Term Glossary

TermDefinition
52 Week High  A security’s trading high point over the last 52
52 Week Low  A security’s trading low point over the last 52
Account FeeA fee that some funds separately impose on investors for account maintenance. For example, individuals with accounts below a specified dollar amount may have to pay an account fee.
Accounts – Opening A Brokerage AccountFor information on what to expect when opening a brokerage account, including what information you will need to provide, what decisions you will be asked to make, and what questions you should ask…
Accredited InvestorsUnder the federal securities laws, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The federal…
Accrued InterestInterest earned on a security but not yet paid to the investor.
Advance Fee FraudAdvance fee frauds ask investors to pay a fee up front – in advance of receiving any proceeds, money, stock, or warrants – in order for the deal to go through.  The advance payment may be described…
Affinity FraudAffinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote…
After-hours TradingAfter-hours trading, also known as extended-hours trading, refers to trading that occurs outside of regular trading hours. Regular trading hours for stocks traded on exchanges and certain other…
All-Or-None OrderAn All-Or-None (AON) order is an order to buy or sell a stock that must be executed in its entirety, or not executed at all.  AON orders that cannot be executed immediately remain active until they…
Alpha  The amount of return expected from an investment from its inherent value.
Alternative Minimum Tax (AMT)  Federal tax, revamped by the Tax Reform Act of 1986, aimed at ensuring that wealthy individuals, trusts, estates and corporations pay at least some tax.
Alternative Mutual Fund (Alt Fund)Alternative mutual funds (sometimes called alt funds or liquid alts) are publicly offered, SEC-registered mutual funds that hold non-traditional…
Alternative Trading Systems (ATSs)Alternative Trading Systems (ATSs) are SEC-regulated electronic trading systems that match orders for buyers and sellers of securities. An ATS is not a…
American Depositary Receipts (ADRs)The stocks of most foreign companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs). U.S. depositary banks issue these stocks. Each ADR represents one or more shares…
Annual MeetingOnce-a-year meetings where the chief executive officer reports on the year’s results to shareholders. At this meeting, shareholders vote to elect the board of directors and on other corporate…
Annual ReportThe annual report to shareholders is a document used by most public companies to disclose corporate information to their shareholders. It is usually a state-of-the-company report, including an…
Annual report  The yearly audited record of a corporation or a mutual fund’s condition and performance that is distributed to shareholders.
Annual Report (10K)A report filed to the SEC by public companies that includes the company’s history, audited financial statements, a discussion of products and services, a review of the organization and its…
Annual ReturnAn annual rate of return is the profit or loss on an investment over a one-year period. There are many ways of calculating the annual rate of return. If the rate of return is calculated on a…
Annualized  A procedure where figures covering a period of less than one year are extended to cover a 12
Annualized rate of return  The average annual return over a period of years, taking into account the effect of compounding. Annualized rate of return also can be called compound growth rate.
AnnuitiesAn annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments. In return…
Appreciation  The increase in value of a financial asset.
Arbitration and MediationArbitration, a form of alternative dispute resolution, is a technique for the resolution of disputes outside the court system.  In arbitration, the parties agree to have their dispute heard by one or…
AssetAny tangible or intangible item that has value in an exchange. A bank account, a home, or shares of stock are all examples of assets.
Asset AllocationAsset allocation involves dividing your investments among different categories, such as stocks, bonds, and cash.
Asset allocation  The process of dividing investments among cash, income and growth buckets to optimize the balance between risk and reward based on investment needs.
Asset class  Securities with similar features. The most common asset classes are stocks, bonds and cash equivalents.
Asset ClassesInvestments that have similar characteristics. The three main asset classes are stocks, bonds, and cash.
Average maturity  For a bond fund, the average of the stated maturity dates of the debt securities in the portfolio. Also called average weighted maturity. In general, the longer the average maturity, the greater the fund’s sensitivity to interest
Back-end LoadA sales charge, also known as a “deferred sales charge,” investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.
Balanced fund  Mutual funds that seek both growth and income in a portfolio with a mix of common stock, preferred stock or bonds. The companies selected typically are in different industries and different geographic regions.
Banking RegulatorsThe SEC routinely receives questions and complaints from investors about the investment products they have purchased. But not all investments are considered securities under the securities laws. For…
BankruptcyFiling for protection under the federal bankruptcy laws can help companies make plans to repay their debts.  A bankrupt company might use Chapter 11 of the Bankruptcy Code to reorganize its business…
Bankruptcy for a Public CompanyA company may decide to declare bankruptcy when it suffers from crippling debt.  Federal bankruptcy laws govern how the assets and business of a company will be used to clear its debts. There are…
Basis PointOne one-hundredth (.01) of a percentage point. For example, eight percent is equal to 800 basis points.
Bear MarketA time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period.
Bear market  A bear market is a prolonged period of falling stock prices, usually marked by a decline of 20% or more. A market in which prices decline sharply against a background of widespread pessimism, growing unemployment or business recession. The opposite of a bull market.
Benchmark  A standard, usually an unmanaged index, used for comparative purposes in assessing performance of a portfolio or mutual fund.
