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Investment Glossary of Terms

A	B	C	D	E-F	G-K	L-M	N-O	P-R	S	T-Z

402(g) Annual Individual Elective Contribution Limit
This establishes the maximum amount an individual may elect to contribute to their deferred contribution plan (403(b) or 457(b) in the current calendar year.

403(b) Deferred Program
Named after a section of the Internal Revenue Code, a 403(b) program is similar to a 401(k) for private employers. It lets employees of not-for-profit organizations, like Michigan public schools, invest for retirement with pre-tax dollars. To benefit employees further, all interest, dividends, and capital gains are taxed only when they are withdrawn. Since these programs are designed for retirement, early withdrawal penalties may apply.

403(b) Special Catch-up
Employees with 15 or more years of service with the same educational institution may contribute an extra $15,000 in total subject to the flollowing two limitations:
1. The participant must have been employed by the same school district for 15 years.
2. The employee must multiply the number of years of service times $5,000, and then subtract all prior year contributions to determine what, if any, extra amount may be contributed to a maximum contribution of $3,000 per year. Thus, eligible catch up contributions may be made for as many years as necessary to meet the $15,000 llimit.

415(c) Limitation Rule
Section 415(c) is a section of the Tax Code that sets the combined annual amount of employer and employee "elective" contributions that may be excluded from a person's income under a defined contribution plan.

457(b) Deferred Compensation Program
Public school employees are eligible for this tax-deferred compensation plan governed by IRS Code Section 457. MEA members can start a 457(b) plan in addition to a 403(b) plan and can contribute the same amount to both.
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A Share
Class A shares typically have a front-end sales charge. Therefore a portion of the dollars you use to purchase these types of shares is not invested on your behalf. The fee is expressed as a percentage of the amount invested. Class A shares tend to have a lower 12b-1 fee and lower annual expenses than other mutual fund share classes. If you plan to purchase Class A shares, be sure to inquire about breakpoints as the mutual fund may offer a discount off the front-end sales charge if you:

Currently hold other funds offered by the same mutual fund family

Make a large purchase

Made a commitment to regularly purchase shares in the mutual fund

Account Fee
A fee that some funds separately impose on investors for the maintenance of their accounts. For example, accounts below a specified dollar amount may have to pay an accountfee.

ACH/Electronic Funds Transfer
Automated Clearing House (ACH) is the electronic funds transfer network in the U.S. that allows direct deposit of money between one account and another. Your banking institution must be a ACH participant to take advantage of such transfers.

Active (Actively Managed)
Funds with an investment adviser who continually researches, monitors and actively trades the holdings of the fund to seek a higher return than the market.
Source:

Administrative Fee
Charges to cover record-keeping and other administrative expenses. This may be charged as a flat account maintenance fee or as a percentage of account value.
Source: United States Securities and Exchange Commission

Age 50+ Catch-up
A special allowance for anyone age 50 or older that permits an additional contribution into an individual's retirement program. Eligibility is based on anyone turning 50 at any time during the year and is not birthdate specific. Different Age 50+ catch up amounts apply to IRA and Roth IRA programs versus 401(k) and 457(b) deferred programs.

American Stock Exchange
Called the Amex. More than 700 small to mid-size companies list here, with a heavy weighting to oil and oil-service companies.

Annual Rate of Return
Annual return on an investment. Rate of return may refer to the dividend yield or it may refer to the total return rate.
Source: FINRA

Annual Report
Corporate document issued each year to detail to investors and others a company's financial performance and outlook.

Annual Reset (Rachet)
Compares the change in the index from the beginning to the end of each year. Any declines are ignored.
Source: United States Securities and Exchange Commission

Annuitant
The person whose life expectancy is used to determine the payout of an annuity

Annuitization
Converting the value of an annuity contract into a stream of income payouts.

Annuity
There are two types of annuities:The first is when you pay a lump sum to a life insurance company, and they pay it out to you right away in periodic installments. This type is known as an immediate annuity - the payments to you start immediately. The second, and more common, is where money paid by you accumulates at interest over a period of time. If you choose, the accumulated amounts will then be paid out to you in periodic installments, usually when you retire, in order to supplement your retirement income. This type is known as a deferred annuity - the payments to you are deferred for a number of years. Currently, a deferred annuity may have tax advantages, in that the interest credited to your funds is deferred from current taxation. That is to say, income tax is not owed until you start receiving distributions from the annuity.

Annuity Certain (Period Certain Annuity)
A type of annuity in which the insurance company will pay you an income for a specified amount of time (5 years, 10 years, 20 years, etc.). In a Life Annuity with Period Certain, the company will pay you an income for as long as you live, but if you die before the period certain that you choose, the income will be paid to a survivor you designate until the end of that period.

