Glossary of Terms

The information presented here is not intended as financial, investment, tax or legal advice and is provided for educational purposes only.
Management Company
The firm that organizes, manages, and administers a fund.


Management Fee
A fee charged by a mutual fund for day-to-day management of the fund, including selecting its holdings — and for shareholder relations and administrative services. Typically, the management fee is a percentage of a mutual fund's assets. A mutual fund's management fee is explained in the fund's prospectus.
Cash, securities or other form of collateral an investor must deposit with a brokerage firm when borrowing money from the company to buy securities. Buying on margin is a complex and potentially very risky practice that allows an individual to buy stocks or other securities using money borrowed from a broker. In return for the loan, the brokerage firm requires collateral (usually 50% of the loan) in the form of cash or securities. If the value of the securities used as collateral declines, the individual may receive a margin call from the brokerage firm demanding additional collateral. Buying on margin and margin calls (together with lax margin requirements) were significant contributing factors to the stock market collapse of 1929 which led to the Great Depression.
Market Capitalization
A broad measure of the size or value of a publicly traded company. In simple terms, a company's market capitalization (or market cap) equals the number of its outstanding shares multiplied by the price of each share. Companies are placed in broad categories — such as a micro cap, small cap, mid cap or large cap. Some mutual funds (AIM Small Cap Growth Fund or AIM Large Cap Growth Fund, for example) invest primarily or exclusively in companies of certain market cap levels.
Market Risk
The possibility that stock or bond prices will fluctuate.


Market Timing
A strategy of shifting investments among asset classes in an effort to benefit from exposure to those asset classes expected to appreciate most over the near term. When carried to an extreme, market timing can be a risky strategy, since few if any investors can be positive when particular asset classes (or the market as a whole) will rise or fall — and because market sentiment is subject to sharp and sudden change. A potentially wiser strategy may be to maintain a broadly diversified portfolio of investments. See Asset Allocation; see Diversification. See Asset Allocation and Diversification .
Market Value
The amount an investment (bond, mortgage, stock, or fund share) would be worth if it were sold at a specific time.
Market Value
The value the stock market assigns to a company's shares, calculated by multiplying its share price by its number of shares outstanding. Also called market capitalization, or market cap.

Stocks with market values of less than $1 billion are commonly called small caps, while those with market caps greater than $5 billion are called large caps. Those in between are called midcaps. These values, of course, are somewhat subjective, and change over time with the overall value of the market.
Marketable Securities
Stocks or bonds that can be easily bought or sold.
Master Notes
Debt instruments with a minimum face value of $25 million offered by the Federal Farm Credit Bank.
The date on which a debt security becomes due and payable. A bondholder receives his principal and a final interest payment upon a bond's maturity.
Maturity Date
The date the principal amount of an obligation is payable.
Median Market Cap
The middle stock in a stock fund's portfolio in terms of market capitalization.


Medium Term Note (MTN)
A type of corporate debt security with varying maturities (usually ranging from nine months to 30 years) that is continuously offered to investors. Usually issued by investment-grade firms, MTNs provide companies with constant cash flow at a relatively low price, since a company must register with the U.S. Securities and Exchange only once, rather than each time it issues debt securities. MTNs generally offer higher coupon rates than comparable short-term notes.
Minimum Investment
The smallest investment permitted when opening a new fund account or marking an additional purchase.
Momentum Fund
A fund that attempts to achieve above-average results by following what its manager discerns as an established trend in securities process.
Monetary Policy
Central banks' actions that are intended to promote economic growth and price stability. In times of economic distress, the U.S. Federal Reserve (the Fed) can provide more credit to the banking system to promote economic expansion. In times of economic expansion, the Fed can withdraw credit from the banking system to promote price stability. The Fed has a variety of tools through which it implements monetary policy. See Fiscal Policy.
Money Market Fund
An open-ended mutual fund that invests in high-quality, short-term liquid securities, such as commercial paper and banker's acceptances. Money market funds are intended to provide investors with safety, liquidity and yield. While the interest rate paid to investors varies, the net asset value of each share is intended to remain at a constant $1. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and is not a deposit or other obligation of, or guaranteed by, a depository institution. Although a money market fund seeks to preserve the value of an investment at $1 per share, it is possible to lose money by investing in a money market fund.
An independent and widely followed mutual fund performance monitor. Morningstar is a global leader in supplying mutual fund performance data and commentary to individual investors and investment industry professionals. It rates mutual funds using a scale of from one (lowest) to five (highest) stars; ratings are recalculated monthly.
Mortgage Pass-Throughs
Debt securities that represent an interest in a pool of residential mortgage loans with monthly amortization of principal and interest. The interest and principal from those loans is passed through or distributed to the investor each month.
Mortgage-Backed Securities (MBS)
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.
Municipal Bond Fund
A mutual fund that invests in debt securities issued by state and local governments, or entities associated with or sponsored by them. Such funds are often designed to provide investors with income exempt from federal income taxes. See Municipal Bond.
Mutual Fund
An investment vehicle that collects money from shareholders and invests it in stocks, bonds, money market securities or other investments. Generally, mutual funds offer shareholders diversification and professional management - in exchange for management and other fees. Mutual funds come in many types and vary based on their investment objectives; types of holdings; geographic, sector or market-cap focuses; among other factors. A trusted financial adviser can recommend mutual funds that may be appropriate based on an individual's financial situation, risk tolerance and investment goals.