Beneficial OwnerA beneficial owner holds stocks indirectly, for example, through a bank or broker-dealer. Beneficial owners are sometimes said to be holding shares in “street name.”
Beta  A measurement of volatility where 1 is neutral; above 1 is more volatile; and less than 1 is less volatile.
Bid PriceThe term “bid” refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.  The term …
Bid Price/Ask PriceThe term “bid” refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.  The term …
Binary optionsA binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise…
Blank Check CompanyA blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified…
Blue chip  A high
Blue Sky LawsIn addition to the federal securities laws, every state has its own set of securities laws—commonly referred to as “Blue Sky Laws”—that are designed to protect investors against fraudulent sales…
Board of DirectorsA group of people elected by shareholders to oversee the management of a corporation.
Board of Trustees  A governing board elected or appointed to direct the policies of an institution.
Boiler Room SchemesBoiler room schemes are large-scale operations designed to lure in as many investors to an investment scam as possible, often using high-pressure sales tactics.   Boiler room scheme operators may…
Bond  A bond acts like a loan or an IOU that is issued by a corporation, municipality or the U.S. government. The issuer promises to repay the full amount of the loan on a specific date and pay a specified rate of return for the use of the money to the investor at specific time intervals.
Bond fund  A mutual fund that invests exclusively in bonds.
Bond Funds and Income FundsWhat is a bond fund? “Bond funds” and “income funds” are terms used to describe a type of investment company (…
Bond SwapThe investor sells one bond and uses the proceeds to buy another bond, often at the same price.…
BondsA bond is a debt security, similar to an IOU.  Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time. When you buy a bond, you are lending to…
Bonds, CorporateCorporate bonds are bonds issued by companies. Companies issue corporate bonds to raise money for a variety of purposes, such as…
Bonds, MunicipalMunicipal bonds (or “munis” for short) are debt securities issued by states, their political subdivisions (such as cities, towns, counties, and school districts), their agencies and instrumentalities…
Bonds, Selling Before MaturityInvestors who hold a bond to maturity (when it becomes due) get back the face value or “par value” of the bond. But investors who sell a bond before it matures may get a far different amount. For…
Bonus Credits for AnnuitiesIn an attempt to attract purchasers, some insurance companies offer variable annuity contracts with “bonus credits.” A bonus credit is the extra amount an insurance company agrees to add to the value…
Breakpoint  The level of dollar investment in a mutual fund at which an investor becomes eligible for a discounted sales fee. This level may be achieved through a single purchase or a series of smaller purchases.
Breakpoint DiscountsSome mutual funds that charge front-end sales loads will charge lower sales loads for larger investments. For…
BrokerAn individual who acts as an intermediary between a buyer and seller, usually charging a commission to execute trades. Brokers are required to seek the best execution of trades they make for…
Broker VoteFor certain routine matters to be voted upon at shareholder meetings, if you don’t vote by proxy or at the meeting in person, brokers may vote on your behalf at their discretion. These votes may also…
Brokerage Account – Closing Your Brokerage AccountGenerally, either you or your brokerage firm may close your brokerage account at any time.  The specific steps you will need to follow to close your account are usually found in the terms and…
Broker-Dealers: Record-Keeping RequirementsInvestors should always keep good records of their securities transactions, including copies of…
Broker-Dealers: Why They Ask for Personal InformationBrokers generally request personal information from their customers, including financial and tax identification information, to comply with U.S. government laws and rules, as well as rules imposed by…
Bull MarketA time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.
Bull market  Any market in which prices are advancing in an upward trend. In general, someone is bullish if they believe the value of a security or market will rise. The opposite of a bear market.
Business Development Companies (BDCs)BDCs are a type of closed-end investment fund. They are a way for retail investors to invest…
Buying LongPurchasing or owning shares of stock, with the expectation that the stock will rise in value.
Callable Bonds (or Redeemable Bonds)Bonds that can be redeemed or paid off by the issuer prior to the bond’s maturity date.
Callable CDsThese give the issuing bank the right to terminate – or “call” – the CD after a set period of time, but they do not give the CD holder the same right. If interest rates fall, the issuing bank might…
Callable or Redeemable BondsCallable or redeemable bonds are bonds that can be redeemed or paid off by the issuer prior to the bonds’ maturity date. When an…
Capital  The funds invested in a company on a long
Capital GainThe profit that comes when an investment is sold for more than the price the investor paid for it.
Capital gain  The difference between a security’s purchase price and its selling price, when the difference is positive.
Capital gains exdate 
Capital gains long term  The difference between an asset’s purchase price and selling price (when the difference is positive) that was earned in more than one year.
Capital gains reinvest NAV  The difference between an asset’s purchase price and selling price (when the difference is positive) that was automatically in vested in more shares of the security or mutual fund invested at the security’s net asset value.
Capital gains short term  The difference between an asset’s purchase price and selling price (when the difference is positive) that was earned in under one year.
Capital loss  The amount by which the proceeds from a sale of a security are less than its purchase price.
Capitalization  The market value of a company, calculated by multiplying the number of shares outstanding by the price per share.
