Glossary of Investment Terms

ASSET ALLOCATION
The process of apportioning investments among various asset classes, such as stocks, bonds, commodities, real estate, collectibles and cash equivalents. Asset allocation affects both the risk and return of investors, and is often used as a core strategy in basic financial planning.

ASSET CLASS
Refers to the categorization of an asset. Examples of key asset classes include stocks, bonds, commodities, currencies, real estate, collectibles, and cash.

AUTHORIZED PARTICIPANTS
This term refers to large financial institutions, such as specialist firms and market makers, which are involved in the creation and redemption activity of exchange-traded funds.
 
ASK
This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock.
 
ASSET ALLOCATION
The process of apportioning investments among various asset classes, such as stocks, bonds, commodities, real estate, collectibles and cash equivalents. Asset allocation affects both the risk and return of investors, and is often used as a core strategy in basic financial planning.

ASSET CLASS
Refers to the categorization of an asset. Examples of key asset classes include stocks, bonds, commodities, currencies, real estate, collectibles, and cash.

AUTHORIZED PARTICIPANTS
This term refers to large financial institutions, such as specialist firms and market makers, which are involved in the creation and redemption activity of exchange-traded funds.

BALANCED MUTUAL FUND
This is a fund that buys common stock, preferred stock and bonds.
 
BASIS POINT
Measurement used to quote bonds. One basis point is equal to 0.01%, or one one-hundredth of one percent. 100 basis points is equal to 1%, whereas 50 basis points would equal one half percent, or 0.50%.

BASKET
A unit or group of securities. ETFs are some times referred to as baskets.

BENCHMARK
A standard index used for measuring the performance of an investment. The goal of most money managers and investors is to outperform their respective benchmark.

BID ASK SPREAD
The difference between what a buyer is willing to pay (bid) for a security and the seller’s offer (ask) price.

BETA
This measures the volatility of a share of stock. A high beta stock, for example, will rise more in value than the stock market average on a day when shares in general are rising. And it will fall more sharply than the average on a day when shares are falling. The Standard & Poor's 500 Index of stocks, an index that represents large-company stocks, has a beta of 1.
 
BOND
A debt instrument issued by corporations and governments to raise capital. Interest on the outstanding debt is paid to bondholders at specific intervals, with the principal amount of the loan paid on the bond maturity date.

BREAKPOINTS
Mutual funds with front-end loads, or a sales charge, enable investors to reduce front-end sales charges as the amount of that investment increases to certain levels called "breakpoints". Each prospectus will have details on the breakpoints used to reduce the front-end sales charge.

BUY PRICE
Enter here the price you paid for a security. If, for example, you paid 8 1/4 a share for a security, enter 8 1/4.

CLOSED-END FUNDS
A closed-end fund sells a fixed number of shares to investors. Those shares sell on an exchange and vary in price, depending on demand for the fund. A fund's shares, for example, can trade below their net asset value or above their net asset value - depending on investors' demand for the shares. Country funds that represent shares in a specific country or region, such as Italy or France, are often closed-end funds.

CLOSET INDEX FUND
An actively managed fund that closely mimics the volatility and performance of an index fund.

CHICAGO BOARD OPTIONS EXCHANGE (CBOE)
Founded in 1973 the CBOE changed options trading by creating standardized listed stock options. Prior to this time, trading options was largely unregulated and did not conform to the principle of "fair and orderly markets." The CBOE lists options on interest rates, individual stocks, and ETFs. The exchange is located in downtown Chicago, IL.

COMMISSION
This is a fee an investor pays a broker for buying or selling securities.

COMMODITY INDEXES
Indexes that measure either the price or performance of physical commodities, or the price of commodities as represented by the price of futures contracts listed on the commodity exchanges.

CONTRARIAN
Describes an investor that believes and does the exact opposite of what the majority of investors are doing at any given moment. For example, contrarians might perceive value in a stock or index that is out of favor, or has performed poorly. Whereas most investors would avoid an out of favor investment, contrarians would buy it in hopes of a turn around or change in market sentiment.

COMMON SHARES
These are securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.

