Glossary of Terms

The information presented here is not intended as financial, investment, tax or legal advice and is provided for educational purposes only.

Active Management
An investment process that attempts to outperform the average or benchmark return in an asset class at a specific level of risk through the use of superior information and judgment in portfolio construction. Active management may be based on some combination of traditional security analysis and research, technical analysis, macroeconomic forecasts and application of various fundamental quantitative tools.
Active Manager
A portfolio manager who takes an active role in any aspect of the investment process, including asset allocation, style exposures, security selection, and risk management in an attempt to improve a portfolio's risk-adjusted return.
The headquarters address of the company as provided in the latest 10-Q or 10-K SEC forms or newswire announcement.
Adjustable Rate Mortgages (ARMS)
A mortgage agreement between a financial institution and a real estate buyer stipulating predetermined adjustments of the interest rate at specified periods. The payments are tied to some index outside the control of the lender. Rate adjustments are usually made at one, three or five-year intervals.
Adjustable-Rate Instrument
Any of a wide variety of fixed principal obligations whose periodic payout is set relative to a reference index rate (such as LIBOR) to create a longer-term fixed principal obligation with a floating –rate interim cost.
Adjusted Gross Income (AGI)
Income on which taxpayers compute their federal income taxes. Generally, this is the sum of wages, interest income, dividend income and capital gains/losses &mdash less unreimbursed business expenses and other allowable adjustments (such as IRA contributions, alimony payments, etc.).
Advance/Decline Line
A measure of the number of stocks advancing (rising in value) versus the number of stocks declining (losing value) over a particular period. The ratio of advancers to decliners illustrates the general direction of the market. If advancers outnumber decliners, it is considered "bullish"; if decliners outnumber advancers, it is considered "bearish".
(1) An organization employed by a mutual fund's board to give professional advice on the fund's investments and asset management practices. (2) An individual or organization that provides advice and information to investors.
Advisory Fee
The amount a mutual fund pays to its investment advisor for the investment management associated with overseeing the fund's portfolio. Also referred to as Management Fee.
After-Hours Last Trade Volume
The total number of shares of a stock exchanged in the last reported after-hours trade.
After-Hours Price
The price per share of the last reported after-hours trade.
After-Hours Trade
A stock trade that takes place after the regular trading session closes. See extended-hours trading.
After-Tax Contribution
Money deducted from an individual's paycheck and invested after taxes are withheld.
After-Tax Return
The return from an investment after all income taxes have been deducted. By comparing after-tax returns an investor can determine which investment makes the most sense based on his or her tax bracket.
The market for a security after an initial public offering. The after-market or secondary market may be over-the-counter or on an exchange.
Agency Debt
Obligations issued by an agency of the U.S. government and benefiting from government credit. In the U.S., debt of certain former agencies such as Fannie Mae and Freddie Max is still referred to as agency debt because it retains implied government support.
Agency Securities
Securities issued by agencies of the U. S. Government, such as the Government National Mortgage Association, Federal Home Loan Mortgage Corporation or Federal National Mortgage Association.
Agency Transaction
A transaction in which the executing brokerage firm acts as an agent and usually charges a commission for its services.
1. An individual or firm that buys or sells securities for others. 2. A securities salesperson that represents a broker-dealer when selling securities to the general public.
Aggressive Growth Fund
A mutual fund that seeks maximum long-term capital gains. Such funds often invest in stocks of small and mid-sized companies, though company size is not always a selection criteria.
Aggressive Investments
One end of the risk spectrum. Aggressive investments generally seek maximum capital gains. Aggressive growth funds may invest in shares of companies with histories of, and the potential for, rapid earnings and profit growth. Such funds seek only capital appreciation and typically produce no dividend income. Because such funds tend to be more volatile than the stock market as a whole, particularly over short periods, they may not suitable for investors who are risk-averse, who have short-term investment horizons or who need current income.
Aggressive Investments

One end of the risk spectrum. Aggressive investments generally seek maximum capital gains. Aggressive growth funds may invest in shares of companies with histories of, and the potential for, rapid earnings and profit growth. Such funds seek only capital appreciation and typically produce no dividend income. Because such funds tend to be more volatile than the stock market as a whole, particularly over short periods, they may not suitable for investors who are risk-averse, who have short-term investment horizons or who need current income.