CashMoney that can be used to pay for goods or services.
Cash AccountA cash account is a type of brokerage account in which the investor must pay the full amount for securities purchased.  An investor using a cash account is not allowed to borrow funds from his or her…
Cash equivalent  A short
CD Call PeriodDon’t assume that a “federally insured one-year non-callable” CD matures in one year. It doesn’t. These words mean the bank cannot redeem the CD during the first year. A “one-year non-callable” CD…
Central Registration Depository (CRD)The Financial Industry Regulatory Authority (FINRA) administers the CRD program, which  facilitates the licensing and registration of U.S. securities industry firms and professionals. The CRD…
Certificate of DepositA certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years.  In exchange, the issuing bank or credit…
ChurningA broker typically earns a portion of the commissions or other fees on each purchase or sale of securities that the brokerage firm makes for an investor…
Class ActionsA federal securities class action is a court action filed on behalf of a group of shareholders under Rule 23 of the Federal Rules of Civil…
ClassesDifferent types of shares issued by a single fund, often referred to as Class A shares, Class B shares, and so on. Each class of a fund holds identical investments and shares the same investment…
Clean SharesA class of fund shares without any front-end load,…
Closed-end FundsA closed-end fund, legally known as a closed-end investment company, is one of three basic types of investment companies…
Closing Price“Closing price” generally refers to the last price at which a stock trades during a regular trading session. For many U.S. markets, regular trading sessions run from 9:30 a.m. to 4:00 p.m. Eastern…
Comment LettersFrom time to time, the SEC invites comments from the public onProposed Rules, Concept Releases…
CommissionsYou will likely pay a commission when you buy or sell a stock through a financial professional.  The commission compensates the financial professional and his or her firm when it is acting as agent…
Committee on Uniform Securities Identification Procedures (CUSIP)The Committee on Uniform Securities Identification Procedures (CUSIP) number identifies most securities, including U.S. government and municipal bonds. CUSIP numbers are unique nine-character…
Commodity Futures Trading Commission (CFTC)The Commodity Exchange Act requires certain firms and individuals to be registered with the CFTC.  Registration and examination of firms and individuals is conducted on behalf of the CFTC by the…
Common stock  Securities that represent ownership in a corporation; must be issued by a corporation.
ComplaintsThe SEC’s Office of Investor Education and Advocacy (OIEA) receives many types of complaints from individual investors, including complaints against brokers, brokerage firms, investment advisers,…
Compound InterestInterest paid on principal and on accumulated interest.
Consolidated TapeThe “consolidated tape” is a high-speed, electronic system that reports the latest price and volume data on sales of exchange-listed stocks. The data reflected on the consolidated tape are generated…
Contact the SECThe SEC’s Office of Investor Education and Advocacy provides a variety of services and tools to address the problems and questions you may face as an investor.  We cannot tell you what investments to…
Contingent deferred sales charge (CDSC)  A back
Contingent Deferred Sales LoadA type of back-end load, the amount of which depends on the length of time the investor holds his or her shares. For example, a contingent deferred sales load might be 5% if an investor holds his…
Conversation StartersWe always recommend confirming whether a financial professional is registered using the free search tool at Investor.gov. After confirming that a financial…
ConversionA feature some funds offer that allows investors to automatically switch from one fund class to another, typically one with lower annual expenses, after a set period of time. The fund’s prospectus…
Convertible SecuritiesA “convertible security” is a security—usually a bond or a preferred stock—that can be converted into a different security—typically shares of the company’s common stock. In most cases, the holder of…
Corporate bond  A long
Corporate GovernanceA framework which may include rules and regulations, corporate charter and bylaws, formal policies, as well as customs and other processes, that determines the leadership, organization, and…
Corporate ReportsCorporate reports can provide important information for investors by, for example, telling you whether a company is making money or losing money and why. You’ll find this information in the company’s…
Country breakdown  Breakdown of securities in a portfolio by country.
CouponA feature of a bond that denotes the amount of interest due and the date that the payment will be made.
Coupon PaymentThe dollar amount of interest paid to an investor. The amount is calculated by multiplying the interest of the bond by its face value.
Coupon RateThe interest rate on a bond. It is expressed as a semi-annual rate.
Creation UnitLarge blocks of shares in an ETF, typically 50,000 shares or more.
Credit Rating AgenciesProvide their opinion on the creditworthiness of a corporate or government borrower by issuing a grade, or credit rating, on bonds issued by that borrower.
Cumulative VotingCumulative voting is a type of voting system that helps strengthen the ability of minority shareholders to elect a director. This method allows shareholders to cast all of their votes for a single…
Current YieldThe ratio of the interest rate payable on a bond to the actual market price of the bond, stated as a percentage. For example, a bond with a current market price of $1,000 that pays $80 per year…
CUSIP NumberCUSIP stands for Committee on Uniform Securities Identification Procedures.  A CUSIP number identifies most financial instruments, including: stocks of all registered U.S. and Canadian companies,…
Custodian  A bank that holds a mutual fund’s assets, settles all portfolio trades and collects most of the valuation data required to calculate a fund’s net asset value (NAV).
