINCIPAL IS ADJUSTED DOWNWARD. THE PRINCIPAL IS RETURNED TO THE INVESTOR AT MATURITY, WHICH CAN BE FROM ONE TO 30 YEARS. INTRODUCED ONLY A FEW YEARS AGO, TIPS ARE ATTRACTIVE TO CONSERVATIVE INVESTORS WHO WANT TO BEAT INFLATION WITHOUT THE RISK OF INVESTING IN THE STOCK MARKET. THE MARKET FOR TIPS IS STILL THIN, HOWEVER, AND THEY ARE NOT AS LIQUID AS TRADITIONAL TREASURY BONDS.
TREASURY BILLS (T-BILLS)
A SHORT-TERM GOVERNMENT SECURITY, SOLD THROUGH THE FEDERAL RESERVE BANK BY COMPETITIVE BIDDING AT WEEKLY AND MONTHLY AUCTIONS, IN DENOMINATIONS FROM $10,000 TO $1 MILLION. T-BILLS ARE THE MOST WIDELY USED OF ALL GOVERNMENT DEBT SECURITIES AND ARE A PRIMARY INSTRUMENT OF FEDERAL RESERVE MONETARY POLICY. U.S. TREASURY SECURITIES, INCLUDING TREASURY NOTES AND TREASURY BONDS, ARE CONSIDERED CONSERVATIVE INVESTMENTS. TREASURY BILLS ARE BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT.
UMBRELLA LIABILITY INSURANCE
YOUR HOME AND AUTO POLICIES BOTH PROVIDE LIABILITY COVERAGE -- INSURANCE THAT PAYS OTHER PEOPLE IF YOU'RE RESPONSIBLE FOR INJURING THEM OR DAMAGING THEIR PROPERTY. UMBRELLA LIABILITY IS EXTRA COVERAGE -- A POLICY THAT PAYS FOR LIABILITY LOSSES IN EXCESS OF THOSE COVERED IN HOMEOWNERS AND AUTO INSURANCE. A $1 MILLION UMBRELLA POLICY CAN INCREASE YOUR TOTAL LIABILITY PROTECTION FROM SAY, $300,000, TO $1.3 MILLION. IT ALSO COVERS RISKS NOT INSURED IN AUTO AND HOMEOWNERS POLICIES -- LIKE SLANDER, INVASION OF PRIVACY, AND LIABILITY FOR PROPERTY THAT YOU DON'T OWN WHILE IT'S IN YOUR CARE. UMBRELLA COVERAGE WOULD PAY, FOR EXAMPLE, IF YOU HURT SOMEBODY WHILE DRIVING A MOTOR BOAT THAT DIDN'T BELONG TO YOU.
UNDERVALUED
A STOCK THAT IS POTENTIALLY WORTH MORE THAN THE MARKET CURRENTLY RECOGNIZES. AN UNDERVALUED STOCK HAS A LOWER PRICE-EARNINGS RATIO THAN OTHER STOCKS IN ITS INDUSTRY OR THE MARKET AS A WHOLE. VALUE INVESTORS SEEK OUT QUALITY COMPANIES WITH RELATIVELY LOW P/E RATIOS. THESE INVESTORS PLAN TO HOLD THE STOCKS FOR THE LONG-TERM, BETTING THAT THE STOCK PRICE EVENTUALLY WILL RISE TO REFLECT THE COMPANYS PERFORMANCE.
UNEMPLOYMENT INSURANCE
A MONETARY COMPENSATION SYSTEM FOR UNEMPLOYED WORKERS THAT IS FUNDED BY AN UNEMPLOYMENT TAX PLACED ON EMPLOYERS.
UNIFIED CREDIT
IN 1999, YOU DON'T HAVE TO PAY TAXES ON ESTATES UP TO $650,000 IN VALUE. FOR ESTATES THAT ARE LARGER THAN THAT, THE IRS MAKES THE FIRST $650,000 TAX FREE THROUGH THE UNIFIED CREDIT WHICH OFFSETS THE TAXES YOU WOULD HAVE PAID ON THAT AMOUNT. THIS YEAR THE CREDIT IS WORTH $211,300. THOSE LIMITS GRADUALLY RISE TO $1 MILLION FOR THE EXEMPTION AND TO A CORRESPONDING $345,800 FOR THE CREDIT IN 2006. YOUR UNIFIED CREDIT CAN BE LOWERED, HOWEVER, IF YOU GIVE LARGE GIFTS WHILE YOU ARE STILL ALIVE. TAX LAW PRESENTLY ALLOWS YOU TO GIVE AS MANY PEOPLE AS YOU'D LIKE A GIFT OF UP TO $10,000 ANNUALLY. IF YOU EXCEED THAT AMOUNT, YOU'RE USING UP SOME OF YOUR ESTATE EXEMPTION. THE TAXES YOU PAY ON THE EXCESS GIFT ARE DEDUCTED FROM YOUR UNIFIED CREDIT THAT WILL EVENTUALLY BE USED TO FIGURE YOU ESTATE TAX.
