Glossary

Amortization
A reduction in value of an asset, or a reduction of a liability over a period of years. A fully-amortized loan is one that will be completely paid off at the end or the agreed-upon period.

Assets
Everything of value that a company owns or has in receivables; such as cash, buildings, machinery and other fixed assets, as well as patents, goodwill and other intangible assets. May be used to cover liabilities.

Automatic Withdrawal
A mutual fund privilege by which the custodial bank disburses to the plan holder a specified sum of money each month or quarter. Over time, the principal may be liquidated.

Average
A stock market indicator based on the sum of market values for a selected sample of stocks divided by either the number of issues or by a divisor that takes into consideration stock splits, dividends, or other changes in capitalization, such as Dow Jones.

Balanced Fund
A management investment company whose policy is to invest in bonds, preferred stock and common stock to minimize risks while earning reasonable current income.

Basis Point
A measurement used to denote changes in bond prices. One one-hundredth of a percentage point. For example, if a Treasury Bill yielding 8.19% changes in price so that it now yields 8.12%, it is said to have declined 7 basis points.

Bear Market
A declining securities market in terms of price.

Blue Chip Stock
Stock of a highly successful, strong and stable corporation that has a consistent history of earnings and dividend payments.

Bond
A legal document representing debt in a corporation, state or municipality issued to raise capital. The issuer pays interest on a bond at specified dates and eventually redeems it at maturity, paying principal plus interest due.

Breakpoint
The dollar level of investment necessary to qualify a purchaser for a discounted sales charge on a quantity purchase of open-end management company shares. The breakpoints are in the prospectus as a percentage figure (% of the offering price).

Broker
An agent, often a member of a stock exchange firm or an exchange member himself, who handles the public's orders to buy and sell securities for a commission.

Bullish
A general increase or anticipated increase in securities prices.

Capital Gain (or Loss)
Profit (or loss) from the sale of a capital asset. Capital gains may be short-term (1 year or less) or long-term (more than 1 year). Capital gains are taxable at the same rate as ordinary income.

Common Stock
A share of equity ownership in a corporation. Owners of this type of stock exercise control over corporate affairs through voting rights and enjoy capital appreciation. Their interest in the assets, in the event of liquidation, is junior to all others.

Coupon Bond
A bond with interest coupons attached. The coupons are clipped as they come due and are presented by the holders to their banks for payment (also known as bearer bonds).

Cumulative Preferred Stock
Preferred stock which allows the accrual of any omitted dividends as a claim against the company. The claim must be paid in full prior to any dividend payable that may be paid on the company's common stock.

Closed-End Fund
A fund that originally issues a fixed number of shares as a new issue with a prospectus. They trade in the open market on a supply/demand basis just as though it were a common stock. The shares are not redeemable, but are marketable.

Debenture Bond
A bond not secured by any specific asset of a corporation. It is backed by the "good faith and credit" of the issuing corporation.

Discount Bond
A bond that sells in the marketplace at a price below its face amount.

Diversified Fund
For a mutual fund to call itself "diversified" it must diversity at least 75% of its total assets as follows: no more than 5% of total assets may be in any one company and the fund may not own any more than 10% of any company.

Dollar Cost Averaging (DCA)
A long-term investment plan based on investing fixed dollar amounts at periodic intervals, regardless of security price fluctuation.

Dow Jones Average (DJIA)
A market average indicator composed (individually) of: 30 industrial; 20 transportation; and 15 public utility common stocks. This composite average includes these 65 stocks collectively.

Earned Income
For federal income tax purposes, personal service income from, salary, wages, commissions, etc.

Equity
Ownership interest in a company. Common and preferred stock ownership represents equity in the corporation.

ERISA
The Employee Retirement Income Security Act (1974) which regulates qualified retirement plans to protect the participants in the plan.

Face Value
The redemption value of a bond or preferred stock stated on the face of the certificate. It is also sometimes referred to as par value.

Front-End Load
A contractual plan in which a large portion (50% of the first year's payments) of the sales charge is fully paid by the purchaser the first year.

Growth Stock
Stock of a company which has shown a rapid growth in earnings. Stockholders in these types of companies do not usually receive dividends as the company uses any profit for expansion.

Income Bond
A type of bond which pays interest only when, as, and if earned (also called an adjustment bond). High risk.

Income Fund
A management investment company whose policy is to invest in securities (usually discount bonds and/or preferred stock) which have a higher-than-average yield.

Individual Retirement Account (IRA)
Used by any individual receiving employment compensation to set aside tax-deferred moneys toward retirement.

Investment Advisor
A person, company or institution registered with the SEC under the Investment Advisors Act of 1940 to manage the investment of third parties. Sometimes known as a management company which directs activities in an investment portfolio for a fund.

KEOGH Plan
A retirement plan for self-employed person. A tax deductible amount may be contributed each year by the employer/owner for himself and any qualified employees.

Liquidity
The ability of the market in a particular security to absorb a reasonable amount of trading at reasonable price change; The ability to convert an asset such as securities or real estate into cash.

Long-Term Capital Gain (Loss)
The result of a purchase, and subsequent sale more than 1 year later.

Money Market
Short-term debt instruments maturing in 1 year or less (i.e., commercial paper, bankers' acceptances, Treasury bills, certificates of deposit).

NASDAQ
National Association of Securities Dealers Automated Quotations. Provides the bids and offers entered by dealers in the OTC market who stand ready to buy or sell 100 share round lots from inventory.

NYSE
The largest of the national stock exchanges.

Open-End Mutual Fund
There is no limit to the number of shares that can be issued. Such funds are a continuous new issue requiring the purchaser to receive a prospectus and the shares must be paid in full (non-marginable).

Ordinary Income
Earned income including salaries, dividends, commissions, etc. 100% taxable.

Preferred Stock
An equity stock of a corporation which has a claim to dividends and assets (upon liquidation) before common stock, but after bondholders.

Rollover
(1) The reinvestment of moneys received from the maturity of a debt instrument into another debt instrument; (2) A term used to describe moving funds from one retirement plan to another.

Stock
A certificate evidencing equity ownership in a corporation. Stocks may yield dividends and can go up or down in value.

Tax Base
The total resources available for taxation.