Cutoff time 
Daily dividend factor (date)  Daily dividend distributed by a money market mutual fund.
Data TaggingData tagging, in formats like XBRL or “eXtensible Business Reporting Language,” is gaining popularity as a way to enhance financial reporting. By using computer codes to “tag” different kinds of…
Day OrderUnless an investor specifies a time frame for the expiration of an order, orders to buy and sell a stock are “Day” orders, meaning they are good only during that trading day.  Day orders that do not…
Day TradeFINRA rules define a “day trade” as the purchase and sale, or the sale and purchase, of the same security on the same day in a margin account.  This definition encompasses any security, including…
Day TradingDay traders rapidly buy, sell and short-sell stocks throughout the day in the hope that the stocks continue climbing or falling in value for the seconds or minutes they hold the shares, allowing…
DebenturesAn unsecured bond backed solely by the general credit of a company.
DefaultA failure by an issuer to pay principal or interest when due, or to fulfill other obligations, such as reporting requirements.
Default  Failure of a debtor to make timely payments of interest and principal as they come due or to meet some other provision of a bond indenture.
Deferred AnnuityWith a deferred annuity, you make payments to an insurance company, which will be free from taxes until you reach a particular age or a date specified in your contact.
Deferred Sales ChargeA sales charge, also known as a “Back-end Load,” investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.
Defined Benefit PlanDefined benefit plans also are known as pension plans. Employers sponsor defined benefit plans and promise the plan’s investments will provide you with a specified monthly benefit at retirement.…
Defined Contribution PlanA retirement savings plan, such as a 401(k) plan, that does not promise a specific payment upon retirement. In these plans, the employee or the employer (or both) contribute to the employee’s…
DerivativesFinancial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value…
Direct Investment Plans: Buying Stock Directly from the CompanyMany companies allow you to buy or sell shares directly through a direct stock plan (DSP).  You can also have the cash dividends you receive from the company automatically reinvested into more shares…
Disaster-related Investment ScamsNatural disasters such as wildfires, floods and hurricanes often give rise to investment scams.  These scams can take many forms, including promoters touting companies purportedly involved in cleanup…
DisclosureInformation about a company’s financial condition and business that it makes public. Investors can use this information to make informed investment decisions about the company’s securities. 
DiscountA bond sold before it matures might not sell at full par value. If it sells below par, it is selling at discount.
Discount NoteShort-term obligations issued at a discount from face value. Discount notes have no periodic interest payments; the investor receives the note’s face value at maturity. For example, a one-year, $1,…
Distribution [and/or Service] (12b-1) Fees  So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing…
Distribution FeesFees paid out of fund assets to cover marketing and selling fund shares. These fees may cover advertising costs, compensating brokers and others who sell fund shares, payments for printing and…
Distribution schedule  A tentative distribution schedule of a mutual fund’s dividends and capital gains.
DiversificationDiversification is a strategy that can be neatly summed up as “Don’t put all your eggs in one basket.” The strategy involves spreading your money among various investments in the hope that if one…
Diversification  The process of owning different investments that tend to perform well at different times in order to reduce the effects of volatility in a portfolio, and also increase the potential for increasing returns.
DividendA portion of a company’s profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule although they can issue them at any time. Unscheduled dividend payments…
Dividend  A dividend is a portion of a company’s profit paid to common and preferred shareholders. Dividends provide an incentive to own stock in stable companies even if they are not experiencing much growth. Companies are not required to pay dividends.
Dividend paid  Amount paid to the shareholder of record a security or mutual fund.
Dividend reinvest NAV  Dividends paid to the shareholder of record that are automatically invested in more shares of the security or mutual fund that are purchased at the security’s net asset value.
Dividend yield  Annual percentage of return earned by a mutual fund. The yield is determined by dividing the amount of the annual dividends per share by the current net asset value or public offering price.
Dollar Cost AveragingDollar-cost averaging means investing your money in equal portions, at regular intervals, regardless of the ups and downs in the market. This investment strategy can help you manage risk by following…
Dollar cost averaging  Investing the same amount of money at regular intervals over an extended period of time, regardless of the share price. By investing a fixed amount, you purchase more shares when prices are low, and fewer shares when prices are high. This may reduce your overall average cost of investing.
Dow Jones Industrial Average (Dow)  The most commonly used indicator of stock market performance, based on prices of 30 actively traded blue chip stocks, primarily major industrial companies. The Average is the sum of the current market price of 30 major industrial companies’ stocks divided by a number that has been adjusted to take into account stocks splits and changes in stock composition.
DTC Chills and FreezesShould problems arise with a company or its securities on deposit at The Depository Trust Company (DTC), DTC may impose a “chill” or a “freeze” on all the company’s securities. A “chill” is a…
Early WithdrawalIf a CD is redeemed before it matures, you may have to pay a penalty or forgo a portion of the interest.
Earnings Per ShareA public company’s net profit divided by the number of its common shares.
