12b-1 Fee
Charges deducted from mutual fund assets to pay for distribution and marketing costs, usually set on a percentage basis.

401k plan
A 401k plan is a retirement plan sponsored by employers. Employees may choose to have a portion of their salary deferred to any of the 401k investment choices selected by the employer. The employer may also contribute to the employee's 401k by matching a portion of the investment (for example, $.50 for every $1.00 the employee invests). The investments to which money is deferred may include stocks, bonds, money market funds, and company stocks. Monies deferred into the 401k are allowed to grow tax-free, and these monies are subtracted from the employee's taxable income. The maximum amount allowed to be contributed to a 401k changes annually. If money is withdrawn from the 401k before the employee turns 59½, the individual may have to pay penalties. If the individual changes jobs, the monies in the 401k may be rolled over to a 401k of the new employer or to an Individual Retirement Account (IRA).

403(b) Plan
A defined contribution plan that may be established by a nonprofit organization or school for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 403(b) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59½.

Adjusted Gross Income (AGI)
An interim calculation in the computation of income tax liability. It is computed by subtracting certain allowable adjustments from gross income.

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

Alpha
This is a measure of value added by the skill of the portfolio manager. A positive Alpha indicates the manager earned "excess returns" above what the security's Beta and underlying index returned.

Annuity
An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Annuity contracts are usually purchased from banks, credit unions, brokerage firms, or insurance companies.

Asset
Anything owned that has monetary value.

Asset Allocation
The process of repositioning assets within a portfolio to maximize return for a given level of risk. This process is usually done using the historical performance of the asset classes within sophisticated mathematical models.

Asset Class
A category of investments with similar characteristics.

Back-End Load
A back-end load is a sales charge or fee charged when funds are withdrawn from an investment, particularly mutual funds and annuities. In many cases, the fee is reduced over the years of investment, or holding period, and eventually is reduced to zero.

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

Beneficiary
A person named in an investment account, 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.

Beta
Given a relatively high R-squared, Beta can be used to determine how much volatility the security has relative to the benchmark index. A Beta above 1.0 indicates the security is more volatile than the index, conversely, a Beta below 1.0 indicates less volatility than the index. A Beta of 1.0 would indicate that the security would move in tandem with the underlying index.

Blue Chip
Blue Chip refers to companies that have become well established and reliable over time, demonstrating sound management and quality products and services. Such companies have shown an ability to function throughout both good and bad economic times, usually paying dividends to investors even during lean years

Bond
A bond is essentially a loan made by an investor to a division of the government, a government agency, or a corporation. The bond is a promissory note to repay the loan in full at the end of a fixed time period. The date on which the principal must be repaid is the called the maturity date, or maturity. In addition, the issuer of the bond, that is, the agency or corporation receiving the loan and issuing the promissory note, agrees to make regular payments of interest at a rate initially stated on the bond. Interest from bonds is taxable based on the type of bond. Corporate bonds are fully taxable, municipal bonds issued by state or local government agencies are free from federal income tax and usually free from taxes of the issuing jurisdiction, and Treasury bonds are subject to federal taxes but not state and local taxes. Bonds are rated according to many factors, including cost, degree of risk, and rate of income.

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.

CAC 40 Index
The benchmark index for the French stock market. The CAC 40 represents 40 of the largest French companies from a variety of different industries.
Capitol 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 Equivalents
Short-term investments, such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.

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.

Certificate of Deposit
A Certificate of Deposit (CD) is a note issued by a bank for a savings deposit that the individual agrees to leave invested in the bank for a certain term. At the end of this term, on the maturity date, the principal may either be repaid to the individual or rolled over into another CD. The bank pays interest to the individual, and interest rates between banks are competitive. Monies deposited into a Certificate of Deposit are insured by the bank, thus they are a low-risk investment and a good way of maintaining a principal. Maturities may be as short as a few weeks or as long as several years. Most banks set heavy penalties for premature withdrawal of monies from a Certificate of Deposit.

Certified Financial Planner®
A credential granted by the Certified Financial Planner Board of Standards, Inc. (Denver, CO) to individuals who complete a comprehensive curriculum in financial planning and ethics. CFP®, CERTIFIED FINANCIAL PLANNER® and federally registered CFP (with flame logo)® are certification marks owned by the Certified Financial Planner Board of Standards. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification.