Asset Allocation
Asset allocation is a strategy for reducing the risk associated with investing. It is dividing ones assets on a percentage basis among various broad categories of investments, such as, stocks, bonds and cash equivalents and where the allocation decisions are based on the investor's goals, risk tolerance and time horizon.

Economic events affect each asset category differently. Therefore when there is a downturn in any one market, other investments may perform better. In a diversified portfolio, fluctuations in asset value are often balanced out. An example would be that you may have a stock that has performed poorly, but bonds you hold that have a predictable income could counteract the loss.

Asset-Based Sales Charges
These fees are taken out of the mutual fund's assets to pay to market and distribute its shares. These charges could include compensation to a broker/dealer for the sale of mutual fund shares, for advertising, and for printing costs associated with the prospectus. Also known as 12b-1 fees.

Asset Class
A group of similar investment instruments linked by related risk and return features.

Average Annual Return (AAR)
AAR is stated after expenses and is the most common basis for stating the historical return of a mutual fund.

Average Annual Yield
Average yearly income on an investment.
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B Share
Class B shares generally do not have a front-end sales charge, so all of your dollars are immediately invested. They may, however, impose a contingent deferred sales load and a higher 12b-1 fee (than Class A shares), along with other annual expenses. The contingent deferred sales charge is paid when you sell your shares. This fee is expressed as a percentage of the amount invested and may also be called a back-end load , an exit fee, or a redemption charge. The contingent deferred sales charge will normally decline and be eliminated the longer you hold your shares. Once this happens they then often convert to Class A shares and will change to the Class A shares asset-based sales charge.

If you are planning a large purchase of Class B shares, refer to the funds prospectus and talk to your financial adviser as Class A shares may be a better choice as the Class A shares generally have a lower expense ratio and may offer a large purchase discount from their front-end sales charge.

Back-end Load (Deferred Sales Charge)
A sales charge investors pay when they redeem (or sell) mutual fund shares, generally used by the fund to compensate brokers.
Source: United States Securities and Exchange Commission

Bailout Provision
Some fixed annuities include a bailout provision which will waive the surrender charge if the contract's declared renewal interest rate falls below the bailout rate point

Basis Point
Basis points are frequently used to describe spreads or changes in yields of interest rates. A basis point equals 1/1OOth of one percent, or 0.01. (i.e., 50 basis points are equal to 1/2 percent).

Balance Sheet
Shows the company's financial condition at a specific point in time. When the asset side is equal to the side containing liabilities and equity, the sides balance.

Basis Point
One one-hundredth of a percent. Thus, if a bond's yield drops from 6.46 % to 6.41 %, it is said to have fallen by 5 basis points.

Bear
A prolonged period in which investment prices fall, accompanied by widespread pessimism.

Bid And Ask Prices
Used mostly in the computer-based NASDAQ market:
· Bid is the selling price
· Ask is the buying price.
· The difference is the spread.

Big Board
Nickname for the New York Stock Exchange.

Blend (Growth & Income)
These mutual funds invest in securities that provide a combination of growth and income. They generally funnel most of their assets into common stocks of well-established companies that pay regular dividends. They may also invest in high-rated bonds.
Source: FINRA

Blue Chip
The stocks of large, historically solid companies.

Bond
A loan to a corporation or government entity, usually paying a fixed rate of interest.

Broker
Individual or firm that acts as an intermediary between a buyer and a seller.

Bull
A prolonged period in which investment prices rise faster than their historical average.

Buy-and-Hold
A strategy that is used to minimize transaction costs and avoid selling on temporary declines designed to hold securities for long periods of time believing that they will appreciate in value over the long term.
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C Share
Class C shares may have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. In most cases your expense ratio will be higher than Class A shares, as well as, Class B shares...even when held for a long time. Class C shares may impose contingent deferred sales charges or other redemption fees, however, the front- or back-end load for Class C shares tend to be lower than that for Class A or Class B shares. Class C shares do not generally convert into another share class. Class C shares are often purchased and used for asset-allocation purposes.

Call
1. An option contract that permits the owner to purchase a specific amount of securities at a specified price until a specified date. Option contracts generally represent 100 shares of the same security
2. The right of the issuer to redeem a bond before its scheduled maturity.

Capital
1. Wealth in the form of money or property, owned, used or acquired in business by a corporation, individual or partnership.
2. Wealth that can be used to produce more wealth.

Capital Gain
Profit on the sale of a capital asset.

Capped
Capped meaning a ceiling...the highest level to which something can go.

Cash Equivalents
Instruments such as certificates of deposit, Treasury bills, money market funds and commercial paper (IOUs of corporations with the highest credit ratings). Technically, a cash equivalent is a very short-term loan to a bank, government or corporation, but it's such a safe investment it's considered to be equivalent to cash in hand.

Cash Flow Statement
Shows where the cash came from, what it is spent on during the specified reporting period, and the net increase or decrease in cash owned by the company.