EDGARThe SEC’s EDGAR database provides free public access to corporate information, allowing you to quickly research a company…
Education Savings PlanA type of 529 plan that lets an account owner open an investment account to save for the account beneficiary’s qualified higher education expenses or tuition for elementary or secondary public,…
Employee Retirement Income Security Act (ERISA)The Employee Retirement Income Security Act of 1974, which is administered by the U.S. Department of Labor. ERISA does not require employers to offer a pension plan. But it does require employers…
Employee Stock Option PlansAn employee stock ownership plan (ESOP) is a retirement plan in which an employer contributes its stock to the plan for the benefit of the company’s employees.  This type of plan should not be…
Employee Stock Ownership Plans ESOPsAn employee stock ownership plan (ESOP) is a retirement plan in which an employer contributes its stock to the plan for the benefit of the company’s employees.  This type of plan should not be…
Enrollment FeeFees that direct-sold college savings plans may charge to join in the program.
EPS  The portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.
Equities  Shares issued by a company which represent ownership in it. Ownership of property, usually in the form of common stocks, as distinguished from fixed
Equity fund  A mutual fund/collective fund in which the money is invested primarily in common and/or preferred stock. Stock funds may vary, depending on the fund’s investment objective.
Escheatment by Financial InstitutionsAll states require financial institutions, including brokerage firms and transfer agents, to report when personal property has been abandoned or unclaimed after a period of time specified by state…
ExDividend 
ExDividend date 
Exchange FeeA fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group.
Exchange privilege  The ability to transfer money from one mutual fund to another within the same fund family.
Exchange-Traded Fund (ETF)Exchange-traded funds (ETFs) are SEC-registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets. In return, investors…
Ex-Dividend DatesTo determine whether you should get a dividend, you need to look at two important dates. They are the “record date” or “date of record” and the “ex-dividend date” or “ex-date.” When a company…
Ex-Dividend Dates: When Are You Entitled to Stock and Cash DividendsTo determine whether you should get a dividend, you need to look at two important dates. They are the “record date” or “date of record” and the “ex-dividend date” or “ex-date.” When a company…
Executing an OrderWhen you place an order to buy or sell stock, you might not think about where or how your broker will execute the trade.  But where and how your order is executed can impact the overall cost of the…
Executive CompensationThe federal securities laws require clear, concise and understandable disclosure about compensation paid to CEOs, CFOs and certain other high-ranking executive officers of public companies. Several…
Expense RatioThe fund’s total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets.
Expense ratio  The ratio between a mutual fund’s operating expenses for the year and the average value of its net assets.
Expense ratio (date)  Amount, expressed as a percentage of total investment that shareholders pay annually for mutual fund operating expenses and management fees.
Fair Disclosure, Regulation FDRegulation FD addresses the selective disclosure of information by publicly traded companies and other issuers. Regulation FD provides that…
Federal Funds Rate (Fed Funds Rate)  The interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements. The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate, which are periodically changed by banks and by the Federal Reserve Board.
Federal Reserve Board (The Fed)  The governing board of the Federal Reserve System, it regulates the nation’s money supply by setting the discount rate, tightening or easing the availability of credit in the economy.
Filing and Registration FeesThe SEC collects fees under various provisions of the securities laws, including the following: Section 6(b) of the Securities Act of 1933 (for registrations of securities); Section 13(e) of the…
Fill-Or-Kill OrderA Fill-Or-Kill order is an order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be cancelled (i.e., no partial execution of the order is…
Financial Accounting Standards Board (FASB)The Financial Accounting Standards Board (FASB) is the accounting standard setter for purposes of the Federal Securities Laws. See GAAP.
Financial Industry Regulatory Authority (FINRA)The Financial Industry Regulatory Authority, a self-regulatory organization for the brokerage industry.
Financial PlannersA financial planner typically prepares financial plans for his or her clients. The kinds of services financial planners offer can vary widely. Some financial planners assess every aspect of your…
Financial ProductExamples of financial products include but are not limited to the following: stocks, bonds, derivatives, and currencies.
Financial Professionals – Background ChecksYou should check out the registration status and background of any financial professional before becoming a client, even if a close friend or family member recommends a financial professional. An…
Fixed AnnuityAn insurance product that promises a minimum rate of interest while your account is growing. The insurance company also guarantees that the periodic payment will be for a set amount for a fixed…
Fixed income fund  A fund or portfolio where bonds are primarily purchased as investments. There is no fixed maturity date and no repayment guarantee.
Fixed income security  A security that pays a set rate of interest on a regular basis.
Fixed-rate BondA long-term bond with a set interest rate.
Floating-rate Bond (or Variable or Adjustable rate Bond)A bond whose interest rate is adjusted periodically according to a predetermined formula; it is usually linked to an interest rate index such as LIBOR.
FloorThe lower limit for the interest rate on a floating-rate bond.
Foreign Corrupt Practices Act (FCPA)The Foreign Corrupt Practices Act (“FCPA”) generally prohibits the bribing of foreign officials. The FCPA also requires publicly traded companies to maintain accurate books and records and to have a…
Foreign currency exchange (forex)A foreign currency exchange rate is a price that represents how much it costs to buy the currency of one country using the currency of another country. Currency traders buy and sell currencies…
Foreign Exchange MarketsMarkets that trade currencies.
