401(k) – A company-sponsored retirement savings plan that allows for pre-tax salary deferrals in addition to optional profit-sharing and matching contributions by the employer.


A Shares – Mutual fund shares which charge an up-front commission deducted from the initial investment.

After Tax Yield – The yield on an investment after taking into account the tax consequences incurred by either the capital gain or ordinary income.

Alternative Minimum Tax (AMT) An alternative tax which includes certain tax preference items that are added back into adjusted gross income. If higher than the regular tax, then the regular tax plus the amount by which AMT exceeds the regular tax is paid.

American Depository Receipt (ADR) – A receipt for shares bought in the U.S. of a foreign-based corporation in an overseas market. The receipt is held by a U.S. bank, but shareholders are entitled to any dividends and capital gains.

Annuity – An annuity is a contract between one or more individuals and an insurance company.


B Shares Mutual fund shares which have no up front sales charge deducted from the initial investment. They are commonly called “back-end loads” because they have a declining sales charge which is charged when shares are sold.

Back-end Load – Mutual funds which do not have an upfront sales charge. Commissions are paid through higher annual expenses and through assessment of a contingent deferred sales charge.

Balance Sheet – A statement showing the financial condition of a company at any given point. It includes assets, liabilities and net worth. Assets always equal, or balance, liabilities plus net worth.

Bear Market – A sharp, prolonged decline in the price of stocks, usually brought on by a slowing economy. Because a bear fights by slapping downward, this term is associated with a falling market.

Beneficiary – An entity (either a person or an institution) named by the investor to inherit their estate or part of their estate after death.

Beta – The measure of a stock’s volatility relative to the stock market. Stocks with a beta of one have historically moved in the same direction as the stock market, which always equals a beta of one. Stocks with beta values greater than one indicate a more aggressive movement in the same direction as the general market. Stocks with a beta lower than one have historically been less volatile than the general market.

Blue Chip Stock – Shares of generally large companies that have a history of strong earnings growth and dividend payments. Known for strong management and excellent products and/or services, these companies usually operate in an established industry with expectations for continued success.

Bond – A certificate representing creditorship; the issuer pays interest on specific dates and redeems by paying the principal at maturity.

Bond Insurance – Insurance purchased by the issuer of a bond from an independent insurance company guaranteeing timely payment of interest and principal.

Bond Ratings – Ratings that evaluate the possibility of default by a bond issuer.

Bull Market A sharp, prolonged rise in the price of stocks, usually lasting several months. Because a bull attacks by thrusting upward, this term is associated with a rising market.


C Shares – Mutual fund shares which have no upfront charge to the customer, but may have a small commission to the broker. Higher annual fees are charged against the fund for as long as an investor holds the investment. These shares will have lower Contingent Deferred Sales Charge (CDSC) than B shares and the CDSC is applicable for a shorter term.

Call Feature – The provision in a bond indenture which allows bonds or preferred stock to be redeemed or retired.

Call Risk – The risk to a bondholder that a bond may be redeemed before scheduled maturity. The risk of having a bond called before maturity is that the investor may be unable to replace the bond’s yield with another similar-quality bond with the same yield.

Capital Gain – Profit on the sale of a capital asset.

Capital Market – Debt and equity securities with maturities greater than one year.

Cash Dividend – Cash distribution (declared by a corporation’s board of directors) paid to current shareholders of record. This is normally a portion of the corporation’s earnings, however a corporation may pay a dividend even if it does not have earnings.

Cash Flow – Net income plus other non-cash charges, such as depreciation and amortization. Cash flow determines a company’s ability to reinvest in its operations and pay dividends.

Cash Flow Return on Investments (CFROI) – Operating cash flow divided by the capital invested in the business equals CFROI. It is one measurement of a company’s profitability.

Certificate of Deposit (CD) – An investment vehicle whereby you lend a bank or a savings and loan a set amount of money, which is then invested insecurities or used for loans. For the use of your money, you are ensured the return of your principal at maturity and interest over the life of the CD. CDs offer a variety of maturities and interest payment options.

Collateralized Mortgage Obligation (CMO) – Income investments collateralized by a pool of residential mortgages. In effect, you loan money to home owners. In return, you receive payment of principal and timely payment of interest over the life of the investment. You can buy CMOs with different maturities.