Certificate Of Deposit
A certificate made out in the owner's name that shows a specified amount of money is on deposit at a bank and the amount of interest it is earning.

Certified Financial Planner (CFP)
The CFP legal team has provided their official definition, along with trademarks: CFP, Certified Financial Planner, and trademarks are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.

Chartered Financial Consultant (ChFC)
ChFC is a financial planning designation for the insurance industry awarded by the American College of Bryn Mawr. ChFCs must meet experience requirements and pass exams covering finance and investing and must have at least three years of experience in the financial industry. They must have studied and passed an examination on the fundamentals of financial planning, ncome tax, insurance, investmentand estate planning.

Chartered Life Underwriter (CLU)
A CLU designation is granted by the American College, Bryn Mawr, PA, which is the insurance and financial service industry's oldest and largest fully accredited institution of higher learning in the U.S. A CLU designation requires completion of 10 college-level courses, 3-years of qualifying experience, and adherence to a strict code of ethics. All CLU designess may join the American Society of CLU and ChFC, a professional association which is also headquartered in Bryn Mawr, for continuing education opportunities and other member services. The American Society has chapters in all 50states.

Closed-End Fund (Closed-End Company)
A type of investment company that does not continuously offer its shares for sale but instead sells a fixed number of shares at one time (in the initial public offering) which then typically trade on a secondary market, such as the New York Stock Exchange or the Nasdaq Stock Market. Legally known as a "closed-end company."
Source: United States Securities and Exchange Commission

Closing Price
The price paid at a stock's final trade of the day.

Commission
A fee charged by an agent or brokerfor his/her service in facilitating a transaction (i.e. buying and/or selling of securities or real estate). In the case of securities trading, brokers, depending on the commissions they charge, can be split into two broad categories.

Discount brokers charge relatively low commissions, but provide no services beyond executing trades.

Full service brokers charge higher commissions and provide research and investment advisory services.

Commodities
Basic items or staple products (e.g. agriculture, fisheries, minerals, mining).

Common Stock / Preferred Stock
The two types of stock an investor can buy. Most is common stock and may or may not pay a dividend. Preferred stock usually does have a dividend, and usually it does not change as the price of the stock goes up and down. It is called preferred because if the company should liquidate or fail, preferred stockholders are paid first.

Compounding
A term that describes the growth of an investment by which the interest and earnings on the original invested principal amount are added to the originall principal and the combined sum continues to earn additional interest on the whole. This transaction continues to be repeated over the period of the investment term.

Consumer Price Index (CPI)
The government's measure of inflation at the consumer level. For the past 30 years or so, the CPI has risen an average of about 4% per year.

Contingent Deferred Sales Charge
A fee that may be charged when you sell your mutual fund shares depending on the share class and/or rules imposed by the mutual fund company. The "CDSC" usually declines according to a schedule and is eventually eliminated after a number of years (typically in the 7th year).

Contribution
Money deducted from payroll and deposited into your retirement program account.

Conversion
A feature some funds offer that allows investors to automatically change from one class to another (typically with lower annual expenses) after a set period of time. The fund's prospectus or profile will state whether a class ever converts to another class.
Source: United States Securities and Exchange Commission

Corporation
A business and legal entity, chartered by State or Federal government, that has its own rights and obligations separate from that of the owners of the business.

Cost Basis
Is generally the amount paid for shares including all reinvested distributions. When you sell mutual fund shares from a taxable account you realize a capital gain or loss which must be reported on your income tax return. In order to calculate your gain or loss you must know the cost basis of the shares sold.

Coupon
The annual rate of interest paid on a debt security as calculated on the basis of the security's face value.

Current Yield
The annual rate of return on a security, calculated by dividing the interest or dividends paid by the market price, expressed as a percentage.

CUSIP Number
CUSIP stands for the Council on Uniform Securities Identification Procedures. A CUSIP number is a unique nine-character alphanumeric code appearing on the face of each stock or bond certificate that is assigned to a security by Standard & Poor's Corporation. CUSIP numbers are the property of the American Bankers Association (ABA) and are administered by Standard & Poor's. The number is used to expedite clearance and settlement.
Source: FINRA

Custodial Fee
The charge for safekeeping or physically holding the securities in the fund.
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Death Benefit
If you die, a person you select as a beneficiary (such as your spouse or child) will receive the greater of: (i) all the money in your account, or (ii) some guaranteed minimum (such as all purchase payments minus prior withdrawals).
Source: United States Securities and Exchange Commission

Deferred Annuity
A contract in which annuity payouts begin at a future date.

