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.

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. First Commonwealth Advisors is a trade name of the First Commonwealth Bank. Osaic Institutions and First Commonwealth Bank are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.