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Financial Glossary


annuities - guaranteed and variable
An annuity is an arrangement whereby the client transfers property to another in return for the other's promise to make periodic payments to the client in fixed amounts for the rest of the Client's life. These investment vehicles are typically sold by insurance companies.

A.M. Best
An organization that rates the financial stability of insurance companies.

This is the quoted “ask,?or the lowest price an investor will accept to sell a stock. In practical terms, this is the quoted offer at which you, the investor, can purchase shares of stock.

bonds - term, serial and balloon
A bond is an instrument of debt issued by a company or government to finance a certain aspect of its operation. When you buy a bond, you are essentially lending money to the institution that has issued that bond, and as a result, you are entitled to collect interest on that loan. The seller of the bond agrees to repay the principal amount of the loan at a specified time.

There are two basic types of investment brokers: Full-service brokers offer advice and usually have a full staff of analysts who follow specific industries. Discount brokers execute a client's order, but do not usually offer investment advice.

This option contract gives the investor holding the option the right to buy at a fixed price within a certain timeframe. It also obligates the writer to sell, a specified number of shares of the underlying stock at the given strike price, on or before the contract's expiration date.

Certificate of Deposit (CD)
CDs pay interest to investors for as long as five years. They offer a fixed return rate and are generally insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC).

The fee a broker collects for administrating a trade, based on the number of shares, bonds, options and/or their dollar value.

A commodity is food, a metal or another physical substance that investors buy or sell, usually via futures contracts.

Commodities Futures Trading Commission
It is against the law for any person or firm to offer futures contracts for purchase or sale unless those contracts are traded on one of the nation's regulated futures exchanges, and unless the person or firm is registered with the Commodities Futures Trading Commission (CFTC).

The rate of interest on a bond, expressed as a percentage of par. The coupon is established at the time of issue and is determined by the then prevailing level of interest rates in the marketplace.

covered put
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside.

A financial security, such as an option or futures contract, whose value is derived in part from the value and characteristics of an underlying security.

The Electronic data gathering and retrieval system used by the sec to transmit company documents to investors. Those documents, which are available via dbc's smart edgar service, include 10qs, 8ks (significant developments such as the sale of a company division or business unit) and 13ds (disclosures by parties who own 5 percent or more of the company's shares).

The value of the common stockholders' equity in a company as listed on the balance sheet.

The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National Association of Securities Dealers (NASDAQ).

fixed-income securities
Securities with specified payment dates and amounts, primarily bonds and preferred stock.

Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. A future is a type of derivative. There are two types of futures contracts, those that provide for physical delivery of a particular commodity or item and those which call for a cash settlement. The month during which delivery or settlement is to occur is specified.

"going long"
This term applies to any type of derivative investment and essentially means buying to profit from an expected price increase.

"going short"
This term applies to any type of derivative investment and essentially means selling to profit from an expected price decrease.

Investors who attempt to minimize the risk of financial loss from adverse price changes by assuming futures positions opposite to cash positions.

index funds
Mutual funds holding portfolios that attempt to duplicate a market average such as the S&P; 500.

The economic environment of rising prices and resulting decline in the buying power of the dollar, sometimes the result of excessive government spending.

initial margin
An initial margin is the good-faith deposit required to activate your account, whether you are using a brokerage firm or administering your own account.

investment portfolio
This is a term used to describe all the investments you own ?bonds, mutual funds, stocks and so on. A diversified portfolio contains a variety of investments.

The practice of investing with borrowed money to increase potential profit. For example, if you invest $5,000 and earn a 20 percent return, your profit is $1,000. If you invest $5,000 and borrow another $5,000 for a total of $10,000, you earn $2,000 (minus interest costs). A word of caution: Remember, leverage works both ways. If your investment loses money, leverage can magnify your losses.

maintenance margin
A maintenance margin will be required if your margin account falls below the required amount due to your investment losses. When this occurs, a margin call is issued , and you are required to deposit additional funds to bring the account back to the amount of the initial margin. Depending on your brokerage firm, you may be asked to deposit the funds, via wire transfer or certified/cashier's check, either same day or by the next day.

money-market products
Money-market investments provide investors with maximum current income consistent with maintaining stability of capital and liquidity. These products include short-term, highly liquid, low-risk assets such as U.S. Government and agency securities, certificates of deposit, guaranteed investment contracts and so on.

municipal bond
State or local governments offer municipal bonds to pay for special projects, such as highway or sewer construction or improvements. The interest that investors receive is exempt from certain income taxes.

mutual fund
A fund managed by an investment company that raises money from individuals and invests it in stocks, bonds, commodities Cheap iphone 4S cases, or money market securities. It is professionally managed for the benefit of the shareholders. Each of your shares in the fund represents part ownership of many different stocks, bonds, options, commodities, or money market securities.

Net Asset Value (NAV)
The per share value of an investment company, based on its portfolio. It is equal to the market value of the portfolio held by the company, divided by the number of its shares outstanding. The NAV is calculated at the close of trading.

net worth
The difference between your total assets and total liabilities. Banks consider your net worth carefully when deciding whether or not to lend you money. It is believed that your net worth conveys an accurate indication of whether or not you can repay a loan.

These contracts give the holder the right to buy or sell securities at a set price or a set period of time Investors often use them to protect, or hedge, an existing investment. An option contract is a type of derivative.

An option to sell a specified number of shares of stock at a specified price within a nine-month period.

The chance that the return on a given investment will be different than the expected return.

The Securities and Exchange Commission (SEC) is the main federal regulatory body of the securities industry.

short sale
The sale of a stock not owned in order to take advantage of an expected stock price decline. If the price declines, the stock can be purchased and the short position closed.

An ownership interest in a company, also known as “shares?in a company. When you own stock in a company, you are a shareholder and may be entitled to receive dividends if the company is profitable.

treasury bill (T-bill)
Treasury bills (T-bills), guaranteed by the U.S. Government, and are issued at a discount and pay no interest, but receive full face value if held until maturity. T-bills are short-term securities with a maturity that is less than a year.

treasury bond
Treasury bonds, guaranteed by the U.S. Government, and are issued at a discount and pay no interest, but receive full face value if held until maturity. Treasury bonds have a scheduled maturity of more than 10 years.

treasury note
Treasury notes, guaranteed by the U.S. Government, and are issued at a discount and pay no interest, but receive full face value if held until maturity. Treasury notes have a scheduled maturity of one to 10 years.

universal life insurance
Life insurance with an investment component as well as a death benefit. You, the policyholder, have the right to increase or decrease the investment amount.

variable life insurance
This is also a type of life insurance that has an investment component as well as a death benefit. The main difference from universal life insurance is that you may select the types of investment vehicles as well as determining the investment amount.

Generally, the total proceeds from an investment in a stock or bond, calculated as a percentage of the amount invested.

zero-coupon bond
A bond sold with no coupons. This type of debt security pays an investor no interest. It is sold at a discount to its face value and matures in one year or longer.

An annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. It must be filed within 90 days after the end of the fiscal year. A 10Q report is filed quarterly for the same purpose.




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