Deferred Sales Charge (Load)
The category "Deferred Sales Charge (Load)" in the fee table refers to a sales load that investors pay when they redeem fund shares (that is, sell their shares back to the fund). You may also see this referred to as a "deferred" or "back-end" sales load. When an investor purchases shares that are subject to a back-end sales load rather than a front-end sales load, no sales load is deducted at purchase, and all of the investors' money is immediately used to purchase fund shares (assuming that no other fees or charges apply at the time of purchase).
Source: United States Securities and Exchange Commission

Discount Broker
A brokerage firm that buys or sells securities for their customers at a lesser commission than what is charged by most full-service brokerage firms.

Diversification
Dividing money among a variety of investments that react differently to different events. Diversification generally reduces risk because overall performance doesn't depend on any one investment.

Dividend
A payment of cash or additional stock to stockholders, as approved by the board of directors.

Dollar Cost Averaging
Putting a certain pre-determined dollar amount into an investment at regular intervals regardless of share price or market activity.

Dow Jones Industrial Average
A price index of 30 large U.S. companies used to help predict trends in the stock market.
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Earnings Per Share
The net income, after taxes, divided by the number of common shares the company has outstanding.

Effective Annual Yield
Most companies compound and credit interest daily. The rate shown is the effective annual yield after compounding the daily nominal rate. Some companies pay a first year bonus on their interest to encourage new business. The Effective Annual Yield (EAY) includes the bonus.

Rate Bonus
- Some annuities pay a bonus on the base rate. For example, if the base rate is 6.00% and there is a 1.00% first year bonus, the EAY will be 7.00%.
Premium Bonus
- Some annuities pay an upfront premium bonus. For example, if the base rate is 6.00% with a 1.00% premium bonus, 7.06% will be shown as the Effective Annual Yield.

Equity
Also called Net Worth. The interest that the shareholders own in the company.

Equity Funds (Stock Fund)
An equity or stock fund is a type of mutual fund. Although a stock fund's value can rise and fall quickly (and dramatically) over the short term, historically stocks have performed better over the long term than other types of investments - including corporate bonds, government bonds, and treasury securities.
Source: United States Securities and Exchange Commission

Equity Index Annuity
These products combine features of traditional insurance products (e.g., the reduced risk of a guaranteed minimum return) and traditional securities (whose return is linked to the equity market). The investor's return is based on changes in an equity index such as the S&P 500 Index. The insurer also guarantees a minimum return to the investor if the contract is held to maturity.
Source: United States Securities and Exchange Commission

Exchange
The transaction that describes an allowed exchange of an individual's investment balance from one company to another within the same employer's plan. A distributable event is not required to effect this transaction but the exchange must be to an investment option approved by the plan.

Exchange Fee (Transfer, Switch)
A fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group or "family of funds."
Source: United States Securities and Exchange Commission

Expense Ratio
The expense ratio of a mutual fund measures the fund's total annual expenses as a percentage of the funds assets. Included is the asset-based sales charge and other ongoing fees that are deducted from the fund's assets and pay for the fund's investment adviser or transfer agent or other expenses of the fund. Not included in the Expenses Ratio are front-end sales charges and Contingent Deferred Sales Charges.

Federal Reserve System
The central banking system of the U.S., comprised of the Federal Reserve Board, the 12 Federal Reserve Banks, and the national and state member banks. Its primary purpose is to regulate the flow of money and credit in the country.

Financial Statements
A portfolio's financial statement is an accountants semi-annual report that provides data detailing investments, assets and liabilities in your mutual fund portfolio; and also, the results fo the operations and net asset changes in the fund.

FINRA. Is the acronym of the Financial Industry Regulatory Authority. It is the largest self-regulatory organization (SRO) in the United States. It writes and enforces rules governing the securities industry, as well as, enforces federal securities laws.

Fiscal Year
An accounting term. A period of 12 consective month after which the accounting period is closed.

Float
That part of a company's stock held by the investing public, and/or traded on an exhange, as opposed to company insiders.

Free Look
Period of ten or more days, during which you can terminate the contract without paying any surrender charges and get back your purchase payments (which may be adjusted to reflect charges and the performance of your investment).
Source: United States Securities and Exchange Commission

Free Withdrawal
Surrender charges are commonly deducted from withdrawals, but these charges often are eliminated for a 30 to 45 day window at the end of each index term. There may also be a limited free withdrawal privilege.
Source: United States Securities and Exchange Commission

Front-End Sales Charge
A fee charged when the mutual fund shares you are purchasing impose a front-end sales charge. Discounts to this charge may be offered if you plan to make a large purchase, hold other mutual funds within the same fund family, or are committing to regularly purchasing a set dollar amount of the mutual fund's shares over a set period of time.