CONSUMER  PRICE INDEX
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI every month.

CREATION UNIT
The smallest block of shares in an exchange-traded fund that can be purchased or redeemed directly from the fund company at net asset value. Creation units are usually transacted in 50,000 share increments, making them large dollar transactions limited to large institutions and other authorized participants. Instead of receiving cash, the seller of a creation unit would receive a basket of securities that corresponds to the portfolio holdings in a particular ETF. This “in-kind” transfer process is unique to ETF’s and does not create tax consequences for the seller.

DILUTED EARNINGS
A calculation that includes stock options, warrants and convertible securities to get per-share earnings.

DISCOUNT TO NAV
The price discount or difference between a fund’s net asset value (NAV) and the actual value of its portfolio holdings. Some closed end funds and ETFs may trade at a discount to NAV.

DIVIDEND
Distribution of earnings paid out to shareholders. With mutual funds and ETFs, dividends can be a result of capital gains, interest income, or dividends paid to the fund itself by securities within the portfolio. Dividends are often paid quarterly, but the frequency can be less and is determined by fund management.

DIVIDEND YIELD
The distribution rate of a fund calculated by dividing the amount of the dividends per share by the per share market price of the fund. For example, a fund price of $20 that pays a $2 dividend per year has a 10% dividend yield.

DOW JONES INDUSTRIAL AVERAGE (DJIA)
The DJIA is a widely followed barometer of U.S. stock market performance. The average is stock price weighted and measures 30 major companies in diversified industries, such as banking, consumer staples, retail, healthcare, and technology.

EARNINGS PER SHARE (EPS)
EPS, as it is called, is a company's profit divided by its number of shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share.

EX-DIVIDEND
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend.

EAFE INDEX
European, Australia, and Far East index computed and published by Morgan Stanley Capital International. (MSCI)

EFFICIENT MARKET
A market theory that dissuades investors from using fundamental research to find undervalued or mis-priced securities. The central idea is that market prices already reflect the full knowledge of investors, which makes it impossible to outperform the market.

EMERGING MARKET
Refers to the financial markets or economy of a developing nation, which is often new, immature or has a short history.

ENHANCED INDEXING
This market strategy seeks incremental outperformance of a benchmark index without changing the profile characteristics of the index. By using leverage, options trading, or another mechanism, enhanced indexing offers the potential of outperforming a benchmark index.

EQUAL WEIGHT INDEX
This is an index strategy that weights all securities inside an index equally. In other words, all index components are given equal representation and have the same impact on the performance and volatility of the index.

EXCHANGE TRADED FUND (ETF)
ETFs are low cost index mutual funds that trade like stocks. Inexpensive, tax-efficient, and flexible, they offer investors instantaneous exposure to local or global indexes via a single trade. ETFs are sometimes referred to as "tracking stocks."

EXCHANGE TRADED NOTE (ETN)
ETNs are debt securities that are linked to stock, bond, currency, or commodity indexes. Investors that opt to keep their ETN to maturity receive a cash payment calculated from the beginning trade date to the ending period, or maturity date. Applicable fees are deducted and can reduce the value of the payment. ETNs can also be sold prior to maturity on the exchange where they trade or they can be redeemed in large blocks.

EXPENSE RATIO
The percentage of a fund's average net assets used to pay its annual expenses. The expense ratio includes costs for investment management, fund administration, and 12b-1 fees. The expense ratio is automatically deducted by the fund company and does not include the cost of acquiring a fund.

FEDERAL FUNDS RATE
This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates.

FINRA
The Financial Industry Regulatory Authority (FINRA), is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,100 brokerage firms, about 173,000 branch offices and more than 676,000 registered securities representatives. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

FUND OF FUNDS
Investment strategy that seeks to diversify risk exposure and manager style among various fund managers. Potential pitfalls include a lack of transparency and an added layer of fees. This strategy is popular with hedge fund investors looking to diversify risk among various fund groups.

FUND FLOWS
Describes the money flow into or out of mutual funds and ETFs. The Investment Company Institute (ICI) tracks and reports monthly fund flow data.