Common Stock – Shares of a public corporation. Owners are usually entitled to receive dividends and vote on important company matters. Should the company be forced to liquidate, assets are distributed to creditors, bondholders and preferred stockholders before common stockholders. Common stocks are usually purchased for their appreciation potential and possible dividend income.

Community Property – A joint account between a husband and wife in which upon death of one spouse his/her half of the account is transferred to his/her heirs.

Compounding – The process of adding interest earned to principal.

Consumer Price Index – The price of a hypothetical basket of goods selected to represent the types of products purchased by typical consumers. It is used as a measure of inflation.

Contingent Deferred Sales Charge (CDSC) – Commission charged on the sale of some mutual funds. If an investor redeems an investment before all charges have been repaid, the CDSC will be deducted from the principal value upon redemption. The CDSC is reduced each year until all commissions/fees have been repaid.

Corporate Bond – A loan to a corporation. When you invest in a bond, the corporation pays you interest on the bonds you own. At a stated date in the future (maturity date), the company returns your principal to you. The maturity dates on corporate bonds can range from one to 40 years.

Cost Basis – The original cost of acquiring a security plus any expenses incurred during the acquisition. This is used for the purpose of calculating gains and losses at the time of sale.

Current Ratio – Current assets divided by current liabilities. Indicates a company’s ability to pay its current obligations from current assets.


Current Yield – Annual Interest divided by current market price. What a bond is actually yielding today as opposed to the yield to maturity or coupon rate.

Custodial Account – An account established for a child that is not of legal age. The account must use of the name of the minor child as well as one adult, or custodian.

Custodian – An adult acting on behalf of a minor in a security account.


D Shares – Mutual fund shares which have a small upfront charge. Higher annual fees are charged against the fund for as long as an investor holds the investment. These shares will have lower CDSC than B shares and the CDSC is applicable for less time.

Day Order – A buy or sell order that is valid only until the close of trading on the day it is placed. If a day order is entered after the close of trading, it is held and entered as a day order on the next trading day.

Debenture – An unsecured bond. Most bonds issued by large corporations are, in fact, debentures, which are backed by the corporation’s reputation rather than secured by any collateral.

Debt-to-Total-Capital Ratio – The proportion of total capital that is represented by long-term debt. For example, a 24 percent ratio means that 24 percent of a company’s total capital is debt.

Debt Security – A security where the issuer has promised to pay a specified amount of principal and interest to the owner of the security at a specified time in the future.

Defensive Stock – Stocks that are usually immune to traditional business cycles, resulting in greater stability. In a weak market, shares historically have declined less than the overall market.

Depression – Economic condition characterized by falling prices, reduced purchasing power, rising unemployment, deflation and a general decrease in business activity.

Diversification – A method to reduce investment risk by putting funds in several different investment categories (i.e., growth, growth and income, and income). Diversification among stocks can be by sectors within an industry or by geographic location.

Dividend – A payment from a company to its shareholders, historically based on its earnings. Dividends are usually paid quarterly in the form of cash and sometimes stock. Payments are in proportion to the number of shares an investor owns.

Dividend Reinvestment – Allows shareholders to automatically use dividend payments to purchase additional shares of stock.

Dividend Yield – Annual percentage of return earned by investors Calculated by dividing a stock’s annual dividend by the current stock price.

Dollar Cost Averaging – Investing equal dollar amounts at regular intervals; results in buying more shares when the price is low and fewer shares when the price is high, for an average cost per share lower than the average price per share.

Dow Jones Industrial Average (DJIA) – A price-weighted average of 30 actively traded blue-chip stocks. It is the oldest and most widely used of all stock market indicators. The average is quoted in points rather than dollars. It is calculated by adding the prices of the stocks an using a divisor that is adjusted for splits and dividends, in addition to substitutions and mergers.


Earnings Per Share (EPS) – A company’s net income divided by the total number of outstanding common shares.

Equity – Ownership interest in a corporation, held by investors through common or preferred stock. Corporations issue equity to raise fund for the investment in the company.

ETF – An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.

Eurodollars – U.S. dollars deposited in foreign, mainly European, banks. These dollars are used in transactions of international business.

Expense Ratio – Annual Operating Expenses divided by Average Annual Net Assets. The amount that mutual fund shareholders pay for management fees and operating expenses.