UNIFORM COMMERCIAL CODE (UCC)
A SET OF POLICIES AND LAWS ADOPTED BY STATE GOVERNMENTS TO CREATE A UNIFORM SET OF REGULATIONS THAT GOVERN BUSINESS TRANSACTIONS. MANY STATES HAVE ENACTED ALTERATIONS OF VARIOUS SECTIONS OF THE UCC.
UNINSURED/UNDER-INSURED
UN-INSURED MOTORIST COVERAGE PAYS FOR INJURIES SUSTAINED BY YOU AND PASSENGERS IN YOUR CAR THAT ARE CAUSED BY AN UNINSURED MOTORIST OR A HIT-AND-RUN DRIVER. YOUR OWN UNDER-INSURED MOTORIST COVERAGE PAYS FOR YOUR MEDICAL TREATMENT, REHABILITATION, LOSSES FROM PAIN AND SUFFERING AND FUNERAL COSTS WHEN YOU OR YOUR PASSENGERS ARE INJURED BY SOMEONE WITH INSUFFICIENT LIABILITY INSURANCE TO COVER YOUR LOSSES. THE DEFINITION OF AN UNDER-INSURED MOTORIST VARIES FROM STATE TO STATE.
UNINSURED/UNDER-INSURED MOTORIST COVERAGE
UNINSURED MOTORIST COVERAGE PAYS FOR INJURIES SUSTAINED BY YOU AND YOUR PASSENGERS AND DAMAGE TO YOUR PROPERTY, THAT ARE CAUSED BY AN UNINSURED MOTORIST OR A HIT-AND-RUN DRIVER. UNDERINSURED MOTORIST COVERAGE PAYS WHEN YOU OR YOUR PASSENGERS ARE INJURED AS A RESULT OF NEGLIGENCE BY SOMEONE WITH INSUFFICIENT LIABILITY INSURANCE TO COVER YOUR LOSSES. THE DEFINITION OF AN UNDERINSURED MOTORIST VARIES FROM STATE TO STATE.
UNIT TRUST
A MUTUAL FUND INVESTED ONLY IN BONDS THAT PAYS PRINCIPAL AND INTEREST.
UNIVERSAL LIFE INSURANCE
LIKE WHOLE LIFE INSURANCE, THIS POLICY TYPE PROVIDES COVERAGE AND BUILDS UP SAVINGS OVER TIME. PEOPLE YOU NAME AS BENEFICIARIES COLLECT A DEATH BENEFIT IF YOU DIE WHILE COVERED. UNLIKE WHOLE LIFE, YOU CAN USE THE INTEREST FROM YOUR ACCUMULATED SAVINGS TO HELP PAY YOUR PREMIUMS, WHICH ARE FLEXIBLE.
UNREALIZED GAIN
THE PROFIT YOU WOULD HAVE EARNED ON AN ASSET, BUT HAVE NOT YET SOLD. SINCE YOU HAVE NOT ACTUALLY RECEIVED ANY CASH PROFIT, IT'S AN UNREALIZED (OR "PAPER") GAIN ON WHICH NO TAXES ARE DUE. (IF YOU WERE TO SELL THE ASSET FOR MORE THAN WHAT IT COST, TAXES WOULD BE DUE ON THE PROFIT YOU REALIZED.)
UNSTACKED COVERAGE
EACH VEHICLE UNDER A POLICY HAS ITS OWN SEPARATE COVERAGE LIMITS.