FUND OVERLAP
Fund overlap refers to the duplication in owning two or more ETFs or mutual funds that have the same identical securities and/or underlying investment strategy. Investors are effectively paying twice for double work. They pay one fund company to execute an investment strategy and then they pay again to a competing fund to do the exact same work.

FUNDAMENTAL INDEXING
This is an index strategy that weights securities inside an index by key fundamentals, such as sales, book value, dividends, or security price.

GLOBAL FUND
A type of mutual fund, closed end fund, or ETF designed to give exposure to any international or emerging market, including the United States.

GLOBAL DEPOSITARY RECEIPT - GDR
A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches.

GOLD FUND
A type of mutual fund or ETF designed to give exposure to gold related securities. This can include stocks in companies engaged in the production, processing, or mining of gold. Often used to hedge against inflation and currency risks.

GOVERNMENT SECURITIES
Securities issued by U.S. government agencies and international governments. U.S.Treasuries are generally considered the safest, because they are backed by the full faith and credit of the government.

GRANTOR TRUST
This type of fund structure distributes dividends directly to shareholders and allows investors to retain their voting rights on the underlying securities within the fund. The original fund components of the index remain fixed and this ETF structure is not registered under the SEC Investment Company Act of 1940. Merrill Lynch's HOLDRs follow this format.

GROWTH AND INCOME FUND
A mutual fund, closed end fund, or ETF with both the growth of capital and income as the primary investment objective.

GROWTH FUND
A mutual fund, closed end fund, or ETF with the growth of capital as the primary investment objective.

GROWTH STOCK
The stock of a company whose business is considered recession-resistant and also possesses an above-average growth rate.

HEDGE
An investment strategy used to reduce financial risk or the possibility of loss. For example, an investor owning stocks could hedge those long positions by owning protective options or short equity funds.

INCOME FUND
An income fund can be a mutual fund, closed end fund, or ETF that has generating income, as the primary investment objective. Income can be derived from various sources, including interest, dividends, and capital gains.

INDEX
An index is a tracking device or statistical measure used to gauge the aggregate performance of financial markets.

INDEX FUND
A mutual fund or ETF that seeks to match the exact performance of a specific market or benchmark index. Index funds are sometimes referred to as passive funds, and are popular for their tax efficiency and low fees. Popular index funds include those that track the S&P, Russell, and Dow Jones indices.

INDEXING
Indexing is an investment strategy that seeks to match the performance of a specific financial market or benchmark index.

INDEX STRATEGY BOX
A financial tool that categorizes exchange-traded funds (ETFs) and related products into nine grid shapes with each shape representing a specific index strategy. The vertical axis groups index strategies into three broad methods for selecting securities: passive, screened, and quantitative. The horizontal axis categorizes index strategies into three broad security weighting methods: market capitalization, fundamental, and fixed/equal weight.

INDEX OPTIONS
Calls and puts on stock or bond indexes. Index options allow investors to trade a particular market sector or index of securities, without having to make individual purchases of each security in that sector. Index options are listed on various exchanges, including the American, New York, and Chicago Board Options Exchange.

INVERSE FUNDS
See "Short Funds."

INVESTMENT COMPANY INSTITUTE (ICI)
The Investment Company Institute (ICI) is the national association of the U.S. investment company industry. Founded in 1940, its membership includes approximately 8,664 mutual funds, 601 closed-end funds, 106 exchange-traded funds, and six sponsors of unit investment trusts.

INVESTMENT COMPANY ACT OF 1940
This Act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. The regulation is designed to minimize conflicts of interest that arise in these complex operations. The Act requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis. The focus of this Act is on disclosure to the investing public of information about the fund and its investment objectives, as well as on investment company structure and operations.

INVESTMENT GRADE
Bonds whose issuers are rated AAA to BBB for safety and ability to repay principal by Standard & Poor’s or Moody’s Investors Service.

INVESTMENT STYLE
Indicates the approach of an investment manager in selecting securities. For example, a certain manager may be value oriented, whereas another may emphasize growth.

