Glossary of Terms

The information presented here is not intended as financial, investment, tax or legal advice and is provided for educational purposes only.
A modified indexing strategy that attempts to exceed the total return of the benchmark index.
Earnings before interest, taxes, depreciation and amortization. Roughly equal to operating cash flow, but calculated using the income statement, rather than the cash flow statement. Ebitda is useful for evaluating companies that are subject to large depreciation charges for their fixed assets, or those that have significant amounts of goodwill that the must amortize. Such charges would normally distort a companies underlying earnings power; Ebitda is designed to gauge operational cash flow by excluding these items. The measure is useful for evaluating companies that have low earnings because of large restructuring, capital build-out or acquisition costs.
Earnings Growth Rate
The average annual rate of growth in earnings per share over the past five years for the stocks in a fund's portfolio.
Earnings Per Share (EPS)
A company's earnings divided by the number of common shares outstanding. For example, if a company earns a profit of $1 million and has 1 million shares outstanding, its EPS would be $1.
Earnings Per Share, Diluted
Net earnings divided by common shares outstanding, adjusted for the assumed conversion of all potentially dilutive securities into common stock. Securities having a dilutive effect may include convertible debentures, warrants, options and convertible preferred stock.
Earnings Yield
A company's earnings divided by its current stock price. Earnings yield (also called earnings-price ratio) can be used to compare the attractiveness of stocks, bonds and money market securities.
Earnings before deductions for interest and taxes. Also called operating income.


Economic Growth and Tax Relief Reconciliation Act
Enacted after the terrorist attacks of September 11, 2001, legislation intended to help stimulate the U.S. economy. The temporary, 10-year measure reduced income taxes for most Americans, repealed estate and gift taxes and increased the amount of tax-deductible contributions individuals can make to their IRAs.
Education IRAs
See Coverdell Education Savings Accounts. See Coverdell Education Savings Accounts (Coverdell ESA).
Effective Annual Yield
The compound yield associated with a periodic interest rate based on the frequency of interest payments per year. For example, if the annual interest rate is 8%, interest is credited semi-annually and the periodic interest rate is 4%, the effective annual yield is 8.16%, calculated as follows: (1.04 x 1.04)-1= 8.16%
Effective Duration
A measure of' the price sensitivity of a financial instrument to changes in interest rates, expressed in years and calculated as the time-weighted present value of cash flows.
Emerging Market Fund
A mutual fund investing a majority of its assets in the financial markets of one or more developing countries, typically small markets with a short operating history. Such funds usually take higher risks in exchange for higher potential returns.
Emerging Markets
Generally, economies in Africa, Asia, Eastern Europe, the Far East, Latin America and the Middle East which, while relatively undeveloped, may hold significant growth potential in the future. Investing in such economies may provide significant rewards — and significant risks. Those risks include potentially high rates of inflation, high transaction costs, relative market illiquidity, political and economic instability and less strict financial and accounting controls and standards than common in more developed markets.
Employee Retirement Income Security Act (ERISA)
The 1974 law that created the Pension Benefit Guaranty Corporation. ERISA laws established specific guidelines for managing pension funds and eased eligibility regulations.
Employee Stock Ownership Plan (ESOP)
A program giving employees the opportunity to buy stock in their company, and with it, a voice in the firm's management.
Enterprise Value
Total purchase price of a company, net of its debt and cash. Equal to market capitalization (share price times number of shares outstanding) plus long- and short-term debt and preferred stock, minus cash. Commonly used in merger and acquisition analysis.
Equity Fund
A mutual fund that invest primarily in stocks.


Equity Security
A type of security representing ownership in a corporation. Common stock, preferred stock, and convertible securities are all equity securities. Non-convertible debt securities do not represent ownership.
Equity Unit Investment Trust
A portfolio of professionally selected common stocks that provide either the potential for above-average capital appreciation or income.
Equity-Income Funds
Funds that invest primarily in stocks of companies with histories of paying dividends.
Equivalent Taxable Yield
A way of comparing taxable yields on corporate or government bonds to tax-free yields of municipal bonds. Depending on an individual's tax situation, a higher yielding corporate bond with a taxable yield may be less attractive than a municipal bond with a lower, but tax-free yield.
Estimated Current Return (ECR)
The estimated annual net interest income per unit divided by the current offering price.


Estimated EPS Growth
The mean estimate of earnings-per-share growth (for the indicated period) as derived from all polled estimates from Wall Street analysts. This information is provided by Zacks Investment Research.
Estimated Long Term Return (ELTR)
This return is calculated according to SEC mandated formulas for a unit investment trust. The estimated return is projected over the estimated life of the trust and is not guaranteed. The calculation is based on an average of the yields to maturity of the bonds held in the unit investment trust, which are adjusted to reflect the sales charge and estimated expenses.
U.S. dollar-denominated currency deposited in a European bank or foreign branch of an American bank. Eurodollars are most commonly used to settle international transactions outside the United States.
The status of shares during the time between the ex-dividend date and the payment date of a fund dividend or capital gains distribution. When a fund is trading ex-dividend, a purchaser is not entitled to the distribution.
Ex-Dividend Date
The date on which a mutual fund's net asset value (NAV) or a stock's price will fall by an amount equal to the dividend and/or capital gain distribution. Most publications that list mutual funds' closing NAVs place an X after a fund's name on its ex-dividend date. See Record Date.
Excessive Trading
1. An unethical practice in which a broker makes frequent trades in a customer's account for the purpose of increasing his or her commissions, rather than to further the customer's investment goals. 2. Frequent trading by mutual fund investors in response to short-term changes in market conditions. Because mutual funds are intended to be long-term investments, mutual fund companies may monitor accounts of customers suspected of engaging in excessive trading and may take other actions to protect the interest of long-term investors.
Exchange Privilege
The right of mutual fund shareholders to transfer their investment from one fund to another within the same fund family, often at no charge.
Exchange-Trade Fund (ETF)
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
A person designated to carry out the provisions of a will as to the administration of the deceased's estate and the distribution of the assets in it. An executor may be a bank trust officer, family member or trusted friend.
Expense Ratio
The ratio of a mutual fund's total expenses (operating expenses and management fees) to its total net assets. A mutual fund's expense ratio is listed in its prospectus. A fund's expense ratio may be a function of its size rather than of its success in controlling expenses.
Extended-Hours Trading
Nasdaq can now transact "after-hours" trades. These are trades that take place after the regular market close at 4:00 p.m. ET up until 6:30 p.m. ET. There is also a "premarket window" permitting Nasdaq trades before the regular trading session begins at 9:30 a.m. ET. These trades can take place as early as 8.00 a.m. ET. Trades outside of regular trading hours are classified as "Form-T" trades. Form-T trades don't impact last, high, low or closing prices, but are reckoned in volume reporting. Nasdaq has specified that the "closing quote" of the regular session will be identified separately from extended-trading-hours quotes.