Certified Public Accountant (CPA)
A professional license granted by a state board of accountancy to an individual who has passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled that state's educational and professional experience requirements for certification.

COBRA
The Consolidated Omnibus Budget Reconciliation Act is a federal law requiring employers with more than 20 employees to offer terminated or retired employees the opportunity to continue their health insurance coverage for 18 months at the employee's expense. Coverage may be extended to the employee's dependents for 36 months in the case of divorce or death of the employee.

DAX Index
The benchmark index for the German stock market. The DAX 30 represents 30 of the largest German companies listed on the Frankfurt Stock Exchange.

EAFE Index
Short for Europe, Asia, Far East Index. This index is a measure of international stock market performance following approximately 20,000 securities from more than 20 countries.

Efficient Frontier
A statistical result from the analysis of the risk and return for a given set of assets that indicates the balance of assets that may, under certain assumptions, achieve the best return for a given level of risk.

Emerging Market
A term used to describe the economies and securities markets of developing nations. Emerging markets have great growth opportunities but at the same time have volatile politcal and economic conditions giving these investments a high degree of risk.

Employer-Sponsored Retirement Plan
A tax-favored retirement plan that is sponsored by an employer. Among the more common employer-sponsored retirement plans are 401(k) plans, 403(b) plans, simplified employee pension plans, and profit-sharing plans.

Equity
Equity is the total ownership or partial ownership an individual possesses minus any debts that are owed. Equity is the amount of interest shareholders hold in a company as a part of their rights of partial ownership. Equity is considered synonymous with ownership, a share of ownership, or the rights of ownership.

ERISA
The Employee Retirement Income Security Act is a federal law covering all aspects of employee retirement plans. If employers provide plans, they must be adequately funded and provide for vesting, survivor's rights, and disclosures.

ESOP (employee stock ownership plan)
Equity is the total ownership or partial ownership an individual possesses minus any debts that are owed. Equity is the amount of interest shareholders hold in a company as a part of their rights of partial ownership. Equity is considered synonymous with ownership, a share of ownership, or the rights of ownership.

Estate Conservation
The Employee Retirement Income Security Act is a federal law covering all aspects of employee retirement plans. If employers provide plans, they must be adequately funded and provide for vesting, survivor's rights, and disclosures.

Estate Tax
A defined contribution retirement plan in which company contributions must be invested primarily in qualifying employer securities.

Emerging Market
Upon the death of a decedent, federal and state governments impose taxes on the value of the estate left to others (with limitations).

Executive Bonus Plan
The employer pays for a benefit that is owned by the executive. The bonus could take the form of cash, automobiles, life insurance, or other items of value to the executive.

Executor
A person named by the probate courts or the will to carry out the directions and requests of the decedent.

Expense Ratio
The percentage of a funds assets paid for operating expenses and management fees such as 12b-1 fees, administrative fees and all other costs incurred by the fund except brokerage costs.

FINRA (The Financial Industry Regulatory Authority)
A regulatory body created after the merger of the National Association of Securities Dealers (NASD) and the New York Stock Exchange's (NYSE) regulation committee. The Financial Industry Regulatory Authority (FINRA) is responsible for governing business between brokers, dealers and the investing public. By consolidating these two regulators, FINRA aims to eliminate regulatory overlap and cost inefficiencies.

Fixed Income
Income from investments such as CDs, Social Security benefits, pension benefits, some annuities, or most bonds that is the same every month.

Front-End Load
A front-end load is a commission or fee that is charged when an investment is initially purchased. Investments that require a front-end load include mutual funds, annuities, and life insurance policies. Typically, the fee amount is a percentage of the net asset value of the investment.

FTSE 100 Index
The benchmark index for the London Stock Exchange. The FTSE 100 is comprised of the 100 most capitalized companies traded on the London Stock Exchange.

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.

Gift Taxes
A federal tax levied on the transfer of property as a gift. This tax is paid by the donor. The first $12,000 a year from a donor to each recipient is exempt from tax. Most states also impose a gift tax. The gift tax exemption is indexed annually for inflation.

