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After-Tax Return: The return from an investment after the effects of taxes has been taken into account.

Aggressive Growth Fund: A mutual fund whose primary investment objective is substantial capital gains.

Annuity: An equal cash flow that occurs annually; or an investment product created by a life insurance company that provides a series of payments over time.

Asset Allocation: A plan for dividing a portfolio among different classes of securities in order to preserve capital buys protecting the portfolio against negative market development

Asset Class: A category of investments with similar characteristics.Go to top

Balanced Mutual Fund: A mutual fund whose objective is a balance of stocks and bonds. Such funds tend to be less volatile than stock-only funds.

Bear Market: When the stock market appears to be declining overall, it is said to be a bear market.

Beneficiary: A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, and so on.

Blue Chip Stock: The common stock of a company with a long history of profitability and consistent dividend payments.

Bond: A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity.

Book Value: The net value of a company's assets, less its liabilities and the liquidation price of its preferred issues. The net asset value divided by the number of shares of common stock outstanding equals the book value per share, which may be higher or lower than the stock's market value.

Bull Market: When the stock market appears to be advancing overall, it is said to be a bull market.

Bear Market: A condition of the market typically associated with investor pessimism and economic slowdown; characterized by generally falling securities prices.

Beneficiary: In life insurance, the person who receives the proceeds of the insurance policy upon the insured's death.

Blue Chip Stock: A stock that is known to provide a safe and stable return; generally issued by companies that are expected to provide an uninterrupted stream of dividends and have good long term growth prospects.

Bid Price: The price at which one can sell a security.

Budget: A detailed financial forecast used to monitor and control expenditures and purchases; it provides a mechanism for carrying out financial plan to achieve short-term financial goals.

Bull Market: A condition of the Market normally associated with investor optimism, economic recovery and expansion; characterized by generally rising securities prices.

Cash Deficit An excess amount of expenditures over income resulting in insufficient funds that must be made up either by drawing down savings or investments, reducing assets, or through borrowing. Results in decreased net worth.

Buy-Sell Agreement: A buy-sell agreement is an arrangement between two or more parties that obligates one party to buy the business and another party to sell the business upon the death, disability, or retirement of one of the owners.Go to top

Capital Gain or Loss: The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss.

Cash Surrender Value: The amount that an insurance policyholder is entitled to receive when he or she discontinues coverage. Policyholders are usually able to borrow against the surrender value of a policy from the insurance company. Loans that are not repaid will reduce the policy's death benefit.

Commodities: The generic term for goods such as grains, foodstuffs, livestock, oils, and metals which are traded on national exchanges. These exchanges deal in both "spot"

Corporate Bond: A bond issued by a corporation; categories include industrials, public utilities, railroad and transportation bonds and financial issues.

Coupon: That feature on a bond that defines the annual interest income that the issuer will pay the bondholder.

Comprehensive Personal Financial Plan: A set of detailed plans and recommendations for achieving specific financial goals, as compiled from a family profile; information on current income, expenses, and financial condition; tax returns; insurance coverages; retirement programs; and estate plans.

Compounding: When interest earned each year is left in the account and becomes part of the principal on which interest is earned in subsequent years.

Certificate of Deposit (CD): A type of savings instrument that is issued by certain financial institutions in exchange for a deposit; typically requires a minimum deposit and has a maturity ranging from seven days to as long as seven or more year.

Cash Surplus: An excess amount of income over expenditures that can be sued for savings or investments and to acquire assets or reduce debts. Results in increased net worth.

Cash Deficit: An excess amount of expenditures over income resulting in insufficient funds that must be made up either by drawing down savings or investments, reducing assets, or through borrowing. Results in decreased net worth.

Cash Surplus: An excess amount of income over expenditures that can be sued for savings or investments and to acquire assets or reduce debts. Results in increased net worth.

Compound Interest: Interest that is computed on the principal and on the accrued interest. Compound interest may be computed continuously, daily, monthly, quarterly, semiannually, or annually.Go to top

Deduction: An amount that can be subtracted from gross income, from a gross estate, or from a gift, thereby lowering the amount on which tax is assessed.

Diversification: The process of choosing securities having dissimilar risk-return characteristics in order to create a portfolio that will provide an acceptable level of return and in acceptable exposure to risk.

Discounting: The process of finding present value; the inverse of compounding to find future value.

Dividend: A pro rata portion of earnings distributed in cash by a corporation to its stockholders. In preferred stock, dividends are usually fixed; with common shares, dividends may vary with the fortunes of the company.Go to top

Equity: The value of a person's ownership in real property or securities; the market value of a property or business, less all claims and liens upon it.

Estate Planning: A goal-oriented activity that uses tax-minimization t3echniques to provide the greatest possible financial security for an individual and his/her heirs or beneficiaries.

ESOP (employee stock ownership plan): A defined contribution retirement plan in which company contributions must be invested primarily in qualifying employer securities.

Exemptions: Deductions from adjusted gross income based on the number of persons supported by the taxpayer's income.Go to top

Fixed Income: Income from investments such as CDs, Social Security benefits, pension benefits.

FVIFA: Financial Assets: Intangible assets, such as savings accounts and securities that are acquired for some anticipated future return

Financial Goals: Short and long term results that an individual wants to attain, such as controlling living expenses, managing one's tax burden, establishing savings and investment programs and meeting retirement needs.