Fund Class
Many mutual funds offer more than one class of shares. For example, you may have seen a fund that offers "Class A" and "Class B" shares. Each class will invest in the same "pool" (or investment portfolio) of securities and will have the same investment objectives and policies. But each class will have different shareholder services and/or distribution arrangements with different fees and expenses. As a result, each class will likely have different performance results.
Source: United States Securities and Exchange Commission

Futures
"Futures Contract"; an agreement to buy or sell a specific amount of a commodity at a particular price on a stipulated future date. A futures contract obligates the buyer to purchase the underlying commodity and the seller to sell it.
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Global Funds
A mutual fund that invests in stocks and bonds issued by companies throughout the world which also includes the country in which the fund is offered for sale.

Going Public
The initial sale of stock to the public by a privately held company. See IPO (Initial Public Offering).

Government Bonds
Obligations of the U.S. Government, regarded as the least risky, highest-grade securities issues. The major types of debt instruments issued by the U.S. government are: Treasury Bills, Saving Bonds, Treasury Notes, and Treasury Bonds.
Source: New York Stock Exchange

Gross Domestic Product
GDP - is the total value of all final goods and services produced in a country over a particular time, usually one year.

Growth Funds
Growth funds focus on stocks that may not pay a regular dividend but have the potential for large capital gains.
Source: United States Securities and Exchange Commission

Guarantees
Insurance companies issuing variable annuities provide a number of specific guarantees. For example, they may guarantee a death benefit or an annuity payout option that can provide income for life. A fixed deferred annuity always contains guarantees. For example, it might guarantee that the interest rate on the funds accumulating in your policy will be at least 4%.
Source: National Association of Securities Dealers, Inc., California Department of Insurance

High Yield
A high-yield bond is by definition a "Non-Investment Grade" security under the Trade Reporting and Compliance Engine (TRACE) Rules. A high-yield bond is a corporate bond that is rated as speculative grade by a nationally recognized statistical rating agency. Source FINRA

Income Distributions
Are distributions to shareholders that result from income earned by the securities held by a mutual fund reduced by any fund expenses. Distributions may be paid to the shareholder or reinvested to purchase additional shares.

Income Funds
Income funds invest in stocks that pay regular dividends.
Source: United States Securities and Exchange Commission

Income Statement
The company financial statement that summarizes sales, expenses and net income for the reporting period.

Index Funds
Index funds aim to achieve the same return as a particular market index, such as the S&P 500 Composite Stock Price Index, by investing in all - or perhaps a representative sample - of the companies included in an index.
Source: United States Securities and Exchange Commission

Individual Retirement Account (IRA)
An investment that lets your money grow without being taxed until it's withdrawn. However, distributions prior to age 59 1/2 may be subject to a 10% tax penalty.

Inflation
Inflation is an increase in the amount of money and credit spent in relation to the supply of goods and services across the economy over a period of time.

Initial Public Offering (IPO)
The first offering of a company's stock to the public.

Initial Rate Period
The period of time, which is most often listed in years, that the company has agreed to pay the initial crediting rate.

Institution
A large organization, such as a pension or mutual fund. Institutions account for more than half of all trading volume.

International Funds
This type of fund generally invests in stocks and bonds of companies located outside the United States.
Source: FINRA

Issue
The first time that an organization's securities are sold in the primary market.

Joint and Survivor Annuity
With this type of annuity the insurance company pays an income to you during your life and after your death pays a percentage of that income (50% or 75%, for example) to your designated survivor during his/her life.
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Lapse
Discontinuation of insurance without cash value when the required premium is not paid. When cash value exists, there may be nonforfeiture provisions available.

Large Cap
Stocks of bigger companies whose market value is above a designated minimum, such as $5 billion.
Source: FINRA

Liability
Debt, legal obligation, claim on the assets of an organization that is owed and must be paid.

Life Annuity
A type of annuity where the insurance company pays you an income for as long as you live.

Liquidity
Liquidity refers to how quickly and cheaply an asset can be converted into cash.

Load (sales charge)
Fee investors are charged when they purchase (front-end load) or redeem (back-end load) shares of a mutual fund.

Loan Fees
Loan fees can vary from a small percentage of the amount you borrow to a rather substantial percentage of the total value of what you'd be eligible to borrow.
Source: FINRA

Loan Value
The amount that can be borrowed by the policyowner from the company using the value of the policy as collateral. The interest rate payable on the loan usually varies based on an index defined in the policy.

Lump Sum
A single cash payment to the participant (under certain circumstances may be made to another designated party). Availability and payment of lump-sum distributions are subject to certain legal restrictions. Premature receipt of a lump-sum distribution can have adverse tax consequences.

Management Fee
The amount paid by a mutual fund to the investment advisor for their management and investment advisory services.

Margin
The amount of unencumbered money or collateral deposited by a client with his or her broker when borrowing from the broker in order to purchase or maintain a security position.