Alpha (cash adjusted)
A risk-adjusted measure of excess return generated by a fund versus its benchmark index. Alpha subtracts the risk-free rate from the returns of both the fund and its benchmark. A positive alpha means a fund beat expectations while a negative alpha means a manager failed to match performance with risk.
Alternative Minimum Tax (AMT)
A minimum tax imposed on taxpayers who itemize deductions - such as interest payments, medical expenses, state taxes, miscellaneous deductions and passive activity losses - or who earn certain types of income. These deductions are added back into the taxpayers' income and the result is taxed at a flat rate. The taxpayer pays the higher of either his regular tax or this AMT. Taxpayers who may be subject to the AMT should consult their tax adviser.
American Depositary Receipts (ADR)
Receipt for shares of stock of a non-U.S. corporation held by U.S. banks and sold in the U.S. market. ADRs allow U.S. investors to buy or sell shares of foreign companies without having to conduct the transaction in foreign markets. They also entitle owners to dividends and capital gains.
American Stock Exchange (AMEX)
A stock exchange located in downtown Manhattan. Companies that trade on the AMEX are generally smaller than those traded on the New York Stock Exchange. The AMEX is the principal listing exchange for ETFs.
The repayment of a loan by installments.
AMT Bonds
Certain types of municipal bonds whose income is subject to the alternative minimum tax (AMT). AMT bonds include those issued to finance such private purpose activities as industrial redevelopment and sports stadium construction.
Annual Report

A report on a mutual fund's operations and holdings over a 12-month period. Mutual funds operate on a fiscal year; as a result, individual mutual funds may issue their annual reports at different times during the calendar year.

Annualized Return

Expressed as a percentage, annualized return calculates the average annual return of a mutual fund or other investment over several years. See Average Annual Total Return.

An investment that offers guaranteed annual payments at some future date, usually in retirement. Such payments may be either fixed or variable, depending on the structure of the annuity. The investment may be in stocks, bonds or other vehicles, and grows tax-deferred. Investors should consider the financial soundness of the insurance company offering the annuity (since the company, not any government agency, "guarantees" the annual payments) and the level of fees and commissions paid to salespersons.
An increase in an asset's value.
Profiting by simultaneously buying a security, currency or commodity in one market and selling it in another because the prices are different in the two markets. By taking advantage of momentary disparities in price, the arbitrageur performs the economic function of making the markets more efficient.
Asked Price/Offering Price

The price at which a mutual fund’s shares can be purchased. The asked or offering price equals the current net asset value (NAV) per share plus sales charge, if any. For a no-load mutual fund, the asked price is the same as the net asset value. See Bid Price/Offering Price; see Net Asset Value; see Spread

See Bid Price/Redemption Price, Net Asset Value (NAV), and Spread.
Anything having value that is owned by an individual, institution or business.
Asset Allocation
Investing in different types of assets (such as stocks, bonds, precious metals, real estate, cash, etc.) in an effort to diversify and reduce risk. Asset allocation cannot guarantee a profit or protect against loss. See Diversification.
Asset Allocation Fund
A fund that invests its assets in a wide variety of investments that may include domestic and foreign stocks and bonds, government securities, gold or other precious metals, and real estate. Some asset allocation funds keep the proportions allocated between different investments relatively constant, while others alter the mix as market conditions change.
Asset Class
Types of investments — such as stocks, bonds, real estate and cash.
Asset Manager
A portfolio manager, corporate treasurer, or other individual responsible for management of the risks and returns associated with a portfolio of securities or other instruments.
Asset Turnover
The ratio at which each dollar of assets has generated a dollar in revenues, calculated by dividing the sum of the past four quarters' revenues by the average of the past four quarter's total assets. Also called asset turns.
Asset-Backed Commercial Paper
Short-term obligations, issued by banks and corporations, and backed by the issuers' assets, such as receivables. Asset backed commercial paper is frequently used for short-term financing needs.
Asset-Backed Securities (ABS)
Bonds or notes backed by loans or accounts receivable originated by banks, credit card companies or other providers of credit and often enhanced through structure, over collateralization, or by a bank letter of credit or insurance coverage provided by an institution other than the issuer.
Automated Clearinghouse (ACH)
The electronic funds transfer network that enables investors to make direct transfers of money from their bank accounts to their mutual funds, provided their bank participates in the ACH.
Automatic Reinvestment
A service offered by most mutual fund companies whereby dividends and capital gain distributions can be used to buy additional shares. Over time, this can build up holdings through the effects of compounding.
Average Annual Total Return

An investment’s average annual gain or loss over a specified period. It is a hypothetical rate of return that reflects a fund’s actual cumulative total return as if performance had been constant over the entire period.

See Annualized Return.
Average Quality
A measure of the financial soundness of an institution, indicating its ability to honor financial obligation in a timely manner. Ratings agencies, such as Moody's, S&P, A. M. Best, and Duff & Phelps, assign quality ratings on banks, insurance companies and other corporate entities based on their financial health, industry outlook, balance sheet, management quality, etc.
Average Volume
Total volume for the previous three months, divided by the number of trading days of the previous three months. Compare this number to the daily volume to see if investor interest in the stock has increased or decreased.
Average Weighted Maturity (WAM)
The length of time until the average security in a fund matures or will be redeemed by its issuer. It indicates a fixed income fund's sensitivity to interest rate changes. Longer average weighted maturity implies greater volatility in response to interest rate changes, while shorter average weighted maturity implies less volatility.