Fannie Mae – Federal National Mortgage Association (FNMA), a government-sponsored, publicly owned corporation whose stock trades on the NYSE. FNMA purchases mortgages from lenders and resells them to investors through the sale of fixed income securities, pass-throughs and equity.

Federal Deposit Insurance Corporation (FDIC) – An agency of the Federal Government established to insure the deposits of account holders at FDIC member institutions.

Federal Farm Credit System – A system of 37 banks that provides loans to farmers and farm-related businesses. Securities include those issued by Federal Intermediate Credit Banks, Banks for Cooperatives and Federal Land Banks. They also include bonds issued through the Federal Farm Credit System as a whole. These securities are guaranteed by the Farm Credit Administration only. They are not direct obligations of the U.S. Government.

Federal Home Loan Banks (FHLB) – Government agency consisting of twelve regional banks owned by savings and homestead associations which issues bonds and notes to finance home building and mortgage loans of their member associations.

Federal Reserve Board – The governing board of the Federal Reserve System.

Federal Reserve System – The Fed, established by Congress to monitor and regulate the U.S. monetary and banking system.

Financial Risk – The uncertainty of the future financial abilities of the issuer to pay stockholders and creditors principal and interest.

FINRA – The Financial Industry Regulatory Authority, known as FINRA, is the largest non-governmental regulator for all securities firms doing business with the United States public—more than 5,000 firms employing more than 660,000 registered representatives. FINRA was created in 2007 through the consolidation of NASD and NYSE Member Regulation.

Firm Name – (Street name) Securities owned by a client but registered in the name of the brokerage firm for safekeeping and ease of transferability.

Fiscal Policy – Federal spending and taxation policies designed to affect the business cycle and attain price stability, sustained economic growth and full employment.

Fixed Annuity– Resembles a bond in that the insurance company promises to pay the investor a fixed rate of interest for a certain period of time.

Forward Split – Procedure a corporation would use to increase the number of shares outstanding without changing shareholders’ equity. Example: 2 for 1 split; the shareholder will double his holdings, but price per share will drop by half.

Freddie Mac – Federal Home Loan Mortgage Corporation (FHLMC), a federally created corporation which issues two types of mortgage certificates, to finance its purchase of conventional residential mortgages, thus maintaining a secondary market in conventional home mortgages.

Fundamental Analysis – The study of a company’s record of sales, earnings, assets, management and other factors to predict future trends. These projections are used to determine if the stock is undervalued or overvalued based on its current price.

Funds from Operations (FFO) – Portion of a real estate investment trust’s (REIT) profit allocated to each outstanding share of common stock. FFO is basically net income plus depreciation. It is a key statistic in evaluating a REITs outlook and is substituted for earnings per share in calculating the dividend payout or the price -to-earnings ratio.

Global Fund – Funds that invest in stocks of foreign companies. A global fund may own securities from both the U.S. and non-U.S. market.


Ginnie Mae – Government National Mortgage Association (GNMA), a government agency pass-through obligation supporting primary mortgages and backed by the full faith and credit of the U.S. Government, subject to all taxes.

Good Till Canceled Order (GTC) – An order to buy or sell stock at a specific price that is left in force until executed or canceled by the client.

Growth-and-Income Stock – A common stock with a relatively high current yield and whose company has historically paid out a large portion of its earnings in dividends. Many utility stocks with higher yields are considered growth-and-income stocks.

Growth Stock – A stock whose earnings increases occur more rapidly than more mature companies or companies in slow-growth industries. The growth record of these companies is expected to continue in the future. Growth stocks tend to carry higher risk, generally trade at higher price-to-earnings ratios and pay little or no dividends.

Guardian – Court-appointed fiduciary, assigned to take care of the property of another person.


House Maintenance – The minimum equity that must be maintained in a margin account as prescribed by the brokerage firm.

Housing Revenue Bonds – Bonds backed by revenues generated from house mortgages or rentals from financed housing projects. These include single-family mortgage revenue bonds – issued to finance mortgages on single on single homes and multi-family housing revenue bonds – issued to finance construction of multifamily housing projects, typically for the elderly or for moderate and low income families.


Income Bonds – These bonds pay interest only if the issuing company has earnings. Income bonds trade flat. This means they trade without any accrued interest.

Income Statement – The summary of a company’s revenues and expenses during a certain accounting period. Bottom-line figures represent the company’s net income and earnings per share.