INITIAL PUBLIC OFFERING
An IPO is stock in a company that is being traded on an exchange for the first time. Investors first read a prospectus that describes the potential of the company and the risks of investing in it.

JUNK BONDS
A bond with a speculative credit rating of BB or lower is a junk bond. Such bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poor's and Moody's Investor Services, provide the rating systems for companies' credit.

LARGE CAP
Refers to companies with a market capitalization over $5 billion.

LEVERAGE
Margin and use of option contracts are forms of leverage which allow investors to enhance their returns without adding to their investments.

LIQUIDITY
Ability to rapidly buy or sell an asset without substantially affecting the asset’s price. ETFs with limited trading activity are generally not considered liquid because a large buy or sell order can dramatically impact the price and volatility. Liquidity also refers to the relative ease with which an asset can be converted into cash.

LEAP
A LEAP is a long-term option contract for a company's stock. They usually run for one year or more and are available on several U.S. exchanges.

LIMIT ORDER
Investors can place an order to buy or sell securities at a set price. The trade can take place only at that price or a lower one.

LONG
Investors who go "long" simply own stock or another security. It is a term that means the opposite of "short," in which investors are short a stock or security because they have borrowed it and sold it to someone else.

LOW PRICE
This is the day's lowest price of a security that has changed hands between a buyer and a seller.

MARGIN
This allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes.

MARKET CAP
This is the company's market capitalization. If a company has 10 million shares and the company's shares are selling for $10, the market cap is $100 million.

MARKET ORDER
This is an order to buy or sell a security at the current trading price.

MID CAP
Refers to companies with a market capitalization between $1 billion and $5 billion.

MSCI
Morgan Stanley Capital International, Inc. (MSCI) distributes index and company-level data and also licenses the MSCI indices to third parties for the purposes of creating Mutual Funds, listed and OTC derivatives, ETFs, and other products.

MOMENTUM
The rate of acceleration of an economic, price or volume movement. An economy with strong growth that is likely to continue is said to have momentum.

MONEY MARKET
Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S. government bonds, Treasury Bills and commercial paper from banks and companies.

MONEY SUPPLY
The stock of money in the economy, consisting of currency in circulation and deposits in checking and savings accounts. M1, M2 and M3 represent money and near-money.

MOVING AVERAGE
A moving average is an average of a security's price over a specific time period. The average changes, for example, on a 30-day moving average, so that it includes the most current 30 trading days. Moving averages often indicate levels of support or resistance for a security.

MUNICIPAL BOND
State or local government offer muni bonds, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.

MUTUAL FUND
Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge.

NASD
See "FINRA."

NASDAQ
NASDAQ is the largest U.S. electronic stock market and the primary market for trading NASDAQ-listed stocks. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to companies that are leaders across all areas of business, including technology, retail, communications, financial services, transportation, media and biotechnology.

NEW YORK STOCK EXCHANGE
Located on Wall Street in New York, this is the oldest and largest stock exchange in the U.S. In 2007, the NYSE Group and Euronext combined forces to bring together major marketplaces across Europe and the United States. Also known as the “Big Board”, or “NYSE Euronext.”

NET ASSET VALUE
Listed as NAV in mutual fund listings, net asset value is the market value of a fund's shares. It is calculated at the close of trading.

OPEN END INVESTMENT COMPANY
See Mutual Fund

OPEN END INDEX FUND
This type of fund structure reinvests dividends the date of receipt and pays them out via a quarterly cash distribution. This ETF structure is also permitted to use derivatives, loan securities and it’s registered under the SEC Investment Company Act of 1940. ETFs that utilize this legal structure include iShares and the Select Sector SPDRs.

OPEN-END MUTUAL FUND
A fund that sells its shares at net asset value is an open-end fund. It creates shares as investors demand them. Investors buy the shares at their market price. Most mutual funds are open-end funds. Those that aren't are closed-end funds that sell a fixed number of shares to investors.

OPEN ORDER
An open order is any order to buy or sell securities that has yet to be executed.

OPTIONS
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 is part of a class of securities called derivatives, so named because these securities derive their value from the worth of an underlying investment.

OVER-THE-COUNTER
The O-T-C market is for securities not listed on a stock exchange.