UPSIDE/DOWNSIDE RATIO
THE RATIO OF THE POTENTIAL RETURN ON A STOCK TO THE POTENTIAL LOSS. USING EARNINGS ESTIMATES AND HISTORIC P/E DATA, ANALYSTS FIRST DETERMINE A TARGET PRICE FOR A STOCK. THEY ALSO ESTIMATE THE POTENTIAL DOWNSIDE, OR HOW LOW A STOCK'S PRICE COULD FALL IF CIRCUMSTANCES CHANGE. THE DIFFERENCE BETWEEN A STOCK'S CURRENT PRICE AND ITS TARGET PRICE IS THE POTENTIAL GAIN AND THE DIFFERENCE BETWEEN THE CURRENT PRICE AND ITS POTENTIAL LOW REPRESENTS THE RISK OF LOSS. A COMMON RULE-OF-THUMB USED BY MANY INVESTORS IS TO LOOK FOR AN UPSIDE/DOWNSIDE RATIO OF 3/1. TAKE A STOCK CURRENTLY TRADING AT $10. WITH A TARGET PRICE OF $22, THE POTENTIAL RETURN ON THIS STOCK IS $12. ON THE OTHER HAND, ANALYSTS MIGHT ALSO BELIEVE THAT SHARES COULD DROP AS LOW AS $6 IF THE MARKET SLIDES. THE POTENTIAL LOSS THEN WOULD BE $4. THE UPSIDE/DOWNSIDE RATIO WOULD BE 12/4 OR 3/1.
UPTICK
TRADE AT A HIGHER PRICE THAN THE SECURITY'S PREVIOUS TRADE. IN A FALLING MARKET THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT SHORT SALES MUST BE MADE ON AN UPTICK OR A ZERO-PLUS TICK.
VALUATION
ESTIMATING OR APPRAISING THE VALUE OF A BUSINESS.
VARIABLE LIFE INSURANCE
LIKE WHOLE LIFE INSURANCE, THIS POLICY TYPE PROVIDES COVERAGE FOR YOUR ENTIRE LIFE AND BUILDS UP SAVINGS OVER TIME. PEOPLE YOU NAME AS BENEFICIARIES COLLECT A DEATH BENEFIT IF YOU DIE WHILE COVERED. UNLIKE WHOLE AND UNIVERSAL LIFE INSURANCE, YOU CAN INVEST YOUR SAVINGS IN ONE OF SEVERAL MUTUAL FUNDS, WHICH OFTEN ARE MANAGED BY THE INSURANCE COMPANY.
VARIABLE-INTEREST LOAN
A LOAN WITH AN INTEREST RATE THAT CHANGES BASED ON THE MOVEMENT OF AN INDEX OF INTEREST RATES. MANY HOME-EQUITY LOANS, FOR EXAMPLE, CHARGE VARIABLE RATES TIED TO THE PRIME RATE. ALSO KNOWN AS "ADJUSTABLE-RATE LOAN."
VENTURE CAPITAL
A MID-TO-LONG TERM START-UP OR EXPANSION LOAN EXTENDED TO A GROWING BUSINESS IN EXCHANGE FOR EQUITY IN THE BUSINESS.  BECAUSE THE MARKET POTENTIAL OF THESE COMPANIES IS FREQUENTLY DISPROPORTIONATE TO TANGIBLE ASSETS OR OTHER COLLATERAL, STANDARD BANK FINANCING IS OFTEN UNAVAILABLE TO THEM.  THIS HAS GIVEN RISE TO VENTURE CAPITAL COMPANIES TRAINED TO EVALUATE LONG-TERM POTENTIAL AND INTERESTED IN FINDING NEW OR GROWING COMPANIES TO INVEST IN.
VERY BASIC COVERAGE
IN THE CONTEXT OF HEALTH INSURANCE, VERY BASIC COVERAGE WOULD PROVIDES FOR MAJOR MEDICAL EXPENSES (HOSPITALIZATION AND PHYSICIANS CHARGES), BUT TYPICALLY HAS VERY HIGH DEDUCTIBLES, LOW LIFETIME LIMITS, HIGH CO-INSURANCE, AND FEW EXTRAS SUCH AS DENTAL OR VISION CARE.
VESTED
YOU ARE VESTED IF YOU ARE ENTITLED TO RECEIVE BENEFITS FROM A CURRENT OR FORMER EMPLOYER. SOME COMPANIES GRANT FULL BENEFITS AFTER YOU WORK FOR THEM A PREDEFINED NUMBER OF YEARS. OTHER COMPANIES GRADUALLY INCREASE THE BENEFITS ("PERCENTAGE OF VESTING") YOU CAN EXPECT TO RECEIVE AS YOU WORK MORE AND MORE YEARS FOR THEM.
VOLATILITY
MEASUREMENT OF THE PROPENSITY OF A STOCK, BOND, MUTUAL FUND, COMMODITY, OR MARKET TO RISE OR FALL SHARPLY IN PRICE. VARIOUS FACTORS MAY MAKE A STOCK OR MUTUAL FUND VOLATILE. VARIATION BASED ON THE INTRINSIC VALUES OF A SECURITY, AS OPPOSED TO GENERAL MARKET CONDITIONS, IS MEASURED BY THE ALPHA COEFFICIENT. THE BETA COEFFICIENT MEASURES THE VOLATILITY OF A STOCK RELATIVE TO THE OVERALL MARKET.