Income Stock – A common stock with a high current yield and whose company has historically paid out a large portion of its earnings in dividends. Many utility stocks with higher yields are considered income stocks.

Indenture – Describes the rights of the bondholders and the duties of the trustees who act to protect the interests of the bondholders.

Individual Retirement Account (IRA) – A personal savings plan that offers tax advantages to set aside money for retirement.

Initial Public Offering (IPO) – When an issuer offers a new security to the public for the first time.

Interest Rate Risk – The uncertainty of investment return due to changes in the market rates of interest; the possibility that a fixed-rate debt instrument will decline in value as a result of a rise in interest rates.

International Fund – Mutual funds that invest in stocks of foreign companies. An international fund may only own non-U.S. securities.

Investment Banker – The middleman between the public and a corporation issuing new securities. An investment banker usually buys a new issue of a stock or bond directly from the issuing corporation and sells it to individuals and institutions. Investment bankers also act as agents to distribute very large blocks of stocks and bonds.

Investment Company – A company which invests and trades securities, using the pooled funds of small investors, providing the investor with diversification and ease of handling.

Investment Grade – A bond with a rating (S & P, Moody’s, etc.) of BBB or above.


Junk bonds – Bonds which carry a rating from Standard & Poor’s of BB or less. These bonds are considered speculative investments. As these bonds will carry a higher coupon than investment grade bonds (bonds carrying a S & P rating of BBB or more), another name for junk bonds is high yield bonds.


Keogh Plans – Former name for business retirement plans for self-employed business owners; now used as a generic term for business retirement plans.


Limit Order – An order to buy or sell a security at a specific price or better. A buy limit order is placed below the market price. A sell limit order is place above the market price.

Liquidity – How easily one’s assets can be converted into cash. For example, a security that can’t be redeemed for 10 years is not considered liquid; however, money that can be withdrawn from an account at any time has a high degree of liquidity.

Listed Securities – Securities of companies traded on an exchange (vs. unlisted securities which trade in the OTC market).

Lump Sum Distribution – A distribution of the total account balance to an individual over a period not to exceed one calendar year.


Maintenance Call – Notice to the customer that the equity in his margin account has fallen below requirements and a deposit must be made.

Maintenance Requirement – The minimum amount of equity that must be maintained in a customer’s margin account.

Margin Account – Customers buy/sell securities using credit extended by the broker/dealer.

Margin Call – Demand that the customer deposit additional equity when the margin account falls below minimum standard levels.

Market Order – An order to buy or sell a stated quantity of a security at the current market price.

Market Risk – The risk of a decline in the price of securities because of a general falling market (also called systematic risk).

Marketability – The degree of liquidity or the ready market for a security.

Maturity Date– Date at which the face value and final interest payment of a fixed-income security is due and payable to the bondholder.

Monetary Policy – The attempt by the Fed to establish a balance in the national income and growth in the economy by controlling the size of the money supply.

Money Market – Debt securities that mature in less than one year.

Money Market Funds – Mutual funds that consist of short-term money market securities They typically include Treasury bills, federal agency notes, commercial paper, CDs and repurchase agreements.

Money Supply – The amount of money in the economy, consisting mostly of currency in circulation and deposits in checking and savings accounts.

Multiple – Price-to-earnings ratio (P/E).

Municipal Bond – Interest-bearing obligations issued by state and local governmental entities primarily to finance capital projects for the “public good”, such as schools, roads, hospitals and water/sewer systems. Interest earned on a municipal bond is free from federal income tax (and in some cases, state and local taxes).

Municipal Note – Notes issued by state and municipal governments to meet short term financing needs. They are not a source of permanent financing. Notes usually have maturities of less than one year, however they may have longer maturities. They may be issued at a discount and redeemed at par or they may pay an interest coupon, usually paid at maturity.

Municipal Security – See Municipal Bond and Municipal Note.

Mutual Fund – An investment company that makes investments on behalf of individuals or institutions with similar financial goals. The fund may invest in a variety of securities, such as stocks, bonds, and money market instruments. Mutual Funds have a low minimum investment amount, can be bought or sold any business day and provide various objectives for almost any investment needs.


Negotiable CD – A short term certificate of deposit with a face value of $100,000 or more.

Net Asset Value (NAV) – Net redemption price (bid price) of an open end investment company.

