The One Group Investment Terms A B C D E F G H I J K L M N O P Q R S T U V W X Y Z # Select the first letter of the word from the list above to jump to appropriate section of the glossary. If the term you are looking for starts with a digit or symbol, choose the '#' link. - A - after-tax return: An investment's return after all income taxes have been deducted. annual report: The yearly audited record of a corporation or a mutual fund's condition and performance that is distributed to shareholders. annuitant: The person during whose life an annuity is payable, usually the person to receive the annuity. annuity: A long-term investment that provides tax-deferred growth and income at regular intervals for as long as you specify. assets: Economic resources of an enterprise or person. A mutual fund's assets include cash and securities. asset allocation: The distribution of assets among various types of securities, including stocks, bonds and money market securities, according to your financial goals, time frame and risk tolerance. assets under management: The value of the assets that a company manages, but does not own. - B - balanced fund: A mutual fund that invests in both stocks and bonds whose objective is both growth and income. bear market: A prolonged period of declining stock prices. beneficiary: The person named in a life insurance policy to receive the insurance proceeds upon the death of the insured. bond: A security that represents a loan investors make to corporations and/or governments. A bond pays a stated return over a fixed period of time. bond fund: A mutual fund that invests exclusively in bonds. bond rating: A measure of quality assigned by independent rating agencies that address the probability of a bond issuer's default. Bonds with the smallest default probability are rated AAA (or Aaa) and usually offer the lowest interest rates. bottom-up approach: An investment strategy that focuses on individual stocks, rather than general market trends. It assumes strong companies can perform well independent of the market environment. broker: A professional who sells financial and investment products. bull market: A prolonged period of rising stock prices. - C - capital: The amount of "extra" funds available after a company has allocated all of its obligations to its policyholders, employees, and creditors. capitalization: The market value of a company's securities, excluding its correct liabilities. Typically, companies with a capitalization under $250 million are called small-cap, companies between $250 million and $1 billion are mid-cap and companies over $1 billion are large-cap. capitalization ratio: An analysis of a company's capital structure organized by asset type (e.g. common stock, preferred stock, other equity and debt). capital gain: The difference between a security's purchase price and its selling price, when the difference is positive. capital gains distribution: A payment to mutual fund shareholders of profits realized from the sale of stocks and/or bonds. capital loss: The amount by which the proceeds from the sale of a security are less than its purchase price. cash position: Percentage of a mutual fund's portfolio held in cash and cash equivalents. certificate of deposit (CD): A debt instrument issued by a bank that usually pays interest. The date of the maturity ranges from a few weeks to several years. closed-end fund: An investment company with a limited number of shares outstanding whose price trades like an individual security. Unlike open-end mutual funds, closed-end funds do not stand ready to issue and redeem shares on a continuous basis. compound interest: Interest computed on the principal plus the interest accumulated previously to the date of compounding. contingent deferred sales charge (CDSC): A back-end sales charge imposed when shares are redeemed from a fund. This fee usually declines over time. cost basis: The purchase price of an investment, used to calculate capital gains when the investment is sold. credit rating: An individual or company's credit history and ability to pay debts. custodian: A bank that holds a mutual fund's assets, settles all portfolio trades and collects most of the valuation data required to calculate a fund's net asset value (NAV). - D - deferred annuity: An annuity providing for income payments to begin at some future date. deferred compensation plan (401(k)): A plan under which the participant is permitted to defer a portion of gross income to a retirement plan. Such a deferral is tax exempt for federal income tax purposes until the proceeds are distributed. defined benefit plan: A pension plan that promises to pay a specified amount upon retirement. The plan states either: (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. defined contribution plan: A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings. Examples are 401(k) and 403(b) plans. discount: The difference between a security's current market price and its estimated value. distribution: See capital gains distribution. diversification: Blending a variety of investments to reduce investment risk. dividend: 1. A company's payment of profits to its stockholders. 2. A mutual fund's payment of profits to its shareholders. 