VOLUME
THE TOTAL NUMBER OF SHARES OF STOCK TRANSACTED DURING AN AVERAGE DAY FOR A PARTICULAR COMPANY. THE DAILY AVERAGE CAN BE CALCULATED USING VARIOUS TIME PERIODS. HOWEVER, A DAILY AVERAGE BASED ON THREE MONTHS' TRADING IS COMMON. AVERAGE DAILY DOLLAR VOLUME REFLECTS THE CURRENT PRICE OF A STOCK MULTIPLIED BY ITS AVERAGE DAILY VOLUME. QUICKEN.COM DISPLAYS AVERAGE DAILY VOLUME USING A 10-DAY BASE PERIOD IN THE QUOTES AREA. IN ONE-CLICK SCORECARD'S FOOLISH 8 STRATEGY, AVERAGE DAILY DOLLAR VOLUME IS CALCULATED USING A 3-MONTH BASE PERIOD. NOTE THAT THE PRICE OF THINLY TRADED STOCKS CAN BE VERY SENSITIVE TO CHANGES IN BUY AND SELL INTEREST. ON ANY GIVEN DAY, VOLUME CAN FLUCTUATE DRAMATICALLY FROM ITS DAILY AVERAGE. UNUSUALLY HIGH VOLUME DAYS TYPICALLY CORRESPOND WITH THE ANNOUNCEMENT OF COMPANY NEWS (POSITIVE OR NEGATIVE). IN THE ABSENCE OF NEWS, HIGH VOLUME IS USUALLY INDICATIVE OF INSTITUTIONAL BUYING AND SELLING.
W-2
THE STATEMENT THAT EMPLOYERS ISSUE TO EMPLOYEES AND THE SOCIAL SECURITY ADMINISTRATION, WHICH REPORTS THE EMPLOYEES' TAXABLE WAGES AND THE TAXES WITHHELD BY THE EMPLOYER.
W-4
A FORM ISSUED BY THE IRS THAT ALLOWS AN EMPLOYER TO DETERMINE HOW MUCH FEDERAL INCOME TAX TO WITHHOLD FROM AN EMPLOYEE'S WAGES. AN EMPLOYEE FILLS OUT FORM W-4 WHEN HE OR SHE IS HIRED.
WHOLE LIFE INSURANCE
AS ITS NAME IMPLIES, THIS POLICY TYPE PROVIDES COVERAGE FOR YOUR ENTIRE LIFE. PEOPLE YOU NAME AS BENEFICIARIES COLLECT A DEATH BENEFIT IF YOU DIE WHILE COVERED. UNLIKE TERM INSURANCE, WHOLE LIFE INSURANCE USES PART OF YOUR PREMIUM PAYMENTS TO BUILD UP SAVINGS OVER TIME.
WILL
A LEGAL DOCUMENT THAT SPECIFIES HOW ASSETS IN YOUR NAME ONLY WILL BE DISTRIBUTED AFTER YOUR DEATH AND OUTLINES GUARDIANSHIP OF MINOR CHILDREN. WITHOUT ONE, THE STATE IN WHICH YOU LIVE WILL DETERMINE HOW THE ASSETS WILL BE DISTRIBUTED. THIS IS KNOWN AS DYING INTESTATE. A WILL IS ABSOLUTELY CRITICAL FOR SOMEONE WITH CHILDREN.
WILSHIRE 4500 EQUITY INDEX
A PROXY FOR THE EXTENDED MARKET, COMPRISED OF THE LARGE AND SMALL CAP STOCKS IN THE WILSHIRE 5000, MINUS THE STOCKS IN THE S&P 500 INDEX.
WILSHIRE 5000 TOTAL MARKET INDEX
A MARKET INDEX THAT INCLUDES ALL COMPANIES HEADQUARTERED IN THE UNITED STATES WITH A READILY AVAILABLE STOCK PRICE. IN GENERAL, THE WILSHIRE 5000 INCLUDES ALL U.S.-BASED COMPANIES TRADED ON THE NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, AND NASDAQ STOCK MARKET. THERE ARE NOW MORE THAN 7,000 COMPANIES IN THE INDEX, WHICH IS WEIGHTED ACCORDING TO COMPANY CAPITALIZATION. THE INDEX IS CONSIDERED A MEASURE OF THE ENTIRE U.S. STOCK MARKET.