Fundamental Analysis: An approach to the stock market in which specific factors - such as the price-to-earnings ratio, yield, or return on equity - are used to determine what stock may be favorable for investment.

Future Value: The value to which an amount today will grow if it earns a specific rate of interest over a given period of time. It can be used to find the yearly savings needed to accumulate a given future amount of money.Go to top

Gross Income: The total of all a taxpayer's income (before any adjustments, deductions, and/or exemptions) that is subject to federal taxes; it includes active, portfolio and passive income.Go to top

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Index: A calculation that uses a selection of stocks or bonds to gauge a certain market.

Inflation: A state of the economy in which the general price level is rising due to excessive demand or rapidly rising production costs; usually occurs during the recovery and expansion phases of the economic cycle.

Investment Category: A broad class of assets with similar characteristics. The five investment categories include cash equivalents, fixed principal, equity, debt, and tangibles.Go to top

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Liability: Any claim against the assets of a person or corporation: accounts payable, wages, and salaries payable, dividends declared payable, accrued taxes payable, and fixed or long-term obligations such as mortgages, debentures, and bank loans.

Liquidity: The ease with which an asset or security can be converted into cash without loss of principal.

Liquid Assets: Assets that are held in the form of cash or can be readily converted to cash with minimal or no loss in value; used to meet living expenses, make purchases, pay bills and loans, and provide for emergencies and unexpected opportunities.Go to top

Mutual Fund: A collection of stocks, bonds, or other securities purchased and managed by an investment company with funds from a group of investors.Go to top

Net Asset Value: The price at which a mutual fund sells or redeems its shares. The net asset value is calculated by dividing the net market value of the fund's assets by the number of outstanding shares.

Net Worth: An individual's or family's actual wealth, determined by subtracting total liabilities from total assets.

Net Asset Value (NAV): The price at which a mutual fund will buy back its own shares; NAV represents the current market value of all securities the fund owns less any liabilities.Go to top

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Personal Financial Planning: Planning that covers the key elements of an individual's financial affairs and is aimed at achievement of his/her financial goals.

Portfolio: All the investments held by an individual or a mutual fund.

Price/Earnings Ratio (P/E Ratio): The market price of a stock divided by the company's annual earnings per share. Because the P/E ratio is a widely regarded yardstick for investors, it often appears with stock price quotations.

Principal: In a security, the principal is the amount of money that is invested, excluding earnings. In a debt instrument such as a bond, it is the face amount.

Prospectus: A document provided by mutual fund companies to prospective investors. The prospectus gives information needed by investors to make informed decisions prior to investing in a specific mutual fund. The prospectus includes information on the minimum investment amount, the fund's objectives, past performance, risk level, sales charges, management fees, and any other expense information about the fund, as well as a description of the services provided to investors in the fund.Go to top

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Risk: The chance that an investor will lose all or part of an investment.

Risk-Averse: Refers to the assumption that rational investors will choose the security with the least risk if they can maintain the same return. As the level of risk goes up, so must the expected return on the investment.Go to top

Savings Ratio: Cash surplus divided by after-tax income; indicates relative amount of cash surplus achieved.

Security: Evidence of an investment, either in direct ownership (as with stocks), creditors (as with bonds), or indirect ownership (as with options).Go to top

Tangible Assets: Physical assets such as real estate and automobiles that can be held for either consumption or investment purposes.

Tax-Deferred: Income that is not subject to taxes immediately but which will be subject to taxes at a later date.

Tax Bracket: The range of taxable income that is taxed at a certain rate. Brackets are expressed by their marginal rate.

Taxable Income: The amount of income used to compute tax liability. It is determined by subtracting adjustments, itemized deductions or the standard deduction, and personal exemptions from gross income.

Technical Analysis: An approach to investing in stocks in which a stock's past performance is mapped onto charts. These charts are examined to find familiar patterns to use as an indicator of the stock's future performance.

Term Insurance: Term life insurance provides a death benefit if the insured dies. Term insurance does not accumulate cash value and ends after a certain number of years or at a certain age.

Time Value of Money: The concept that a dollar today is worth more than a dollar received in the future; it exists as long as one can earn a positive rate of return (interest rate) on investments.

Trust: A relationship created when one party, the grantor, transfers property to a second party, the trustee, for the benefit of third party(ies), the beneficiaries.

Trustee: An organization or individual hired by the grantor to manage and conserve his/her property for the benefit of the beneficiaries.

Total Return: The total of all earnings from a given investment, including dividends, interest, and any capital gain.

Trustee: An individual or institution appointed to administer a trust for its beneficiaries.Go to top

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Volatility: The range of price swings of a security or market over time.Go to top

Welfare Benefit Plan: An employee benefit plan that provides such benefits as medical, sickness, accident, disability, death, or unemployment benefits.

Whole Life Insurance: A type of life insurance that offers a death benefit and also accumulates cash value, tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as "ordinary" or "straight" life insurance.

Will: A legal document that declares a person's wishes concerning the disposition of property, the guardianship of his or her children, and the administration of the estate after his or her death.Go to top

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Yield: In general, the yield is the amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation.Go to top

Zero-Coupon Bond: This type of bond makes no periodic interest payments but instead is sold at a steep discount from its face value. Bondholders receive the face value of their bonds when they mature.Go to top
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