New Housing Authority Bonds – Municipal bonds issued by the Public Housing Authority (PHA). They are primary obligations of the PHA, however they also carry the full faith and credit of the United States government if PHA does not have the funds available to meet principal and interest payments.

No-load Mutual Funds – Offered directly to the public at net asset value with no sales charge.


Odd Lots – Stock transactions that involve fewer than 100 shares.

Official Statement – A document which discloses material information about a new municipal issue. It is the municipal equivalent to a prospectus.

Open End Investment Company – An investment company that continually creates and sells new shares and redeems outstanding shares. Also referred to as a mutual fund.

Operating Ratio – Operating Expense divided by Net Sales. This ratio is the complement of the Margin of Profit ratio. It shows what percentage of net sales was spent to operate the company, the Operating Expenses.

Ordinary Income – Income that does not qualify for capital gains treatment. This would include earned income such as compensation received for services, or unearned income such as interest and dividends from securities.

Over the Counter (OTC) – A market in which securities not listed on an organized exchange are traded through a telephone and computer network connecting broker/dealers. OTC stocks are generally issued by smaller companies that do not meet the listing requirements of major exchanges.

Overvalued – A stock whose current price is not justified by the earnings outlook. It is therefore expected that the stock will eventually drop in price.


Payout Ratio – The percentage of a firm’s profits paid out to shareholders in the form of dividends.

Penny Stocks – A low-priced, high risk common stock that has a short or erratic history of revenues and earnings. A penny stock usually sells for under one dollar and is highly volatile.

Portfolio – The combined securities held by an individual or institution. A portfolio may include stocks, bonds, mutual funds or other types of securities.

Preferred Stock – A class of stock that pays dividends at a fixed, specified rate and has preference over common stock in dividend payments and liquidation. Preferred stocks usually do not carry voting rights. If dividend payments are missed on a preferred stock, all missed dividends must be paid before any dividends can be paid on a common stock. Preferred stocks are generally more attractive for corporations because of favorable tax treatments.

Premature Distribution – Taken from an IRA (Individual Retirement Plan) before the age of 59 1/2 (except due to death or permanent disability). It is taxable and subject to a 10 percent penalty.

Price-to-Earnings Ratio (P/E) – Price of a stock divided by its earnings per share. A higher P/E generally implies a greater expected growth of a company’s earnings. The P/E ratio may either use the reported earnings from the latest year (called a “trailing P/E”) or employ an analyst’s forecast of next year’s earnings (called a “forward P/E”).

Prospectus – A document giving details about an offering of securities investment for sale to the public. It gives a detailed financial background of the investment, including the charges, fees and expenses of a registered product.

Public Housing Authority Bonds (PHAs) – A municipal bond issue backed by the issuing agency and secondarily by the full faith and credit of U.S. government; payable from rent collections.

Public Offering Price (POP) – Price at which a fund can be purchased by the public. It differs from the Net Asset Value (NAV) of the fund by the amount of the sales charge.


Qualified Retirement Plans – A plan using tax-deductible contributions, set up by a corporation or individual that meets the requirements of the IRS and is eligible for special tax considerations. Qualified retirement plans use “pretax” dollars. Taxes on income and earnings are deferred until withdrawn.


Real Estate Investment Trust (REIT) – Publicly traded trusts that hold title to real estate assets and pass the income stream from those assets along to the trust holders (the equivalent of shareholders). Equity REITs usually specialize by property type, such as apartments, retail shopping centers, commercial office buildings and health care facilities.

Real Estate Mortgage Investment Conduit (REMIC) – A pass through security created to issue different classes of mortgage-backed securities.

Recession – A mild decline in stock prices, business activity and employment for two consecutive quarters (six months).

Record Date – The date a shareholder’s name must be on the company register to be entitled to a dividend.

Redemption – (1) The retirement of a bond issue prior to or at maturity at or above par. (2) The shareholder’s privilege of converting his mutual fund shares into cash, normally at net asset value.

Refunding – Replacing one bond issue with another prior to maturity.

Regulation T Requirement – The minimum equity which must be deposited initially after a purchase or short sale in a margin account.

Regular Way (Normal) Settlement – Third business day after trade date for corporates and municipals, the following business day for U.S. government securities and options.

Reinvestment Risk – Risk based on the premise that customer may have to reinvest principal at a lower interest rate in the future when an investment matures.