Market Index
A measurement of the performance of a specific "basket" of stocks considered to represent a particular market or sector of the U.S. stock market or the economy. For example, the Dow Jones Industrial Average (DJIA) is an index of 30 "blue chip" U.S. stocks of industrial companies (excluding transportation and utility companies).
Source: United States Securities and Exchange Commission

Market Maker
A firm that buys and sells stock for its own account, hoping to profit through quick turnarounds. Specialists on exchanges and NASDAQ dealers are market makers.

Market Price
The price at which a security trades in the secondary market.

Market Value or Market Capitalization
The total value of a company, determined by number of shares of stock outstanding multiplied by the stock price.

Maturity
The date on which a finanical obligation is to be paid.

Mid Cap
Stocks of mid-sized companies whose market value falls between a designated minimum and maximum, such as $1 billion to $5 billion.
Source: FINRA

Minimum Rate Guarantee After Initial Period
This minimum rate guarantee provides a minimum interest rate a company may credit to an annuity after the initial rate period. and is also the rate that insurance company actuaries use to calculate reserve requirements in order to meet state insurance laws.

Minimum Required Distribution
A minimum required distribution is the smallest amount you can take each year from your 401(k), 403(b), traditional IRA, or other retirement savings plan once you've reached the mandatory age for making withdrawals, usually 70 1/2. If you take less than the required minimum, you owe a 50% penalty on the amount you should have taken. You calculate your MRD by dividing your account balance at the end of your plan's fiscal year - usually but not always December 31 - using a divisor determined by your age.
Source: FINRA

Money Market
A market for short-term debt securities (i.e. banker's acceptances, commercial paper, negotiable certificates of deposit, repos & Treasury Bills with a maturity of 1 year or less (& often 30 days or less). Money market securities generally are very safe investments that return a relatively low interest rate that is most appropriate for short-term time horizons or temporary cash storage.Bid and ask spreads are relatively small due to the large size and high liquidity of the market.

Mortality and Expense
This charge is equal to a certain percentage of your account value, typically in the range of 1.25% per year. This charge compensates the insurance company for insurance risks it assumes under the annuity contract.
Source: United States Securities and Exchange Commission

Municipal Bond
A debt security issued by a state or local government, usually exempt from taxes on the interest it earns.

Mutual Fund
A popular type of investment that pools the money of many different investors and uses it to purchase a variety of stocks, bonds, and other securities. Each investor then owns shares of the mutual fund. Every mutual fund is professionally managed toward a specific investment goal: long-term growth, current income, a balance of growth and income, etc.
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NASDAQ Composite Index
Tracks the NASDAQ market. As there are many high-tech companies on the NASDAQ, it has become a measure of the high-tech industry.

NASDAQ National Market System
National Association of Securities Dealers Automated Quotations. A computerized national trading system for more than 4,000 public companies.

Net Asset Value
The dollar value of each share of a mutual fund, based on the value of the underlying assets of the fund minus its liabilities, divided by the total number of outstanding shares. Calculated at the end of each business day.

Net Worth
"Net worth" at any given date is the difference between total assets and total liabilities on that date. It is the difference between what is owned and what is owed (measuring the value of what is owned by its cost rather than unrealized increases in market value).

New York Stock Exchange (NYSE)
Founded in 1792, it now lists more than 3,000 companies. Each company must meet stringent requirements for size and profitability in order to be listed.

No-Load Fund
A mutual fund sold without a sales charge.

Option
A contract that allows an investor to purchase or sell a specific amount of securities at a specified price during a fixed and certain term.

Over The Counter Market
Refers to a security which is not traded on an exchange as they often do not meet the listing requirements. Research about these stocks is more difficult to obtain and OTC stocks are typically very risky as they are stocks that are not considered large or stable enough to trade on a major exchange, thus broker/dealers negotiate directly with one another over computer networks and by phone. Their activities are monitored by the NASD. As such, they tend to trade infrequently, making the bid-ask spread larger.
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Par Value
The stated value of a security printed on the security's certificate.

Payout Period
The period during which you receive the income from your annuity contract.

Point
Used to track a stock. "Up a point," means up $1 a share.

Portfolio
All the various stocks and/or bonds held by one investor or institution.

Point to Point
Compares the change in the index at two discrete points in time, such as the beginning and ending dates of the contract term.
Source: United States Securities and Exchange Commission

Portfolio Rebalancing
As you get closer to retirement, or as market performance alters the values of your asset classes, you may find that your asset allocation no longer guarantees the balance of growth and return that you want. In that case, you may want to consider adjusting your holdings and rebalancing your portfolio.
Source: FINRA

Preferred Stock
A security that represents prior claim to common stock on a firm's earnings and assets. Preferred stockholders receive a fixed dividend that takes precedence over payment of dividends to common stockholders. Preferred stockholders usually forego voting rights.

Price Earnings Ratio
Current market value of a stock divided by the firm's earnings per share.