Foreign RegulatorsThe SEC is the primary overseer of the U.S. securities markets while foreign regulators oversee securities markets in other jurisdictions. The SEC and most foreign securities regulators are members…
Form 1099, Investment Income (Interest and Dividends)The federal tax laws require brokerage firms, mutual funds, and other entities to report on Form 1099 all investment income, usually interest or dividends, they have paid to investors during the…
Form 10-KThe federal securities laws require publicly reporting companies to disclose information on an ongoing basis. For example, domestic companies must submit annual reports on Form 10-K, quarterly…
Form 10-QThe federal securities laws require publicly reporting companies to disclose information on an ongoing basis. For example, domestic issuers must submit annual reports on …
Form 13F -—Reports Filed by Institutional Investment ManagersAn institutional investment manager that uses the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercises investment discretion over $100…
Form 144This Form must be filed with the SEC by an affiliate of the issuer as a notice of the proposed sale of securities in reliance on…
Form 8-KIn addition to filing annual reports on Form 10-K and quarterly reports on …
Form ADVForm ADV is the uniform form used by investment advisers to register with both the SEC and state securities authorities. The form consists of two parts, both of which are available to the public on…
Form CRSForm CRS is a client or customer relationship summary. Advisers and brokers are required to deliver a relationship summary to you beginning in summer 2020. The relationship summary contains important…
Form DCompanies may use an exemption under Regulation D to offer and sell securities without having to register the…
Forms 3, 4 and 5The federal securities laws require certain individuals (such as officers, directors, and those that hold more than 10% of any class of a company’s securities, together we’ll call, “insiders”) to…
FraudsterA person whose goal is to con people out of their money.
Free look PeriodVariable annuity contracts typically have a “free look” period of ten or more days. During this period, you are free to terminate your contract without paying any surrender charges and you will…
FreeridingIn a cash account, an investor must pay for the purchase of a security before selling it.  If an investor buys and sells a…
Freeze, Brokerage AccountIn a cash account, an investor must pay for the purchase of a security before selling it.  If an investor buys and sells a…
Front-end LoadAn upfront sales charge investors pay when they buy fund shares. It generally is used by the fund to compensate brokers. A front-end load is deducted from the purchase and reduces the amount…
Fund  A pool of money from a group of investors in order to buy securities. The two major ways funds may be offered are (1) by companies in the securities business (these funds are called mutual funds); and (2) by bank trust departments (these are called collective funds).
Future ValueThe value of an asset at a specified date in the future.
Futures contractAn agreement to buy or sell a specific quantity of a commodity or financial instrument at a specified price on a particular date in the future.
Futures MarketMarkets that trade futures contracts for commodities such as gold, oil or wheat, as well as financial futures.
General Obligation BondA municipal bond not secured by any assets; instead it is backed by the issuer’s power to tax residents to pay bondholders.
Generally Accepted Accounting Principles (GAAP)GAAP (Generally Accepted Accounting Principles) are accounting standards, conventions and rules. It is what companies use to measure their financial results. These results include net income as…
Going PrivateA publicly held company generally means a company that has a class of securities that is registered with the SEC because those securities are widely held or traded on a national securities exchange.…
Good-Til-Cancelled OrderA Good-Til-Cancelled (GTC) order is an order to buy or sell a stock that lasts until the order is completed or canceled. Brokerage firms typically limit the length of time an investor can leave a GTC…
Growth investing  Investment strategy that focuses on stocks of companies and stock funds where earnings are growing rapidly and are expected to continue growing.
Hedge FundsLike mutual funds, hedge funds pool investors’ money and invest the money in an effort to make a positive return.  Hedge funds typically have more flexible investment strategies than mutual funds.  …
High-yield Bond (or Junk Bond)Bonds that are believed to have a higher risk of default and receive low ratings by credit rating agencies, namely bonds rated Ba or below (by Moody’s) or BB or below (by S&P and Fitch). These…
High-Yield Investment ProgramsHigh-Yield Investment Programs (HYIP) are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible…
Holding Your SecuritiesSecurities may be held in three different ways. One way is to hold them in certificate form, where the securities are registered in your name on the books of the company, and you receive a printed…
Holiday Schedules and Trading Hours for the National Securities ExchangesYou can find the holiday schedules and trading hours for the national securities exchanges on each of their websites. You can find links to each exchange’s website here…
Householding RulesInvestors often invest in funds through a variety of individual and family accounts and, as a result, sometimes receive multiple copies of the same documents from those funds.  To avoid duplication,…
Immediate AnnuityThis annuity has no accumulation phase. Instead, you start receiving annuity payments right after you purchase the annuity.
