Glossary of Terms

The information presented here is not intended as financial, investment, tax or legal advice and is provided for educational purposes only.
Fair Value
The amount that a willing buyer will pay a willing seller for a future income stream. Fair value is usually reported as market value.
Federal Agency Issue
Debt securities issued by agencies or corporations chartered by the federal government, such as the Tennessee Valley Authority. The issuers of such securities lack an explicit guarantee from the federal government, but because they have an implicit guarantee their debt is considered high quality.
Federal Deficit
The shortfall created when the federal government spends more in a fiscal year than it receives in revenues. To cover the shortfall, the government sells long- and short-term debt securities.
Federal Deposit Insurance Corporation, U.S. (FDIC)
An independent agency created by Congress in 1933 that maintains the stability and public confidence in the U.S. financial system by insuring deposits, examining and supervising financial institutions and managing receiverships.
Federal Funds Target Rate
The interest rate charged by banks with excess reserves at a Federal Reserve district bank to other banks who need overnight loans to meet reserve requirements. The Fed funds target rate is the most sensitive gauge as to the direction of interest rates, since it changes daily.
Federal Home Loan Mortgage Corporation (FHLMC)
A debt instrument in which interest and principal are paid from the mortgage payments on a pool of underlying real estate loans. Common agency issuers include GNMA, FNMA and FHLMC.
Federal National Mortgage Association (FNMA)
A debt instrument in which interest and principal are paid from the mortgage payments on a pool of underlying real estate loans. Common agency issuers include GNMA, FNMA and FHLMC.
A person, company or association charged with investing assets for the benefit of another. Examples include a pension fund trustee or an executor of a will.
Fiduciary Account
An account administered by a bank, savings association, or trust company acting in a fiduciary capacity.
Fiduciary Capacity
The capacity or role of acting as a fiduciary. Examples of fiduciary capacity include a bank acting as a trustee of a trust or as an adviser to an investment management account. Under ERISA, a person acting in a fiduciary capacity must discharge all of its duties with respect to a retirement or employee benefit plan solely in the interest of the plan's participants and beneficiaries.
Financial Adviser
An investment professional who assists clients on financial issues such as retirement planning, investing and, if qualified to do so, insurance. Financial advisers may have varying levels or areas of expertise, but all are registered with - but not licensed or endorsed by - FINRA.
Financial Industry Regulatory Authority (FINRA)
The largest non-governmental regulator of securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.
Fiscal Policy
Tax and spending policies implemented by Congress intended to achieve full employment, price stability and sustained economic growth. In times of economic distress, government spending may be increased and/or taxes may be decreased to stimulate demand and promote full employment. The cash for clunkers program in 2009 — in which the government provided financial incentives to spur new-car sales — is an example of fiscal policy. See Monetary Policy. See Monetary Policy.
Fiscal Stimulus
An increase in public spending or a reduction in the level of taxation that might be performed by a government in order to encourage and support economic growth. Most government bailout packages offered to various business types can be considered a form of fiscal stimulus. See Fiscal Policy.
Fiscal Year-End
The time when a corporation closes its books and determines its profit or loss. It may or may not coincide with the calendar year-end.
Fixed-Income Security
A security that pays a fixed rate of return, such as a bond or note.
A debt security with a variable interest rate tied to another interest rate — similar to an adjustable rate mortgage. Interest rates on floaters rise if the related interest rate increases, but fall if the related interest rate declines. Floaters can be particularly attractive when interest rates appear likely to rise.
Foreign Account Tax Compliance Act (FATCA)
Refers to US tax legislation provisions that became law in March 2010 and is intended to target tax non-compliance by US taxpayers with foreign accounts.
Foreign Tax Credit
Many funds invest in securities of foreign companies and pay taxes in those countries. If a fund has more than 50% of its assets invested in foreign securities at fiscal year-end, it may pass a foreign tax credit through to shareholders. This credit may be used to offset the amount of tax due on a shareholder’s federal income tax return. Shareholders have the option of taking the foreign tax credit or deduction. Holding-period rules may apply. If you have questions about claiming a foreign tax credit or deduction, consult a tax advisor or see IRS Form 1040 for instructions.
Front-End Load
A sales charge on certain fund shares levied at the time of purchase. A mutual fund's prospectus includes complete information about applicable front-end sales charges.
Fund Family
An issuer that sponsors multiple mutual funds, each with its own investment objective. Often, investors may move assets from one fund to another within the same fund family without charge. See Exchange Privilege.
Funding Agreement
Illiquid insurance contracts, often held by mutual fund companies, that provide guaranteed payment of principal and interest for a specified period of time.
Futures Contract
An agreement obligating a seller to sell, and a buyer to buy, an asset (such as a commodity or financial instrument) at a predetermined date and price. Futures contracts are used for speculation, hedging and arbitrage, and may be traded themselves before the predetermined date. Futures contracts differ from options, which give a buyer the right — but not the obligation — to purchase an asset.