PASSIVE MANAGEMENT
A market strategy that involves selecting a benchmark index to assure investment performance is the same as the underlying index. Passive investing assures that an investor will not underperform (or outperform) a market index. Passive management is opposite of active management.

PERFORMANCE DRAG
A reduction of portfolio performance due to various factors. An example of performance drag occurs when gains within a portfolio are offset by various expenses, such as management fees, transaction costs, research costs, etc. These expenses create a drag or negative effect on the portfolio’s performance.

PORTFOLIO TURNOVER
Relates to the frequency with which a money manager is buying and selling securities within a fund. High portfolio turnover translates into higher trading costs whereas low portfolio turnover is better because it lessens the impact of trading and tax related costs.

PREMIUM TO NAV
The price premium or difference between a fund’s net asset value (NAV) and the actual value of its portfolio holdings. Some closed end funds and ETFs may trade at a premium to NAV.

PROSPECTUS
Required by securities laws and issued by mutual fund companies and ETFs, the prospectus is a legal document that discloses the investment objectives of the fund, operating history, fund management, management fees, portfolio holdings, and other related financial data. Brokers are required to give a prospectus to investors before they invest.

PREFERRED SHARES
Preferred shares give investors a fixed dividend from the company's earnings. And more importantly: preferred shareholders get paid before common shareholders.

PREMIUM
This generally refers to extra money an investor is willing to pay to buy or sell something. For a bond, a premium is the amount for which the security sells above its par value. For a stock, a premium is the amount that a security's price exceeds those of its peer group, or comparable stocks.

PRIME RATE
The interest rate banks charge, determined by market forces affecting a bank's cost of funds and the rates the borrowers will accept. This rate tends to become standard for the banking industry when a major bank raises or lowers its rate.

P/E
A stock has a price-to-earnings ratio: the share price divided by earnings per share for the company's most recent four quarters. A projected P/E divides the share price by estimated earnings per share for the coming four quarters.

PUT OPTION
This security gives investors the right to sell fixed number of shares at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

RUSSELL INDEXES
In 1984, Frank Russell Company created the Russell family of stock indexes as part of a comprehensive system for evaluating the performance of investment managers. Russell now maintains a diverse menu of domestic and global equity indexes.

R2
R squared measures the correlation of a fund’s movement in comparison to its category benchmark. An R squared score of 1.00 would indicate a perfect correlation, whereas a score of 0.00 indicates no correlation.

RECORD DATE
The date on which a shareholder must officially own shares in order to be entitled to a dividend. After the date of record the stock is said to be ex-dividend.

RELATIVE STRENGTH
Stocks which have been strong relative to all other stocks should continue to be relatively stronger in the future and securities which have been relatively weak tend to continue to be weaker.

RETURN ON EQUITY
Return on equity measures the return, expressed as a percentage, earned on a company's common stock investment for a specific period. It is calculated by common stock equity, or a company's net worth, into net income. The calculation is performed after preferred stock dividends and before common stock dividends. The figure shows investors how well -- how effectively -- their money is being used by managers.

SECURITY
This piece of paper proves ownership of stocks, bonds and other investments.

SELL PRICE
Enter here the price you received when you sold a security. If you received $10 for a share that you sold at 10, then enter 10.

SETTLEMENT DATE
In U.S. financial markets, an investor must pay for the purchase of shares by the third business day after he or she buys securities. And an investor must deliver an investment that he or she has sold by the third business day after the transaction.

SHAREHOLDERS' EQUITY
This is a company's total assets minus total liabilities. A company's net worth is the same thing.

SHARES
Enter here the number of shares you own. If you bought shares of a specific security at different times and various prices, enter the total number of shares here and enter the average price for the purchases under Buy Price.

SECTOR ROTATION
A strategy that uses elements of market timing to identify business sectors of the economy that are in a position to either under or outperform. For example, if an investor owned the iShares Dow Jones U.S. Utilities ETF (AMEX: XLU), but felt this index was ready to underperform versus other sectors, one might consider selling this holding in favor of another one with a better outlook. In short, this particular investor would be exiting or rotating out of one sector for another.