Primary Market
The first time a company's shares are sold, they are sold into the primary market which is made up of the first owners of the shares. When the shares are resold, this then is called the secondary market.

Principal
The sum of money you invest, as distinguished from the earnings that the money produces. Your regular plan contributions comprise the principal in your account. Oftentimes called "capital."

Profit
The financial gain realized (after all costs are deducted) from the use of capital in a transaction or series of transactions in a given period of time in relation to amount of capital invested.

Prospectus
The formal document that discloses the terms of a securities offering or a mutual fund. Strict rules govern the information that must be disclosed to investors in the prospectus.

Proxy
Written authorization to act for a stockholder.

Public Offering Price ("POP")
The price of a fund share is the net aset value per share plus any applicable initial sales charge.

Purchase Fee
A purchase fee is another type of fee that some funds charge their shareholders when the shareholders purchase their shares. A purchase fee differs from, and is not considered to be, a front-end sales load because a purchase fee is paid to the fund (not to a broker) and is typically imposed to defray some of the fund's costs associated with the purchase.
Source: United States Securities and Exchange Commission

Put
An option contract which gives the buyer of the Put the right to sell an asset at a specified price until a specified date. Contracts generally represent 100 shares.

Record Date
As of this date, any shareholder on record will receive dividends.

Redemption
Repayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price by the security's issuer.

Registered Investment Advisor (RIA)
An investment advisor registered with the SEC (certification is not required).

Registered Representative
Individual licensed to sell securities and has the legal power of an agent, having passed the Series 7 and Series 63 examinations. Usually works for a brokerage licensed by the SEC, NYSE, and NASD. Also called account executive.

Return On Investment
The amount of profit earned from an investment. Typically expressed as a percentage: profit divided by capital invested and multiplied by 100= % of return on investment.

Rollover
A rollover occurs when you withdraw cash or other assets from one qualified employer retirement plan and contribute all or part of it within 60 days to another qualified retirement plan or traditional IRA. This is only available if the employee experiences a distributable event such as severance from service or attaining age 59 1/2.

Roth Individual Retirement Account (Roth IRA)
An Individual Retirement Account that permits your investment to grow and be distributed tax-free. As long as you have earned income, there is no limit to how long you can contribute and no rules regarding when you must take money out. A special provisions allows you to withdraw a portion of the interest without penalty for the purchase of a first home.
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Sales Load
Funds that use brokers to sell their shares must compensate the brokers. Funds may do this by imposing a fee on investors, known as a "sales load" (or "sales charge (load)"), which is paid to the selling brokers. In this respect, a sales load is like a commission investors pay when they purchase any type of security from a broker. Although sales loads most frequently are used to compensate outside brokers that distribute fund shares, some funds that do not use outside brokers still charge sales loads.
Source: United States Securities and Exchange Commission

Secondary Market
Where an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market.

Securities
Stocks and bonds.

Securities and Exchange Commission (SEC)
Federal regulator of securities and securities markets.

Sector Funds
Sector funds may specialize in a particular industry segment, such as technology or consumer products stocks.
Source: United States Securities and Exchange Commission

Security
A stock or bond. A stock certificate shows partial ownership of a company, whereas with a bond the security shows the issuer's promise to repay the amount of the bond at a stated interest rate.

Settlement Option
The manner in which the insured or beneficiary chooses to have the policy proceeds paid. Source: California Department of Insurance

Shareholder Service Fees
Fees paid to persons to respond to investor inquiries and provide investors with information about their investments.
Source: United States Securities and Exchange Commission

Short Sale
Sale of a security not owned by the seller,who hopes to buy them back later at a lower price to realize a profit.

Signature Guarantee
Assures that a signature is genuine and protects shareholders from unauthorized account transactions.

Simple Interest
Interest computed on a principal amount only.
Source: Internal Revenue Service Manual

Small Cap
Stocks of smaller companies whose market value is below a designated minimum, such as $1 billion.
Source: National Association of Securities Dealers, Inc.

Spread
Some Equity Index Annuities use a spread, margin or asset fee in addition to, or instead of, a participation rate. This percentage will be subtracted from any gain in the index linked to the annuity.
Source: United States Securities and Exchange Commission

Standard & Poor's 500 Stock Index
A comprehensive stock index, used by professionals, calculated using the market values of the common stock of 500 of the largest publicly held companies.

Stock
Shares of ownership in a corporation. A stock's market value fluctuates depending on the company's current performance and future prospects.

Stock Symbol
Letters by which companies are recognized for stock trading. NYSE symbols normally are one, two or three letters. Amex symbols are usually three. NASDAQ symbols are usually four.

