Glossary

Active Investing – the investor continuously monitors account activity, researches options, and buys and sells to increase return
Annuity – buy this investment upfront and then receive an ongoing series of payments after retirement in return; usually sold through insurance companies
Appreciation – gain in value over time
Asset Allocation – the percentage of total capital invested in each major asset category, such as mutual funds, savings accounts, or 401k’s
Bonds – investment offering a fixed rate of interest when cashed in after a specified length of time, usually offered by a government or municipal entity
Broker – someone who charges a fee or commission to buy or sell an investment on behalf of another
Capital – financial value of investments; may refer to the initial amount invested
CD Laddering – varying the redemption dates of certificates of deposit, generally by buying several cd’s with different maturity dates
Certificates of Deposit – a savings certificate with a fixed interest rate and maturity date, insured by the federal government
Certified Financial Analyst - a financial professional paid for advice and analysis
Certified Financial Planner – a financial professional paid for advice and planning
Certified Public Accountant – a financial professional paid for accounting and tax related functions
College savings plan – one of several options that allow you to invest money for your college education or that of a family member
Commission – the amount you pay to a broker when you buy or sell an investment. The charge is usually a percentage of the total cost of the trade but can also be a flat fee.
Compound Interest – interest that accumulates over time, so that future interest is calculated on the total of principal plus earned interest from previous time periods
Controllable expenses – you can control the amount you spend on these expenses each month
Cost of Investing – the fees, commissions, and other dollar amounts paid to invest
Diversification – dividing the money you invest among a variety of options so that your overall risk of losing money is lowered
DOW Industrial Average - the oldest continuing index in the U.S. It’s composed of 30 of the largest and most widely held industrial companies traded on the New York Stock Exchange. The trend in the movement of the market value of these shares is considered to be an indicator of the movement of the entire US stock market.
Employer Match – contribution an employer makes to the employees 401k, based on a percentage of the employee contribution
Emergency Fund – a short term savings account used to pay emergency expenses
Fees – money charged for financial transactions
Financial Foundation – when a person has their basic finances in order, including paying off high interest debt and establishing short term savings for emergencies
Fixed Expenses – the amount of these expenses cannot be changed from month to month
Fund Prospectus - a written document provided by each fund at least once a year to its investors and prospective investors
IRA / Individual Retirement Account – a retirement account where contributions are tax deductible and distributions are taxed at after-retirement rate; penalties for withdrawal before age 59 ½
Interest Rates – a percentage of the money you save or invest which is paid as an incentive and added to your original amount
Investing – putting money into an account which assumes some risk, for an extended period of time, to earn higher interest rates
Investment Fraud – misrepresentation of an investment to make it more attractive to investors
Life Cycle – events over time as an investor ages which may make some investment options more appropriate than others
Liquidity – the ability to convert an asset to cash quickly and without loss of value
Large Cap Stock - A large-cap stock is the stock of a company having a market capitalization over $10 billion (although the criteria for what makes a large-cap stock tends to vary). Large-cap stock is often called blue chip stock; it is the stock of the largest companies, such as IBM, Microsoft, and 3M.
Long Term – a time range looking at a period of years as opposed to months
Money Market Account – a type of short term savings which allows limited withdrawals and check writing
Mutual Funds – Accounts where several investors pool their money to buy a variety of investment options, resulting in increased diversity and reduced risk
Net Worth – the amount by which the value of a person’s assets exceeds their liabilities
Paid Fund Manager - The person responsible for the overall strategy and the specific buying and selling decisions for a mutual fund
Passive Investing - the investor only occasionally monitors account activity and rarely changes investment options
Payroll Deduction - Amount withheld by an employer from employee's earnings. It typically includes income tax, national insurance or social security contributions, and may also include group insurance or pension fund contributions, union or association dues, authorized wage assignments, etc.
Profit Sharing – a company divides a portion of its yearly profits among employees, either as cash or company stock
Registered Security – a security which is approved by an overseeing agency such as the Securities and Exchange Commission
Return – the money you receive for saving or investing, usually a percentage of the amount you originally contributed
Risk – the chance that an investment’s actual return will be lower than expected, including the possibility of losing the original money invested
Risk Capacity – the financial ability to assume risk and possibly lose part or all of your investment
Risk Tolerance – the emotional ability to assume risk and take the chance of losing all or part of your original investment
Roth IRA – a type of IRA where contributions are not tax deductible but distributions after retirement are tax free
Roth 401k – a type of 401k where employee contributions are not tax sheltered (made with after tax dollars) but distributions from the employee portion of the fund are tax free after retirement
SEC EDGAR - The SEC's system used by all public companies to transmit required filings, such as quarterly reports and annual reports and ongoing disclosure obligations. also called Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
Saving – setting aside money in an easily accessible short term account after your expenses are met
Savings Account – an account which allows you total access to your money and offers a lower interest rate
Savings Bonds – A government issued bond offering a fixed interest rate over a specific period of time, redeemable for principal and interest at the end of that time
Seasonal Expenses – expenses that are incurred once a year or only a few times a year
Securities – stocks, bonds, mutual funds, and other types of investments where you pay money for use by another entity in exchange for interest, and where your investment can be bought, sold, or traded
Securities and Exchange Commission (SEC) - agency of the U.S. government created by the Securities Exchange Act of 1934 and charged with protecting the interests of the public and investors in connection with the public issuance and sale of corporate securities. The five members of the SEC are appointed by the President and confirmed by the Senate for terms of five years.
Short Term – a time range looking at months instead of years
Small Cap Stock - stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.
Spending Plan – a budget or plan so that you do not spend more money than you bring home each month
Stocks – shares of ownership in a company which can be bought and sold
Tax Sheltered – an investment that is free or partially free from being taxed
Transfers – changes in allocation of money between investments or retirement plans
Treasury Bill – an investment option offered by the government which is sold in $1,000 increments with due dates less than one year
Withdrawals – deductions from a savings or investment account
401k – an employer sponsored retirement plan where contributions are tax sheltered and which may offer an employer matching percentage contribution
529 – a college savings plan offered by state governments where contributions are tax deductible, withdrawals are tax free, and the account is considered an asset of the donor