WILSHIRE REIT INDEX
A MARKET-WEIGHTED INDEX OF PUBLICLY TRADED REAL ESTATE INVESTMENT TRUSTS(REITS), REAL ESTATE OPERATING COMPANIES(REOCS), AND REAL ESTATE PARTNERSHIPS.
WITHHOLDING
MONEY DEDUCTED FROM THE WAGES OR SALARY OF EMPLOYEES TO PAY STATE AND FEDERAL TAXES AND INSURANCE.
WORK LOSS BENEFIT
THIS BENEFIT PROVIDES A CERTAIN PERCENTAGE OF THE GROSS INCOME OF THE INJURED INSURED DRIVER (UP TO A CERTAIN MAXIMUM DOLLAR AMOUNT) FOR A DEFINED PERIOD OF TIME. THIS BENEFIT IS PAID IN THE EVENT THAT AN INJURED INSURED DRIVER OR FAMILY MEMBER IS UNABLE TO WORK. THIS BENEFIT MAY BE EXCLUDED FROM THE PIP(LINK) COVERAGE IN SOME STATES.
WORKER'S COMPENSATION
INSURANCE, WHICH IS REQUIRED BY LAW, THAT COMPENSATES EMPLOYEES WHEN THEY ARE INJURED ON THE JOB. THE EMPLOYER USUALLY PAYS FOR WORKER'S COMPENSATION INSURANCE.
YEARS TO ACCUMULATE
FOR EACH CHILD, THE NUMBER OF YEARS UNTIL THE END OF THE PROJECTED EDUCATIONAL EXPENSES. AVERAGE THIS ACROSS ALL CHILDREN WITH EDUCATIONAL NEEDS.
YIELD
THE INTEREST EARNED ON A BOND, OR THE DIVIDEND PAID ON A STOCK OR MUTUAL FUND. TOTAL RETURN IS THE COMBINATION OF YIELD PLUS ANY CHANGE IN THE UNDERLYING VALUE OF A SECURITY.
ZERO COUPON BONDS
BONDS THAT ARE SOLD AT A SIGNIFICANT DISCOUNT TO THEIR FACE VALUE. THEY PAY NO INTEREST, BUT YOU RECEIVE THE FULL VALUE OF THE BOND WHEN IT REACHES MATURITY. THE YIELD IS CALCULATED BY TAKING THE DIFFERENCE BETWEEN THE PURCHASE PRICE AND THE FACE VALUE AND FIGURING IN THE YEARS TO MATURITY. ISSUED BY CORPORATIONS, MUNICIPALITIES, AND THE FEDERAL GOVERNMENT, ZEROES PROVIDE A PREDICTABLE RETURN FOR INVESTORS WHO WANT A LUMP SUM OF MONEY BY A SPECIFIC DATE. ZEROES DO HAVE SOME DRAWBACKS. YOU MUST PAY INCOME TAXES EVERY YEAR AS IF YOU WERE INDEED COLLECTING INTEREST ON THE BOND. A TIP: HOLDING ZEROES IN A TAX-DEFERRED RETIREMENT ACCOUNT ELIMINATES THIS PROBLEM. ANOTHER PROBLEM IS THAT MANY ZEROES ARE CALLABLE, WHICH MEANS THAT AN ISSUER CAN PAY YOU OFF EARLY AT SOME PERCENTAGE OF THE FACE VALUE. THIS FEATURE COMPLICATES YOUR TAXES. IF THE IRS THINKS YOU RECEIVED MORE THAN YOU SHOULD HAVE, CONSIDERING THE YIELD, YOU ARE LIABLE FOR CAPITAL GAINS. IF YOU RECEIVE LESS, YOU CAN TAKE A CAPITAL LOSS. YOU CAN SELL ZEROES BEFORE THEY REACH MATURITY. BUT SINCE THE VALUE OF THESE BONDS IS EXTREMELY SENSITIVE TO SWINGS IN INTEREST RATES, MOST EXPERTS RECOMMEND HOLDING THEM FOR THE FULL TERM.
ZERO-MINUS TICK
A TRADE AT THE SAME PRICE AS THE SECURITY'S PREVIOUS TRADE BUT LOWER THAN THE TRADE BEFORE THAT.
ZERO-PLUS TICK
A TRADE AT THE SAME PRICE AS THE SECURITY'S PREVIOUS TRADE BUT HIGHER THAN THE TRADE BEFORE THAT. IN A FALLING MARKET THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT SHORT SALES MUST BE MADE ON AN UPTICK OR A ZERO-PLUS TICK.
ZONING
GOVERNMENT CLASSIFICATION AND REGULATION OF LOCAL LAND USE.