Global
A name given to a fund that invests in companies all over the world, both in the United States and International.

Going Public
A company that has previously been privately owned is said to be 'going public' the first time the company's stock is offered up for public sale.

Growth Stock
A stock with earnings that are expected to grow at an above average rate relative to the rest of the market. A growth stock rarely pays a dividend preferring to re-invest it's earnings into captial projects for expansion.

Hang Seng Index
The benchmark index of the Hong Kong Stock Market. The Hang Seng is comprised of the 38 of the largest companies across various sectors traded on the Hong Kong Stock Exchange.

Hedge
Hedging is a strategy of reducing risk by offsetting investments with investments of opposite risk. Risks must be negatively correlated in order to hedge each other; for example, an investment with high inflation risk and low immediate returns with investments with low inflation risk and high immediate returns. Long hedges protect against a short-term position and short hedges protect against a long-term position. Hedging is not the same as diversification, as it aims to protect against risk by counterbalancing a specific area of risk.

Holographic Will
A will entirely in the handwriting of the testator. Without witnesses, holographic wills are valid and enforceable only in some states.

Index
A calculation that uses a selection of stocks or bonds to gauge a certain market. The Dow Jones Industrial Average, for example, is an index of 30 large industrial companies on the New York Stock Exchange.

Individual Retirement Account (IRA)
Contributions to a traditional IRA are deductible from earned income in the calculation of federal and state income taxes if the taxpayer meets certain requirements. The earnings accumulate tax deferred until withdrawn, and then they are taxed as ordinary income. Individuals not eligible to make deductible contributions may make nondeductible contributions, the earnings on which would be tax deferred.

Inflation
An increase in the price of products and services over time. The government's main measure of inflation is the Consumer Price Index.

Inflation Risk
Inflation risk is the risk that rising prices of goods and services over time, or, generally the cost of living, will decrease the value of the return on investments. Inflation risk is also known as 'purchasing-power risk' since it refers to increased prices of goods and services and a decreased value of cash.

International
A term used to describe a fund that trades stocks/bonds of companies based outside of the United States. Or simply a security that is traded outside of the U.S.

Intestate
The condition of an estate left by a decedent without a valid will. State law then determines who inherits the property or serves as guardian for any minor children.

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

IRR (Internal Rate of Return)
The rate of return that would make the present value of future cash flows plus the final market value of an investment equal the current market price of the investment. Also called dollar weighted rate of return. It is the discount rate that results in a net present value of zero for a source of future cash flows.

Irrevocable Trust
A trust that may not be modified or terminated by the trustor after its creation.

Joint and Survivor Annuity
Most pension plans must offer this form of pension plan payout that pays over the life of the retiree and his or her spouse after the retiree dies. The retiree and his or her spouse must specifically choose not to accept this payment form.

Joint Tenancy
Co-ownership of property by two or more people in which the survivor(s) automatically assumes ownership of a decedent's interest.

Jointly Held Property
Property owned by two or more persons under joint tenancy, tenancy in common, or, in some states, community property.

Junk Bond
Junk bonds are bonds that are considered high yield but also have a high credit risk. They are generally low rated bonds and are usually bought on speculation, with the investor hoping for the yield, rather than the default. An investor with high risk tolerance may choose to invest in junk bonds.

Keogh Plan
The Keogh Plan is a type of tax-deductible retirement plan, similar to Individual Retirement Accounts, for self-employed individuals. It is also known as a self-employed pension plan. The individual may contribute up to $30,000 or 15% of total earned income per year, net of any contributions, whichever is less.

Large Cap
A term used to describe stocks with a market capitalization of more than $5 billion. Stocks are usually classified as either Large Cap, Mid Cap, Small Cap or Micro Cap.

Lehman Brothers Aggregate Bond Index
An index measuring the total return of more than 5,000 investment grade U.S. bonds. The index is used to measure the aggregate performance of the United States bond market.

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.

Limited Partnership
Limited partnerships pool the money of investors to develop or purchase income-producing properties. When the partnership subsequently receives income from these properties, it distributes the income to its investors as dividend payments.