Straight Life Annuity (Annuities for a single life)
You receive definite amounts at regular intervals for life. The payments end at death.
Source: Internal Revenue Service Publication 575

Surrender Charge
If you withdraw money from a variable annuity within a certain period after a purchase payment (typically within six to eight years, but sometimes as long as ten years), the insurance company usually will assess a "surrender" charge, which is a type of sales charge.
Source: United States Securities and Exchange Commission

Surrender Period
The surrender charge is a percentage of the amount withdrawn, and declines gradually over a period of several years, known as the "surrender period."
Source: United States Securities and Exchange Commission

Sweeps
While brokerage firms are required to send funds or certificates "promptly" to customers following the settlement of a trade, there are no deadlines imposed by federal law or regulations. Brokerage firms will credit your account with sale proceeds as soon as your trade settles. Some brokerage firms may immediately "sweep" your money into an account that earns interest. You should ask your broker about how you can assure that all funds and securities are delivered to you promptly.
Source: United States Securities and Exchange Commission

Systematic Risk
This type of risk affects all companies in your portfolio at the same time. Rising interest rates, inflation, wars, and political changes influence the whole economy, not just one company, and are virtually impossible to avoid.
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Target Date Funds (also know as Lifecycle Fund)
A mutual fund that is highly diversified and designed to remain an appropriate set of investments in terms of risk for investors throughout a variety of life circumstances. Lifecycle funds offer different risk profiles where investors can shift invested funds between them so as to manage risk effectively as they move from young adults, to middle age and on into retirement. Target Date/ Lifecycle funds share the common goal of first growing principal and then in later years, preserving principal. These funds can contain any mix of stocks, bonds, and cash.

Tax-Deferred Annuity
A retirement program for employees of public schools and certain tax-exempt organizations that defers income taxes by allowing contributions to be made with pre-tax dollars and letting earnings accumulate without being taxed. Funds are only taxed when withdrawn at normal distribution. Because this is a retirement plan, early withdrawal penalties may apply.

Tax-Deferred Investment
An investment that allows you to defer paying taxes until a later date, usually until distributions are taken.

Tax-Deferred Purchase Plan (TDP)
Allows eligible Michigan school employees to purchase up to five years of Service Credit through payroll deduction or a lump-sum payment. The number of years purchased count toward increasing an employee's monthly pension amount and satisfying the 30-year full pension requirement, but they don't count as credit to satisfy the minimum ten-year service credit requirement to vest.

Temporary Life Annuity
With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter.
Source: Internal Revenue Service Publication 939

Ticker (Stock Symbol)
A unique four- or five-letter symbol assigned to a Nasdaq security that is used for identifying it on stock tickers, in newspapers, on on-line services, and in automated information retrieval systems. If a fifth letter appears, it identifies the issue as other than a single issue of common or capital stock.
Source: FINRA

Total Annual Fund Operating Expense
The total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets. You'll find the total in the fund's fee table in the prospectus.
Source: United States Securities and Exchange Commission

Total Return
Expressed as a percentage, this value represents the change in the value of a portfolio share. It includes reinvested distributions and any expenses, and/or sales charges from the beginning of a specific period of time to the end of a specific period of time.

Transfer
The transaction that describes the movement of a 403(b) account under one employer's 403(b) plan into investment products permitted under another employer's 403(b) plan. This requires a separation from service and rehire with another eligible 403(b) plan sponsor.

Transfer Fee
An amount charged by a fund to transfer either within the fund family or to another company.

Treasury Bill
A short-term, one year or less, debt security issued and guaranteed by the United States Treasury.

Treasury Bond
A longer term debt security, over 10 years, issued and guranteed by the United States Treasu

Unsystematic Risk
Risk that applies to a specific company. This could relate to poor sales or be as dramatic as the building being destroyed by a natural disaster. This is just one of the reasons why a diversified portfolio is important, as it is highly unlikely that all the companies you are invested in would have the same kind of loss at the same time.

Value Stocks (Income)
Value stocks are those considered to be selling at lower prices or "undervalued" because the companies that issue these shares have had business setbacks or are out of favor with investors. Value stocks have been known to outperform growth stocks in slow markets - and vice versa. But there is still a risk with value stocks because not all companies recover from setbacks.
Source: FINRA

Variable Annuity
A contract issued by an insurance company that offers you a tax-deferred way to build assets for the future. A variable annuity gives you the freedom to allocate your plan contributions among one or more investment portfolios. Your return depends upon the performance of the underlying investments in the portfolios.

Withdrawal Charge
A fee charged by some annuities and funds when an investor withdraws money from his or her account.

Wrap Fee
Charge for an investment program that bundles or "wraps" a number of services (brokerage, advisory, research, consulting, management, etc.) together and covers them with a single fee based on the value of assets under management.
Source: National Association of Securities Dealers, Inc.

Yield
The rate of return of an investment.

Yield to Maturity
The annual rate of return that is to be earned from purchasing a debt secrity at the current market price assuming that the security will be held until its scheduled maturity.
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