Immediate-Or-Cancel OrderAn Immediate-Or-Cancel (IOC) order is an order to buy or sell a stock that must be executed immediately. Any portion of an IOC order that cannot be filled immediately will be cancelled. …
ImpersonatorsImpersonators may falsely claim to be affiliated with the SEC (or another federal government agency) in an attempt to steal your personal information or your money. Federal government agencies,…
Index  An investment index tracks the performance of many investments as a way of measuring the overall performance of a particular investment type or category. The S&P 500 is widely considered the benchmark for large
Index FundAn “index fund” describes a type of mutual fund or unit investment trust (UIT) whose investment…
Indexed AnnuitiesAn indexed annuity is a type of annuity contract between you and an insurance company. It generally…
Individual Retirement Account (IRA)Individual Retirement Accounts (IRAs) provide tax advantages for retirement savings.  You can contribute each year up to the maximum amount allowed by the Internal Revenue Service.  There are several…
Inflation  A rise in the prices of goods and services, often equated with loss of purchasing power.
Information About Some Companies Not Available From the SECInvestors are sometimes surprised to learn the SEC does not have information about all companies that offer and sell securities. When a company conducts a registered offering or an exempt offering…
Information Available to Investment Company ShareholdersBefore you invest in any registered investment company you should read its prospectus and any…
Initial Public Offering (IPO)An initial public offering, or IPO, generally refers to when a company first sells its shares to the public. For more information about IPOs generally, see our …
Initial Public Offerings, Why Individuals Have Difficulty Getting SharesThe underwriters and the company that issues the shares control the IPO process. They have wide latitude in allocating IPO shares. The SEC does not regulate the business decision of how IPO shares…
Interestrate risk 
Interest rate  The fixed amount of money that an issuer agrees to pay the bondholders. It is most often a percentage of the face value of the bond. Interest rates constitute one of the self
Investment advisor  An organization employed by a mutual fund to give professional advice on the fund’s investments and asset management practices.
Investment company  A corporation, trust or partnership that invests pooled shareholder dollars in securities appropriate to the organization’s objective. Mutual funds, closed
Investment grade bonds  A bond generally considered suitable for purchase by prudent investors.
Investment objective  The goal of a mutual fund and its shareholders, e.g. growth, growth and income, income and tax
Letter of intent  A letter of intent may also be issued by a mutual fund shareholder to indicate that he/she would like to invest certain amounts of money at certain specified times. In exchange for signing a letter of intent, the shareholder would often qualify for reduced sales charges. A letter of intent is not a contract and cannot be enforced, it is just a document stating serious intent to carry out certain business activities.
Lipper ratings  The Lipper Mutual Fund Industry Average is the performance level of all mutual funds, as reported by Lipper Analytical Services of New York. The performance of all mutual funds is ranked quarterly and annually, by type of fund such as aggressive growth fund or income fund. Mutual fund managers try to beat the industry average as well as the other funds in their category.
Liquidity  The ability to have ready access to invested money. Mutual funds are liquid because their shares can be redeemed for current value (which may be more or less than the original cost) on any business day.
Longterm investment strategy 
Management fee  The amount paid by a mutual fund to the investment advisor for its services.
Market price  The current price of an asset.
Market risk  The possibility that an investment will not achieve its target.
Market timing  A risky investment strategy that calls for buying and selling securities in anticipation of market conditions.
Maturity  The date specified in a note or bond on which the debt is due and payable.
Maturity distribution  The breakdown of a portfolio’s assets based on the time frame when the investments will mature.
Median Market Cap  The midpoint of market capitalization (market price multiplied by the number of shares outstanding) of the stocks in a portfolio, where half the stocks have higher market capitalization and half have lower.
Money market mutual fund  A short
Morningstar ratings  System for rating open
Mutual fund  Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities.
NASDAQ  National Association of Securities Dealers Automated Quotations system, which is owned and operated by the National Association of Securities Dealers. NASDAQ is a computerized system that provides brokers and dealers with price quotations for securities traded over
Net Asset Value per share (NAV)  The current dollar value of a single mutual fund share; also known as share price. The fund’s NAV is calculated daily by taking the fund’s total assets, subtracting the fund’s liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The process of calculating the NAV is called pricing.
Number of Holdings  Total number of individual securities in a fund or portfolio.
P/B Ratio  The price per share of a stock divided by its book value (net worth) per share. For a stock portfolio, the ratio is the weighted average price
P/E Ratio (1 yr forecast)  Price of a stock divided by its projected earnings for the coming year.
P/E Ratio (1 yr trailing) (long position)  Price of a stock divided by its earnings from the latest year.
Par value  Par value is the amount originally paid for a bond and the amount that will be repaid at maturity. Bonds are typically sold in multiples of $1,000.
Portfolio  A collection of investments owned by one organization or individual, and managed as a collective whole with specific investment goals in mind.
Portfolio allocation  Amount of assets in a portfolio specifically designated for a certain type of investment.
Portfolio holdings  Investments included in a portfolio.
Portfolio manager  The person or entity responsible for making investment decisions of the portfolio to meet the specific investment objective or goal of the portfolio.
Preferred stock  A class of stock with a fixed dividend that has preference over a company’s common stock in the payment of dividends and the liquidation of assets. There are several kinds of preferred stock, among them adjustable
Premium  The amount by which a bond or stock sells above its par value.
Prospectus  Formal written offer to sell securities that sets forth the plan for proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. Prospectuses are also issued by mutual funds, containing information required by the SEC, such as history, background of managers, fund objectives and policies, financial statement, risks, services and fees.