SECURITIES AND EXCHANGE COMMISSION (SEC)
Federal agency created by the Securities Exchange Act of 1934 with the primary mission of protecting investors and maintaining the integrity of the securities markets. The SEC has five Commissioners who are appointed by the President of the United States with the advice and consent of the Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year.

SEC YIELD
A yield calculation developed by the SEC to standardize yield data for mutual funds, close-end funds, and ETFs. The calculation uses the fund’s net investment income over the last 30 days, minus income generated from capital gains or other sources. SEC yields are often quoted for bond funds.

SHARE CLASSES
Some mutual funds use multiple share classes for the same underlying portfolio. For example, Class A shares would allow an investor to pay an upfront sales charge to enter a fund, whereas a Class B share would defer the sales charge based on how long the investor stays in the fund. Some mutual fund families only offer conventional share classes. Others, like Vanguard’s VIPERs are offering ETF versions of their funds.

SHARPE RATIO
A measure of a fund’s historical returns adjusted for risk or volatility. The calculation is fund return minus the return on 3-month treasury bills divided by the fund standard deviation.

SHORT FUNDS
Short ETFs and funds are designed to increase in value when a certain stock, bond, or currency market declines in value.

SMALL CAP
Refers to companies with a market capitalization between $1 billion and $250 million.

STANDARD DEVIATION
A measure of the degree to which a fund's return will vary from its historical returns or from the average of similar funds. Large standard deviations indicate greater risk and performance fluctuations from the average return.

STYLE DRIFT
Style drift happens when a fund diverts from its prospectus defined investment strategy to pursue another course.

SHORT SALE
Investors who borrow stock and sell it to someone else are betting the shares go down in price. Then, they can buy back the stock at a lower price and pocket the difference as profit. Going "short" is the opposite of going "long," or owning shares for the long haul.

SHORT INTEREST
This is the total number of shares of a security that investors have sold short -- borrowed, then sold in the hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

SPLIT
Sometimes, companies split their outstanding shares into larger number of shares. If a company with one million shares did a two-for-one split, the company would have two million shares. An investor, for example, with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same.

SPREAD
This is the gap between bid and ask prices of a stock or other security.

STOCK TICKER
This is a lettered symbol assigned to securities and mutual funds that trade on U.S. financial exchanges.

SYMBOL
This is the ticker symbol of the security. New York Stock Exchange and American Stock Exchange tickers, for example, are three or fewer letters. Example: Ford is F. Nasdaq tickers are four and sometimes five letters. Example: Data Broadcasting Corp. is DBCC. Mutual Fund tickers end with the letter "X." Options tickers have their own help tables.

TICK
This refers to a change in the price of a security. An uptick occurs when the last trade in a security takes place at a higher price than the prior trade. A downtick occurs when the last trade in a security takes place at a lower price than the prior trade. An indicator may be fashioned from the difference between the number of NYSE issues showing upticks on the last trade and the number of NYSE issues showing downticks on the last trade. This indicator is known as the TICK, and is found on many quote screens. A TICK of +236 means 236 more NYSE issues last traded on upticks than those trading on downticks.

TAX LOSS HARVESTING
This market strategy focuses on selling a portfolio's worst performing security to 1) offset realized capital gains of winning securities, and 2) to reinvest the sale proceeds into securities with a similar investment objective or correlation.

TRANSPARENCY
Refers to the visibility level of securities holdings within a given portfolio or fund. Generally, the transparency of an index fund will be greater than an actively managed fund. This is due to the fact that holdings within an index fund are openly disclosed and available.

TECHNICAL ANALYSIS
An attempt to predict the performance of a security by spotting trends in price, without regard to the underlying fundamentals, such as cash flow and balance sheet. Sometimes referred to as “charting”.

TICKER SYMBOL
The lettering system used to identify a stock, mutual fund, or ETF on an exchange. Also called trading symbols.

TURNOVER
Relates to the frequency with which a money manager is buying and selling securities within a fund portfolio. High turnover translates into higher trading costs, which fund investors must pay. Low portfolio turnover is better because it lessens the impact of trading and tax related costs.

