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Glossary of Investment Terms

ASSET ALLOCATION - the act of investing in different types of assets to minimize investment loss and reduce volatility.

BALANCED FUND - a fund investing in stocks, bonds and money market to provide the investor moderate risk and consistent returns; usually a mix of about half of the assets in money market and bonds and half of the assets in stocks.

BEAR MARKET - a falling or declining market.

BOND - a debt instrument of a corporation or government entity that promises to you a specified amount of interest for a specific time period, with the principal amount to be repaid at the bond's maturity.

BULL MARKET - a rising market.

CERTIFICATE OF DEPOSIT (CD) - evidence of money deposited with a financial institution for a specific term and rate of interest; very low risk when the institution is federally insured.

COMMON STOCK - ownership interest and voting rights in the issuing corporation.

COMPOUND INTEREST - interest earned on the original principal investment as well as the accrued earnings of that investment.

CONSUMER PRICE INDEX (CPI) - the average prices of specific goods and services in major cities across the U.S. compared to a the same data in a specific base year; published by the U.S. Department of Labor; also considered a measure of inflation.

CORPORATE BONDS - debt instruments of Government entities; ie: US Treasuries, agencies, municipalities.

DIVERSIFICATION - the act of investing in various types of assets to spread risk against adverse market conditions.

DOLLAR-COST AVERAGING - the practice of investing money in the same assets over a long period of time without regard for the price per share; purchasing some shares at a higher cost and some at a lower cost giving a lower average cost per share over time.

DIVIDEND - payments by a corporation to its shareholders based on a declared rate times the number of shares held.

DOMESTIC STOCKS - investments of companies in the United States.

EXPENSE RATIO - refers to the percentage of a mutual fund's assets that were used to run the mutual fund; ie: management and advisory fees.

GIC - Guaranteed Investment Contract (or certificate) - often issued and used in retirement plans, relatively low risk, fixed rate of return per certificate or contract.

GROWTH STOCK - a stock of a company that is generally growing faster than the economy or the norm in the market; tend to be higher risk.

HIGH YEILD BONDS - bonds purchased for speculative purposes usually rated BB or lower. Also known as junk bonds. They have a higher risk.

INCOME STOCK - a stock that pays shareholders a relatively high portion of earnings as dividends; offers lower risk and higher yields.

INDEX FUND/STOCK - a fund that the investment mix mimics the S&P 500 (Standard & Poor's 500) or another stock index; risk is moderate to high.

INFLATION RISK - the measure of the increase in the cost of living from one year to the next as published by the U.S. Department of Labor in the CPI.

INTERNATIONAL STOCKS - investments in the stocks of companies outside of the United States.

LARGE CAP - companies with larger capitalization usually; between $10 billion and $200 billion is considered a large cap company.

LIQUIDITY RISK - the ability or inability to sell and collect the proceeds for a specific asset.

MARKET RISK - the potential loss of capital due to fluctuations in the price of the securities.

MID CAP - companies with middle range capitalization; usually between $2 billion and $10 billion are considered a mid cap company.

MONEY MARKET - short-term debt securities (maturities less than one year) that are safe and highly liquid.

NET ASSET VALUE - per share value of a mutual fund; computation found by subtracting total liabilities from total assets and dividing by the number of outstanding shares.

NO LOAD FUND - a mutual fund whose shares are sold without commissions or sales charges. Investors benefit because all of the money is working for the investor.

PRINCIPAL - original capital sum invested less interest or profits.

PROSPECTUS - the full disclosure of the pertinent printed material offering a security for sale.

RETURN - the profit that can be earned on an investment.

RISK - the chance that the value of an investment could decline in the marketplace due to various factors (market risk, inflation risk etc.).

S&P 500 - a broad measure of the stock market comprised of 500 stocks as compiled by Standard & Poor's Corporation.

SECURITIES - various assets such as stocks, bonds and money markets that allow holders to participate in earnings, distribution of property or other corporate assets.

SMALL CAP - companies with relatively small market capitalization; usually between $300 million and $2 billion is considered a small cap company.

STOCKS - ownership interest in a company; preferred or common stock also known as equities.

TOTAL RETURN - the unrealized appreciation (increase or gain) or depreciation (decrease or loss) of the asset's value during a certain period including the income of the asset generated during that period.

VALUE STOCK - stocks of companies that have been out of favor and are relatively cheap compared to the value of their assets.

YIELD - the interest or dividend paid and expressed as a percentage of the price of the security and may include capital appreciation.

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