Liquidity
Liquidity refers to the ease with which investments can be converted to cash at their present market value. Additionally, liquidity is a condition of an investment that shows how greatly the investment price is affected by trading. An investment that is highly liquid is composed of enough units (such as shares) that many transactions can take place without greatly affecting the market price. High liquidity is associated with a high number of buyers and sellers trading investments at a high volume.

Living Trust
A trust created by a person during his or her lifetime.

Lump-Sum Distribution
The disbursement of the entire value of a profit-sharing plan, pension plan, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.

Marginal Tax Bracket
The range of taxable income that is taxable at a certain rate. Currently, there are six marginal tax brackets: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent.

Marital Deduction
A provision of the tax codes that allows all assets of a deceased spouse to pass to the surviving spouse free of estate taxes. This provision is also referred to as the unlimited marital deduction.

Market Risk
Market risk is the risk that investments will lose money based on the daily fluctuations of the market. Bond market risk results from fluctuations in interest. Stock prices, on the other hand, are influenced by factors ranging from company performance to economic factors to political news and events of national importance. Time is a stabilizing element in the stock market, as returns tend to outweigh risks over long periods of time. Market risk cannot be systematically diversified away.

Market Value
Market value is the value of an investment if it were to be resold, or the current price of a security being sold on the market.

Micro Cap
A term used to describe stocks with a market capitalization of less than $250 million. Stocks are usually classified as Large Cap, Mid Cap, Small Cap or Micro Cap.

Mid Cap
A term used to describe stocks with a market capitalization of more than $1 billion but less than $5 billion. Stocks are usually classified as Large Cap, Mid Cap, Small Cap or Micro Cap.

Modern Portfolio Theory
Aims to minimize the risks of investing while maximizing returns through the diversification of a portfolio. Diversification is the process of allocating funds among a number of different asset classes. Modern portfolio theory looks at three main factors in determining appropriate investments for an investor's portfolio: the investor's goals and objectives for investing, the time frame of investment, and the investor's risk tolerance, or how comfortable the investor is with taking certain risks. Optimizing a portfolio according to modern portfolio theory involves matching the statistics of expected risk and return for a number of different assets with the individual's terms of investment.

Money Market Fund
A mutual fund that specializes in investing in short-term securities and that tries to maintain a constant net asset value of $1. A money market is a conservative investment with the goal of providing a return that is greater than a typical savings account with little volatility.

Municipal Bond
A debt security issued by municipalities. The income from municipal bonds is usually exempt from federal income taxes. In many states, it is also exempt from state income taxes in the state in which the municipal bond is issued.

Mutual Fund Mutual funds are investment companies whose job it is to handle their investors' money by reinvesting it into stocks, bonds, or any other type of security which the Board of Directors of the Invesment Company has approved to be purchased within the particular fund. Mutual funds are divided into shares and can be bought much like stocks, allowing most mutual funds to have a high liquidity. Mutual funds are convenient, particularly for small investors, because they diversify an individual's monies among a number of investments. Investors share in the profits and losses of a mutual fund, and mutual fund shares can be sold back to the company on any business day at the net asset value price. Mutual funds may or may not have a load, or fee;

NASD--See FINRA

NAV (Net Asset Value)
Mutual funds are investment companies whose job it is to handle their investors' money by reinvesting it into stocks, bonds, or any other type of security which the Board of Directors of the Invesment Company has approved to be purchased within the particular fund. Mutual funds are divided into shares and can be bought much like stocks, allowing most mutual funds to have a high liquidity. Mutual funds are convenient, particularly for small investors, because they diversify an individual's monies among a number of investments. Investors share in the profits and losses of a mutual fund, and mutual fund shares can be sold back to the company on any business day at the net asset value price. Mutual funds may or may not have a load, or fee;

NIKKEI 225 Index
Net Asset Value is the price of a share in a mutual fund or investment company. This price is calculated once or twice daily. Net asset value is the amount by which the assets' value exceeds the company's liabilities. It is calculated by adding up the market value of all securities owned by the company, subtracting the company's liabilities, and dividing this value by the number of shares of the company outstanding. Thus, the NAV indicates the current buying or selling price of a share in an investment company net of any loads charged by the fund.