3. A return of part of the premium on participating insurance to reflect the difference between the premium charged and the combination of actual mortality, expense and investment experience. dividend addition: An amount of paid-up insurance purchased with a policy dividend and added to the face amount of the policy. dollar-cost averaging: An investment strategy which involves regular investing over time into the same security or mutual fund. A dollar-cost averaging program does not guarantee a profit or protect against loss in a declining market. Dow Jones Industrial Average (DJIA): A popular index used to measure and report value changes in representative stock groupings. "The Dow" is a price weighted average of 30 actively traded blue chip stocks primarily of industrial companies. duration: A measure, expressed in years, of a bond's sensitivity to interest-rate changes. Typically the shorter the duration, the more stable the bond. - E - employee stock ownership plan (ESOP): A defined contribution pension plan designed to invest primarily in employer securities. endowment: Life insurance payable to the policyholder, if living, on the maturity date stated in the policy, or to a beneficiary if the insured dies prior to that date. equity: The net worth of a business, consisting of capital stocks, capital surplus, earned surplus, and, occasionally, certain net worth reserves. equity fund: A mutual fund that invests primarily in stocks. Also known as a stock fund. equity security: Instrument, such as a stock, that represents an ownership interest in a corporation. ex-dividend: The interval between a fund distribution's record date and payable date. During this period, investors who purchase shares are not entitled to the distribution payment. exchange privilege: The ability to transfer money from one mutual fund to another within the same fund family. - F - face value: The total value of an investment or insurance policy, usually stated on the "face" of the document. Federal Reserve System: "The Fed" is a network of banks established to regulate the national money supply and whose Board sets prevailing national interest rates. financial quality: A measure of the financial soundness of an institution indicating its ability to honor financial obligations. fiscal year: A 365-day accounting period for which a company or mutual fund prepares financial statements. fixed-income security: Instrument, such as a bond, that pays a fixed rate of return. - G - group annuity: A pension plan providing annuities at retirement to a group of people under a master contract. It is usually issued to an employer for the benefit of employees. growth fund: A mutual fund that invests in companies with the potential for accelerating earnings. guaranteed interest contract: A vehicle for benefit plan sponsors to invest funds at a fixed interest rate for a fixed duration. - H - HR 10 Plan (Keogh): A retirement plan for small businesses. - I - immediate annuity: A financial vehicle designed to help you manage your money by providing an income stream that begins immediately after (usually six months) you have purchased the annuity. index: A benchmark against which investment performance is judged. individual retirement account (IRA): A tax-deferred account to which an eligible individual can make annual contributions up to $2,000 ($4,000 for a single-income married couple filing a joint income tax return). inflation: A rise in the price of goods and services -- often described as "too much money chasing too few goods" and often associated with a loss of purchasing power. investment grade: Bonds that are rated within one of the top four ratings categories. investment objective: The goal of a mutual fund and its shareholders, e.g. growth, growth and income, income, and tax-free income. - J - junk bond: A low-rated bond, offering higher interest rates and higher risk, that is most appropriate for aggressive bond investors. - K - Keogh (HR 10) Plan: A retirement plan for small businesses. - L - large cap: See capitalization. liabilities: Amounts set aside to pay future obligations or guarantees; for example, life insurance claims. life annuity: A contract that provides an income for life. life expectancy: The average number of years of life remaining for a group of persons of a given age according to a particular mortality table. liquidity: A measure of the ease in which an asset may be sold at a reasonable price on short notice. loads (back-end, front-end, and no-load): Sales charges on mutual funds. A back-end load is assessed at redemption (see contingent deferred sales charge), while a front-end load is paid at the time of purchase. No-load funds are free of sales charges. long-term capital gain (or loss) -- The profit (or loss) realized from the sale of securities held for more than a year. Net long-term capital gains are currently taxed at a maximum rate of 28%. lump sum distribution: A simple payment to a beneficiary and/or investor of an account's entire current value. - M - market timing: A risky investment strategy that calls for buying and selling securities in anticipation of market conditions. market value: The price at which a security or mutual fund is trading and could presumably be purchased or sold. maturity date: Date on which the principal amount of a note, bond, certificate of deposit, or other debt security becomes due and payable. money market fund: A mutual fund seeking principal security and income. mutual fund: A portfolio of several stocks, bonds, and/or money market securities that is owned by many investors and managed by a professional investment company. - N - National