TRADE SIZES
On most trading screens, investors can see the amount of stock available for buyers and sellers. In a stock with a bid price of 18 and an ask price of 18 1/2, for example, a trade size of 10x5 indicates that investors have bids in to buy 10 blocks of 100 shares at the price of 18. Sellers, on the other hand, are willing to sell five blocks of 100 shares at 18 1/2.

TRADING HALT
Trading of a stock, bond, option or future contract can be halted by an exchange while news is being broadcast about the security.

TRIPLE-WITCHING
This occurs on the third Friday of March, June, September and December when futures and stock options, based on the S&P 500 index, all expire on the same day.

UNIT INVESTMENT TRUST
This type of fund structure does not reinvest dividends in the fund and pays them out via a quarterly cash distribution. In order to comply with diversification rules, this ETF structure will sometimes deviate from the exact composition of a benchmark index. This type of fund is registered under the SEC Investment Company Act of 1940. The “Dow DIAMONDS”, PowerShares QQQ Trust, and S&P 500 “SPDRs” follow this format.

U.S. TREASURY BILL
U.S. government debt with a maturity that is less than a year is a bill.

U.S. TREASURY BOND
U.S. government debt with a maturity of more than 10 years is a bond.

U.S. TREASURY NOTE
U.S. government debt with a maturity of one to 10 years is a note.

VALUE
This is the current price of the security multiplied by the number of shares you own. If you own 1000 shares of Apple Computer, and the shares are selling for $25, the value should be $25,000.

VALUE STOCK
A stock perceived by the marketplace to be undervalued based on criteria such as its price-to-earnings ratio, price-to-book ratio, dividend yield, etc.

VOLATILITY
This describes the fluctuations in the price of a stock or other type of security. If the price of a stock is capable of large swings, the stock has a high volatility. The pricing of options contracts depends in part on volatility. A stock with high volatility, for example, commands higher prices in the options market than one with low volatility. Volatility may be gauged by several measures, one of which involves calculating a security's standard deviation. Stock investors sometimes prefer to measure a stock's volatility versus that of an index, such as the Standard & Poor's 500 Index. This is known as a stock's beta. A beta of 1.2 implies a stock that is 20% more volatile than the S&P 500. When the S&P rises 10%, the stock is expected to rise 12%.

VOLUME
This is the daily number of shares of a security that changes hands between a buyer and a seller.

WARRANT
This piece of paper gives an investor the right to purchase securities at a fixed price within a fixed time span. Warrants are like call options, but with much longer time spans -- sometimes years.

WASH SALE RULE
An IRS tax rule that prohibits claiming a loss on the sale of an investment if it or a substantially identical investment is purchased within 30 days before or after the sale.

WINDOW DRESSING
Denotes the selling weak of performing stocks or bonds by money managers just before the end of each reporting quarter, so they don't appear as significant investment positions. This selling activity is often accompanied with buying activity of strong performing stocks and bonds. After quarterly reports are issued, the portfolio will reveal holding positions in strong performing stocks and bonds, despite the fact that the majority of the capital gains in these were never experienced by shareholders. Window dressing is a cosmetic affect and adds little or no value.

YEAR-TO-DATE (YTD)
The period beginning at the start of the calendar year up until the most current date.

YIELD CURVE
A graph that illustrates the relationship between the yields of bonds with the same credit quality, but with varying maturities. A positive yield curve means short term interest rates are lower versus long term rates. A negative yield curve is just the opposite, whereas a flat yield curve shows little variance in the yields of short term bonds versus long term bonds.

YIELD SPREAD
The difference in yield between bonds.

YIELD TO MATURITY
The rate of return received by an investor for holding their securities to their maturity date.

ZERO COUPON BOND
Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer.

12b-1 FEE
12b-1 fees, also known as distribution fees, are one component of a mutual fund's annual fund operating expenses and can be thought of as an alternate way of paying sales-related expenses, such as compensating investment professionals. A fund can have 12b-1 fees only if its board of directors has approved a 12b-1 plan authorizing their payment.