NYSE (New York Stock Exchange)
The benchmark index for the Japanese stock market. The NIKKEI 225 is comprised of the 225 largest companies traded on the Tokoyo Stock Exchange.

Option
Established in 1792, the New York Stock Exchange in the largest securities exchange in the United States. Securities are traded by brokers and dealers for customers on the trading floor at 11 Wall Street in New York City. The exchange is headed by a board of directors that includes a chairman and 20 representatives who represent both the public and the members of the exchange. This board approves applicants as new NYSE dealers, sets policies for exchange, oversees the exchange, regulates member activities, and lists securities.

Peer Group
An option is a security that can be bought as a contract to fix the price on another, underlying security. The buyer can pay the issuer of the option a premium that fixes the price on an investment, including stocks, bonds, real estate, and others, for a specified period of time. The holder of the option can then choose to buy or sell the underlying security at the fixed price during this time period; however, the holder is under no obligation to buy. For example, if the holder purchases an option to buy a stock at $30, the individual may not wish to buy the stock during the time period of the option if the shares are being sold for $27. However, if the shares are being sold for $33, the holder will save $3 per share with the option. Thus, options may or may not prove advantageous to the holder.

Pooled Income Fund
A term used to describe a group of funds that a mutual fund is compared to. For example, the peer group for a Large Cap Growth mutual fund would be other Large Cap Growth mutual funds, it would not make sense to compare a Large Cap Growth mutual fund to a group of Small Cap Value funds.

Portfolio
A trust created by a charitable organization that combines the contributions of several donors and distributes income to those donors based on the earnings of the trust. The trust is managed by the charitable organization, and contributions are partially deductible for income tax purposes.

Preferred Stock
A class of stock with claim to a company's earnings, before payment can be made on the common stock, and that is usually entitled to priority over common stock if the company liquidates. Generally, preferred stocks pay dividends at a fixed rate.

Prenuptial Agreement
A legal agreement arranged before marriage stating who owns property acquired before marriage and during marriage and how property will be divided in the event of divorce. ERISA benefits are not affected by prenuptial agreements.

Price-Earnings Ratio (P/E Ratio)
The price-earnings ratio is a measure of how much buyers are willing to pay for shares in a company, based on that company's earnings. Price earnings ratio is calculated by dividing the current price of a share in a company by the most recent year's earnings per share of the company. This ratio is a useful way of comparing the value of stocks and helps to indicate expectations for the company's growth in earnings. It is important, however, to compare the P/E ratios of companies in similar industries. Price-earnings ratio is sometimes also called the "multiple".

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.

Probate
The court-supervised process in which a decedent's estate is settled and distributed.

Profit-Sharing Plan
An agreement under which employees share in the profits of their employer. The company makes annual contributions to the employees' accounts. These funds usually accumulate tax deferred until the employee retires or leaves the company.

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.

Qualified Domestic Relations Order (QDRO)
At the time of divorce, this order would be issued by a state domestic relations court and would require that an employee's ERISA retirement plan accrued benefits be divided between the employee and the spouse.

Qualified Retirement Plan
A pension, profit-sharing, or qualified savings plan that is established by an employer for the benefit of the employees. These plans must be established in conformity with IRS rules. Contributions accumulate tax deferred until withdrawn and are deductible to the employer as a current business expense.

Quote/Quotation
A quotation, or quote, refers to the current price of a security, be it either the highest bid price for that security or the lowest ask price.

Real Estate Investment Trust (REIT)
A REIT is pool of real estate properties that gives small investors the opportunity to own a portion of large properties. The properties are owned jointly amongst the owners of the REIT in proportion to the number of shares they purchased.

Real Rate of Return
The Real Rate of Return refers to the annual return on an investment after being adjusted for inflation and taxes.

Reinvest
Reinvestment is the use of capital gains, including interest, dividends, or profit, to buy more of the same investment. For example, the dividends received from stock holdings may be reinvested by buying more shares of the same stock.

Revocable Trust
A trust in which the creator reserves the right to modify or terminate the trust.

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

Risk Tolerance
A term used to define the amount of risk an investor is comfortable taking. An investor's risk tolerance is used along with their time horizon to determine the appropriate allocation for their portfolio. A person with a high risk tolerance would typically invest more heavily in stocks than a person with a low risk tolerance.