Relative Valuation – Compares stock P/E to the market’s P/E (i.e., S&P 500). If the P/E is less than the market’s, the stock is said to be trading at a discount to the market.

Required Minimum Distributions (RMD) – The minimum distributions from an IRA (Individual Retirement Account) that an individual is required to take upon reaching age 70 1/2.

Retained Earnings – Profits after dividends that a company reinvests in its operations.

Return on Equity (ROE) – Net income divided by equity. ROE measures company profitability relative to its capital base.

Reverse Stock Split – A company can reduce the number of shares outstanding by executing a reverse split. This does not change the total value of the outstanding shares, abut each share will be worth more. For example, if you owned 100 shares of Company A at $40 per share and the stock splits 1-for-2, you would own 50 shares worth $80 each.

Rollover – The investment of funds from one retirement plan to another.

Roth IRA – An IRA that allows for tax-free withdrawals as long as the contributions remain in the account for five years, and the account holder meets on e of the following criteria: age 59 1/2, death, disability or first-time home purchase.

Round Lot Order – An order to buy or sell stock in multiples of 100 shares, the generally accepted unit of trading.


Sallie Mae (SLMA) – An agency that has authority to provide liquidity for banks, savings and loans, educational institutions, state agencies and other lenders engaged in the Federal Guaranteed Student Loan Program, and other programs that support the credit needs of students. The securities issued by Sallie Mae are not directly backed by the U.S. government, but are direct obligations of the agency itself. It is now known as SLM Holding Corporation.

Secondary Market – Purchase and sale of already issued securities.

Sector Fund – Funds that invest a large portion of their assets in the common stocks of a particular industry. The objective may be income, safety of principal or growth.

Securities and Exchange Commission – Established by the Securities Act of 1934, the SEC’s purpose is to regulate the securities industry. The SEC has jurisdiction in all securities markets, whether primary or secondary, and is charged with administering both the 1933 and 1934 Securities Acts.

Security – Any note, stock, debenture or certificate of participation.

Serial Bonds – Bonds which are issued on the same date and mature in installments.

Series EE Bond – Non-marketable U.S. Government debt available only through banks and savings and loans. They are issued at a discount from par and accrue interest until the savings bonds are redeemed at maturity. Interest is not taxable until maturity.

Series HH Bond – Non-marketable U.S. Government debt available only through banks and savings and loans. They are sold at par, and interest is paid to the investor semiannually.

Short Account (Short Margin Account) – An account in which a customer is selling a security they do not own. The customer borrows the security to sell and at a later date repurchases the same security to give back to the lender.

Short Sale – The sale of a security not owned (it is borrowed), which must be effected in a margin account.

Special Miscellaneous (Memorandum) Account (SMA) – Separate account within a margin account used to record excess equity.

Standard and Poor’s 500 (S&P 500) – Five hundred widely held common stocks whose average performance serves as a broad-based measurement of changes in stock price. Unlike the Dow Jones Industrial Average, the S&P 500 is market-value weighted vs. price weighted. The selection of stocks and publication of the index are services of Standard & Poor’s.

Shares Outstanding – Shares of a corporation that have been issued to common shareholders.

Stock Dividend – Stock distribution declared by a corporation’s board of directors paid to current shareholders of record.

Stock Exchange – Marketplace where brokers and dealers meet to buy and sell stocks of publicly traded companies on behalf of investors. Major U.S. stock exchanges include the New York Stock Exchange (NYSE), the NASD and the American Stock Exchange. The NYSE is where most of the largest, most actively traded companies in the United States are listed. Many countries have stock exchanges where shares of companies in that country are traded.

Stock Market Averages – Sampling of securities used to forecast movements of security prices.

Stock Market Indices – Measure of a large group of stocks used to forecast price movements in securities.

Stock Split – The division of outstanding shares of a corporation into a larger number of shares. A company can create more shares of stock by splitting the existing number. For example, if you owned 100 shares of Company B at $40 each and the stock splits 2-for-1, you would own 200 shares worth $20 per share. A split does not change the total value of the outstanding shares.

Stop Order – An order to buy or sell at the current market price once the stock has traded at, or through, the specified stop price. A sell stop or stop loss order is used to protect a profit or limit a loss in the event of a decline the security’s market price. A buy stop order is used to protect a short stock position if the market price rises. When the specified price is reached, the stop order becomes a market order and fills at the next available market price. The risk of a stop order is that it may be triggered by temporary market movements or may be executed at a price higher or lower than the stop price due to market orders placed ahead of it.