Proxy  A shareholder vote on matters that require shareholders’ approval.
Public offering price (POP)  A mutual fund share’s purchase price, including sales charges.
Quality distribution  The breakdown of a portfolio’s assets based on quality rating of the investments.
R2  The percentage of a fund’s movements that result from movements in the index ranging from 0 to 100. A fund with an R2 of 100 means that 100 percent of the fund’s movement can completely be explained by movements in the fund’s external index benchmark.
Ratings  Evaluations of the credit quality of bonds usually made by independent rating services. Ratings generally measure the probability of timely repayment of principal and interest on debt securities.
Recession  A downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country’s gross domestic product.
Redemption  Sale of mutual fund shares by a shareholder.
Reinvestment option  Refers to an arrangement under which a mutual fund will apply dividends or capital gains distributions for its shareholders toward the purchase of additional shares.
Relative risk and potential return  The amount of potential return from an investment as related to the amount of risk you are willing to accept.
Rights of accumulation  The right to buy over a period of time. For example, this might be done by an institutional investor to avoid making a single substantial purchase that might drive up the market price, or by a retail investor who wants to reduce risk by dollar cost averaging.
Risk tolerance  The degree to which you can tolerate volatility in your investment values.
Sales charge  An amount charged for the sale of some fund shares, usually those sold by brokers or other sales professionals. By regulation, a mutual fund sales charge may not exceed 8.5 percent of an investment purchase. The charge may vary depending on the amount invested and the fund chosen. A sales charge or load is reflected in the asked or offering price. See loads.
Sector  A group of similar securities, such as equities in a specific industry.
Sector breakdown  Breakdown of securities in a portfolio by industry categories.
Securities  Another name for investments such as stocks or bonds. The name ‘securities’ comes from the documents that certify an investor’s ownership of particular stocks or bonds.
Securities and Exchange Commission (SEC)  The federal agency created by the Securities and Exchange Act of 1934 that administers the laws governing the securities industry, including the registration and distribution of mutual fund shares.
Share  A unit of ownership in an investment, such as a share of a stock or a mutual fund.
Share class net assets (date)  Fund assets included in a specific share class.
Share classes  Classes represent ownership in the same fund but charge different fees. This can enable shareholders to choose the type of fee structure that best suits their particular needs.
Time horizon  The amount of time that you expect to stay invested in an asset or security.
Top 10 holdings  Ten largest holdings in a portfolio based on asset value.
Top 10 long and short positions  The top 10 holdings ranked by market value in each position category (long and short). A long position is one in which an investor buys shares of stock and as an equity holder will profit if the price of the stock rises. With a short position an investor will sell shares of stock that they do not own but have borrowed. The investor in a short position will profit if the price of the stock falls.
Top five contributors  Top five industries in a portfolio based on amount of invested assets.
Top five detractors  Five assets in a portfolio that generated largest negative returns (losses).
Top five holdings  Top five securities in a portfolio based on amount of invested assets.
Top five industries  Top five industries in a portfolio based on amount of invested assets.
Total return  Accounts for all of the dividends and interest earned before deductions for fees and expenses, in addition to any changes in the value of the principal, including share price, assuming the funds’ dividends and capital gains are reinvested. Often, this percentage is presented in a specified period of time (one, five, ten years and/or life of fund). Also, a method of calculating an investment’s return that takes share price changes and dividends into account.
Tracking Error  The active risk of the portfolio. It determines the annualized standard deviation of the excess returns between the portfolio and the benchmark.
Transfer agent  An agent, usually a commercial bank, appointed to monitor records of stocks, bonds and shareholders. A transfer agent keeps a record of the name of each registered shareholder, his or her address, the number of shares owned, and sees that certificates presented for the transfer are properly canceled and new certificates are issued in the name of the new owner.
Treasury bill  Negotiable short
Treasury bond  Negotiable long
Treasury note  Negotiable medium
Treasury security  Securities issued by the U.S. Treasury Department and backed by the U.S. government.
Trustee  1. An organization or individual who has responsibility for one or more accounts. 2. An individual who, as part of a fund’s board of trustees, has ultimate responsibility for a fund’s activities.
Turnover Ratio  Percentage of holdings in a mutual fund that are sold in a specified period.
Valuation  An estimate of the value or worth of a company; the price investors assign to an individual stock.
Valuestyle funds 
Value investing  A strategy whereby investors purchase equity securities that they believe are selling below estimated true value. The investor can profit by buying these securities then selling them once they appreciate to their real value.
Value stock  Typically an overlooked or underpriced company that is growing at slower rates.
Volatility  The amount and frequency with which an investment fluctuates in value.
Weighted average maturity  A Fund’s WAM calculates an average time to maturity of all the securities held in the portfolio, weighted by each security’s percentage of net assets. The calculation takes into account the final maturity for a fixed income security and the interest rate reset date for floating rate securities held in the portfolio. This is a way to measure a fund’s sensitivity to potential interest rate changes.
Wtd. Avg. Market Cap  Most indexes are constructed by weighting the market capitalization of each stock on the index. In such an index, larger companies account for a greater portion of the index. An example is the S&P 500 Index.