Association of Securities Dealers: The NASD is a self-regulatory body which oversees its members, including most mutual fund companies. national brokerage: A firm with offices located throughout the United States. net asset value (NAV): The price of a share of a mutual fund, net of sales charges. Price may vary daily. - O - (empty) - P - payable date: The date on which a fund's distribution is paid to shareholders. pension plan: An employee benefit plan that provides retirement income to participants by means of advance funding or deferral of income. price to earnings ratio (P/E ratio): A stock's price divided by its earnings per share, which indicates how much investors are paying for a company's earning power. pricing: The process of determining premium rates, dividend scales, interest crediting rates, and miscellaneous fees, charges, and credits on a company's products. prospectus: A legal document detailing a fund's investment objective, financial highlights and fees. proxy: A shareholder vote on matters that require shareholders' approval. public offering price (POP): A mutual fund share's purchase price, including sales charges. - Q - qualified plan: A plan which the Internal Revenue Service approves as meeting the requirements of Section 401(a) of the 1954 Internal Revenue Code. Such plans receive tax advantages. - R - rating agency: A firm which thoroughly evaluates all aspects of a company's operations in order to determine its financial quality and issues debt and claims-paying-ability ratings (e.g. Moody's Investors Service and Standard & Poor's Corporation). record date: The date on which a shareholder must officially hold fund shares in order to be entitled to a distribution payment. redemption: Sale of mutual fund shares by a shareholder. - S - sales charge: See loads. sector fund: A mutual fund that focuses on investments in one industry or economic sector. Securities and Exchange Commission (SEC): Federal agency that oversees the registration and distribution of company stock and mutual fund shares. self-administered (trusteed or directly invested) plan: A plan generally funded through a bank which directly invests in the accumulated funds. Retirement payments are made from the fund as they fall due. separate account: An asset account established by a life insurance company separate from other funds, used primarily for pension plans and variable life products. This arrangement permits wider latitude in the choice of investments, particularly in equities. short-term capital gain (or loss) -- The profit (or loss) realized from the sale of securities held for one year or less. Net short-term capital gains are taxed as ordinary income. simplified employee pension plan (SEP): A retirement plan for small businesses and self-employed individuals. small-cap: See capitalization. stock: Ownership of a corporation represented by shares that are a claim on the corporation's earnings and assets. When a company profits, its shareholders can profit if the stock price rises and/or if the company pays a dividend per share. systematic investment plan: A service option that allows investors to buy mutual fund shares on a regular schedule, usually through bank account deductions. - T - tax-deferred: Term describing an investment whose accumulated earnings are free from taxation until the investor takes possession of them. top-down approach: An investment strategy that focuses on general market trends and selects specific stock sectors that can benefit from these broad trends. total return: A method of calculating an investment's return that takes share price changes and dividends into account. transfer agent: An agent, usually a commercial bank, appointed to monitor records of stock, bond, and shareholders. treasury bill, note, bond: Short-term securities guaranteed by the federal government with terms ranging from three months to thirty years. trustee: 1. An organization or individual who has responsibility for one or more accounts. 2. An individual who, as part of a fund's board of trustees, has ultimate responsibility for a fund's activities. - U - (empty) - V - value investing: An investment strategy that seeks companies with an estimated value that is not reflected in their market price. variable annuity: An annuity where the amount of each periodic income payment may fluctuate. The fluctuation is tied to variables such as a cost of living index, or securities market value. volatility: The tendency of a security's price to go up and down. For example, rapid, frequent share price changes indicate a high degree of volatility. - W - (empty) - X - (empty) - Y - yield: The return on an investor's capital investment. With respect to stocks and mutual funds, it is the percentage of income that a security or mutual fund distributes in relation to share price. For example, if a mutual fund distributes $1 per share over a year and has a $10 share price, its yield is 10%. - Z - (empty) - # - 12b-1 fee: The fees, usually less than 1% of a fund's assets, are charged annually to shareholders to pay a fund's promotional expenses. 401(k) Plan: A type of pension plan that allows employees to contribute a portion of their salaries to retirement investments on a tax-deferred basis. 403(b) plan: A type of pension plan for employees of non-profit organizations that allows employees to contribute a portion of their salaries to retirement investments on a tax-deferred basis.