Stop Limit Order – A stop order that become a limit order once the stop price has been reached or passed. Once the order is triggered at the stop price, the order will fill only at the limit price or better. The risk is that the market moves through the limit price and the order is not executed because the limit price or better does not occur.

Strips – A security created by a brokerage house from a U.S. Treasury bond. The brokerage firm creates a strip by removing or “stripping” the coupon from a principal and selling each at a deep discount to investors.

Surrender Charges – Penalty charges incurred if an owner surrenders or cancels a deferred annuity contract before a specified period of time.


Tax Deferral – The obligation to pay the tax is delayed, but not eliminated.

Tax Equivalent Yield – Yield of a Municipal Bond (YTM) divided by 100 percent multiplied by the investor’s tax bracket. The yield a corporate bond would need to pay to make it competitive with a municipal bond.

Tax Shelter – Method used by investors to legally avoid or reduce tax liabilities. Legal shelters include those using depreciation of assets like real estate or equipment or depletion allowances of oil and gas exploration.

Tax Exempt – Refers most commonly to municipal bonds. Interest income on tax exempt securities is free from taxation by governmental entities. Interest income on municipal bonds has historically been exempt from federal income tax. Municipal bonds are commonly referred to as “tax-exempt bonds”.

Technical Analysis – The study of supply and demand of securities based on price and trading volume trends. Technical analysis is usually short-term in nature and involves the use of charts and/or computer programs to forecast market trends and security prices.

Tenants In Common – A form of joint ownership where, upon the death of one tenant, the decedent’s fractional interest in the account is retained by his estate.

Term Bonds – A bond issue with all the bonds having the same maturity date.

Tennessee Valley Authority (TVA) – Established by Congress in 1933 to assist in the development of the Tennessee River and adjacent areas. TVA is a wholly-owned corporate agency and instrumentality of the United States. Bonds issued by TVA carry the implied backing of the U.S. government, though they are not government-guaranteed.

Treasury Bill – U.S. Treasury securities with maturities of 1 year or less. Typically, T-bills (Treasury bills) are issued with initial maturities of 3 months, 6 months and 1 year. T-bills are issued at a discount and mature to face value.

Treasury Bond – U.S. Treasury securities with maturities greater than 10 years. They pay an interest coupon semiannually.

Treasury Note – U.S. Treasury securities with maturities of 2-10 years. They pay an interest coupon semiannually.


Undervalued – A security selling below its liquidation value or the market value that analysts believe it deserves. Fundamental analysts try to spot undervalued companies so clients can buy before the stocks become fully valued.

Uniform Gift to Minors Act – Law which allows for the transfer of assets to a minor without having to establish a trust. In most instances the Uniform Gift to Minors Act (UGMA) has been replaced with the Uniform Trust to Minors Act (UTMA).

Unit Trust – An investment in a fixed, diversified group of professionally selected stocks or bonds.

U.S. Treasuries – Direct obligations of the U.S. government, issued to finance its debt. Available in bills, notes or bonds.


Valuation – The estimated or determined market value of a stock.

Variable Annuity – Offers investors the choice of investing in one or more professionally managed stock or bond sub-accounts and a fixed account.


Wash Sale – The purchase of substantially the same security sold for a tax loss, purchased within 30 days before or after the sale. The IRS will not allow this loss.


Yield – The total income from a security divided by the total principal amount (the cost to own this stream of income). This is expressed as a percentage and may include additional calculations to adjust the stream of income for the time value of money. Yield on bonds may be expressed as current yield, yield to call and yield to maturity. For mutual funds, the current yield is calculated by dividing the fund’s dividend income for the previous 12 months by the current maximum offering price.

Yield to Call – The total annual income of a security divided by the current principal amount/market price minus the time value of the difference between the price paid and the price of the call if the bond was purchased at a price greater than the call price. If the purchase price was less than the call price, then the time value of the difference is added. This is expressed as a percentage.

Yield to Maturity – Rate of return to the investor, considering the purchase price, the time value of the investment, the total of annual interest payments and the redemption value.


Zero Coupon Bonds – Debt instruments, purchased at a discount, that mature at the stated par or face value. Pay no interest over the life of the issue, investors see their interest at maturity..