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.

Rollover
A method by which an individual can transfer the assets from one retirement program to another without the recognition of income for tax purposes. The requirements for a rollover depend on the type of program from which the distribution is made and the type of program receiving the distribution.

Roth IRA
A nondeductible IRA that allows tax-free withdrawals when certain conditions are met. Income and contribution limits apply.

R-Squared
A statistical measure of correlation between a group of securities (stocks/bonds) and their best fit index. Measured on a scale of 1-100, a high R² indicates that the fund/investment is highly correlated to the index it is being compared to.

Rule of 72
The Rule of 72 is a mathematical concept that approximates the number of years it would take to double the principal at a constant rate of return.

Russell 1000 Growth Index
An index that tracks the performance of the companies within the Russell 1000 index with higher price-to-book ratios and higher forecasted growth rates. This index is typically used to compare the performance of Large Cap Growth stocks/funds.

Russell 1000 Index
An index that tracks the performance of the 1000 largest companies in the Russell 3000 Index.

Russell 1000 Value Index
An index that tracks the performance of the companies within the Russell 1000 index with lower price-to-book ratios and lower forecasted growth rates. This index is typically used to compare the performance of Large Cap Value stocks/funds.

Russell 2000 Growth Index
An index that tracks the performance of the companies within the Russell 2000 index with higher price-to-book ratios and higher forecasted growth rates. This index is typically used to compare the performance of Small Cap Growth stocks/funds.

Russell 2000 Index
An index that tracks the performance of the 2000 smallest companies in the Russell 3000 Index.

Russell 2000 Value Index
An index that tracks the performance of the companies within the Russell 2000 index with lower price-to-book ratios and lower forecasted growth rates. This index is typically used to compare the performance of Small Cap Value stocks/funds.

S&P 500 Index
The Standard and Poor's 500 Index is a market index of 500 of the top-performing United States corporations. This index is a broader measure of the domestic market than the Dow Jones Industrial Average, indicating broad market changes. The S&P 500 index includes 400 industrial firms, 20 transportation firms, 40 utilities, and 40 financial firms.

SEC (Securities and Exchange Commission)
The Securities and Exchange Commission is a federal government agency comprised of 5 commissioners appointed by the president and approved by the Senate. The SEC was established to protect the individual investor from fraud and malpractice in the marketplace. The commission oversees and regulates the activities of registered investment advisors, stock and bond markets, broker/dealers, and mutual funds.

Sector/Sector Fund
A subset of a developed economy. Typically sectors are divided into: Utilities, Consumer Discretionary, Financials, Materials, Industrials, Technology and Telecommunication.

Security
A security is any investment purchased with the expectation of making a profit. Securities include total or partial ownership of an asset, rights to ownership of an asset, and certificates of debt from an institution. Examples of securities include stocks, bonds, certificates of deposit, and options.

Simplified Employee Pension Plan (SEP)
A type of plan under which the employer contributes to an employee's IRA. Contributions may be made up to a certain limit and are immediately vested.

Single-Life Annuity
An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Generally used as a supplement to retirement income and pays over the life of one individual, usually the retiree, with no rights of payment to any survivor.

Small Cap
A term used to describe stocks with a market capitalization of more than $250 million but less than $1 billion. Stocks are usually classified as Large Cap, Mid Cap, Small Cap or Micro Cap.

Split
A split is when a company's board of directors and the shareholders agree to increase the number of shares outstanding. The shareholders' equity does not change; instead, the number of shares increases while the value of each share decreases proportionally. For example, in a 2-for-1 split, a shareholder with 100 shares prior to the split would now own 200 shares. The price of the shares, however, would be cut in half; shares that cost $40 before the split would be worth $20 after the split.

Split-Dollar Plan
An arrangement under which two parties (usually a corporation and employee) share the cost of a life insurance policy and split the proceeds.

Spousal IRA
An IRA designed for a couple when one spouse has no earned income. The maximum combined contribution that can be made each year to an IRA and a spousal IRA is $8,000 (in 2007) or 100 percent of earned income, whichever is less. This total may be split between the two IRAs as the couple wishes, provided the contribution to either IRA does not exceed $4,000.

Standard Deviation
A statistical measure that can be use to measure a stock or portfolio's volatility. Generally a higher standard deviation implies a greater chance of volatility in the future while a lower standard deviation implies a smaller chance of volatility in the future.

Stock
A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and by capital gains or losses in the stock's share price.

Style Drift
A term used to measure a fund's tendency to deviate from it's specified investment style. For example, stlye drift occurs when a fund that typically invests in large cap companies now invests a significant portion of it's portfolio in small cap companies.

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

Tax Credit
Tax credits, the most appealing type of tax deductions, are subtracted directly, dollar for dollar, from your income tax bill.

Tax Deferred
Interest, dividends, or capital gains that grow untaxed in certain accounts or plans until they are withdrawn.

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.

Tax-Exempt Bonds
Under certain conditions, the interest from bonds issued by states, cities, and certain other government agencies is exempt from federal income taxes. In many states, the interest from tax-exempt bonds will also be exempt from state and local income taxes.

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.

Tenancy in Common
A form of co-ownership. Upon the death of a co-owner, his or her interest passes to his or her chosen beneficiaries and not to the surviving owner or owners.

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.

Testamentary Trust
A trust established by a will that takes effect upon death.

Testator
One who has made a will or who dies having left a will.

Ticker
The ticker displays information on a moveable tape or, in modern times, as a scrolling electronic display on a screen. The symbols and numbers shown on the ticker indicate the security being traded, the latest sale price of the security, and the volume of the last transaction.

Ticket Fee
The brokerage cost's associated with placing a trade not including commissions.

Time Horizon
The amount of time before an investor needs to take a significant distribution from their portfolio. A longer time horizon will typically allow an investor to be more aggressive while a shorter time horizon should generally necessitate a more conservative allocation.

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

Trust
A legal entity created by an individual in which one person or institution holds the right to manage property or assets for the benefit of someone else. Types of trusts include: Testamentary Trust – A trust established by a will that takes effect upon death; Living Trust – A trust created by a person during his or her lifetime; Revocable Trust – A trust in which the creator reserves the right to modify or terminate the trust; Irrevocable Trust – A trust that may not be modified or terminated by the trustor after its creation

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

Trustee-to-Trustee Transfer
A method of transferring retirement plan assets from one employer's plan to another employer plan or to an IRA. One benefit of this method is that no federal income tax will be withheld by the trustee of the first plan.

Underwriter
An underwriter is an individual distributing securities as an intermediary between the issuer of the security and the buyer. For example, an underwriter may be the agent selling insurance policies or the person distributing shares of a mutual fund to broker/dealers or investors. Generally, the underwriter agrees to purchase the remaining units of the security from the issuer, such as remaining shares of stocks or bonds, if the public does not buy all specified units. An underwriter may also be a company that backs the issue of a contract, agreeing to accept responsibility for fulfilling the contract in return for a premium.

Universal Life Insurance
A type of life insurance that combines a death benefit with a savings element which accumulates tax deferred at current interest rates. Under a universal life insurance policy, the policyholder can increase or decrease his or her coverage, with limitations, without purchasing a new policy.

Value Stock
A company that is trading at a lower price than what it's earnings and financial situation would dictate. A company who's stock price is considered to be undervalued relative to it's past valuation, it's sector or the market in general.

Variable Universal Life Insurance
A type of life insurance that combines a death benefit with a savings element that accumulates tax deferred. Under a variable universal life insurance policy, the cash value in the policy can be placed in a variety of subaccounts with different investment objectives. The policyholder can transfer funds among the subaccounts as he or she wishes. Fees are charged after a certain number of transfers.

Volatility
Volatility is an indicator of expected risk. It demonstrates the degree to which the market price of an asset, rate, or index fluctuates from average. Volatility is calculated by finding the standard deviation from the mean, or average, return.

Warrant
A warrant is similar to an option, giving the holder the right to purchase securities at a set price for a specific period of time. Warrant certificates last longer than options, typically holding value for a few years or indefinitely. Warrants are often traded as securities at a price that reflects the underlying security.

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.

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. 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.