It is highly recommended that you review the videos of the investment tools at least on your entry into the program. After that, you will be able to refer back to them at anytime by clicking the “video” button at the bottom of the page.
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Listed below is our glossary subdivided into the six alphabetical chapters. We invite you to use this resourse to better understand the terminology used in this website. |
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Fair Credit Reporting Act: A federal law that limits who can see your credit report. Current legislation holds that a credit reporting agency may furnish a credit report only under specific circumstances.
Fair market price: Amount at which an asset would change hands between two parties, both having knowledge of the relevant facts.
Federal agency securities: Securities issued by corporations and agencies created by the U.S. government, such as the Federal Home Loan Bank Board and Ginnie Mae (Government National Mortgage Association).
Federal credit agencies: Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g. Savings & Loans Associations, small business firms, students, farmers, and exporters.
Federal Deposit Insurance Corporation (FDIC): A federal institution that insures bank deposits.
Federal funds rate: The interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.
Federal Home Loan Banks: The institutions that regulate and lend to savings and loan associations.
Federal National Mortgage Association (Fannie Mae): The publicly owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages.
Federal Reserve System: The central bank of the U.S., established in 1913, and governed by the Federal Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding companies, international operations of U.S. banks, and U.S. operations of foreign banks.
Fiduciary: A responsible person, company or association holding assets for another party, often with the legal authority and duty to make decisions involving financial matters on behalf of the other party.
Fill or kill order: A trading order that is canceled unless executed within a designated time period.
ill price: The price at which an order is executed.
Financial analysts: Also called securities analysts and investment analysts, professionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks.
Financial Planner: Investment professional who analyzes personal financial circumstances and prepares a strategy to meet financial needs and objectives.
Financial ratio: The result of dividing one financial statement item by another.
Financial risk: The risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity.
FINEX: The financial futures and options division of the New York Cotton Exchange (NYCE).
Fiscal policy: The use of government spending and taxing for the specific purpose of stabilizing the economy.
Five "Cs" of credit: Five characteristics that are used to form a judgment about a customer's creditworthiness: character, capacity, capital, collateral, and conditions.
Fixed annuity: Contracts in which the insurance company or issuing financial institution pays a fixed dollar amount of money per period.
Fixed asset: Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition.
Fixed cost: A cost that is fixed in total for a given period of time and for given production levels.
Fixed-income security: A security that pays a specific interest rate, such as a bond, money market instrument or preferred stock.
Fixed-rate loan: A loan where the rate paid by the borrower is fixed for the life of the loan.
Float: The number of shares of a corporation that are outstanding and available for trading by the public, excluding insiders or restricted stock on a when issued basis.
Floor broker: Member of an exchange who is an employee of a member firm and executes orders, as agent, on the floor of the exchange for clients.
Floor trader: A member of a stock exchange who generally trades only for his own account, for an account controlled by him or who has such a trade made for him.
Foreign currency option: An option that conveys the right (but not the obligation) to buy or sell a specified amount of foreign currency at a specified price within a specified time period.
401(k): A 401(k) is a retirement plan funded by employee contributions and in some cases by employer contributions. 401(k) plans have many desirable features: Deductions can be set up automatically with your employer; contributions grow tax-free until withdrawn; contributions can reduce your taxable salary; after-tax contributions are also possible; and your balances are portable - you can take it with you when you change jobs.
403 (b) plan: A 403(b) is a defined contribution retirement program created for employees of certain tax-exempt employers. Named after the relevant section of the Internal Revenue Code, the 403(b) covers many teachers, non-profit, religious and scientific workers. Contributions and investment earnings in a 403(b) grow tax-deferred until withdrawal.
457 plan: Tax code section 457 provides rules to govern all non-qualified deferred compensation plans of governmental employees and non-church controlled tax-exempt organizations. The pension plan designed to comply with these rules is simply referred to as a Section 457 plan. Employees are allowed to defer compensation on a pre-tax basis through payroll deductions that further allows them to defer federal and sometimes state taxes until the assets are drawn.
457 (b) plan: A 457(b) plan is a non-qualified tax-deferred compensation plan that works very much like other retirement plans such as the 403(b) and 401(k). Created in 1978, the name refers to the relevant section [457] in the Internal Revenue Code that governs the plan.
Freddie Mac (Federal Home Loan Mortgage Corporation): A chartered corporation that purchases qualified residential government from the financial institutions that originate them, and then resells them in the form of securities. The securities are not backed by the U.S. Government. The market value of these securities prior to maturity is not guaranteed and will fluctuate.
Free cash flows: Incoming cash earned by a company, but not required for operations or for reinvestment.
Fully diluted earnings per share: Common stock earnings per share expressed as if all outstanding convertible bonds and preferred stock were converted into common stock, and all warrants and stock options were exercised.
Fund family: Set of mutual funds offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.
Futures: Contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
Futures contract: Agreement to buy or sell a set number of shares of financial instruments or physical commodities on a designated future date at a price agreed upon today by the buyer and seller.
Futures market: A market in which contracts for future delivery of financial instruments or physical commodities are bought or sold.
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GEMs - growing-equity mortgages: Mortgages in which annual increases in monthly payments are used to reduce outstanding principal and to shorten the term of the loan.
General obligation bonds: Municipal bond securities secured by the issuer's pledge of its full faith, credit, and taxing power.
Generally accepted accounting principles (GAAP): The rules and procedures for standard accounting practices in the U.S. established by the Financial Accounting Standards Board.
Global bonds: Bonds that are designed so as to qualify for immediate trading in any domestic capital market and in the Euro market.
Global funds: Mutual funds that can invest anywhere in the world, including the U.S.
Globalization: Tendency toward a worldwide investment environment, and the integration of national capital markets.
Gold standard: An international monetary system in which currencies are defined in terms of their gold content and payment imbalances between countries are settled in gold.
Golden parachute: Compensation paid to top-level management by a target firm, usually when a takeover occurs.
Government National Mortgage Association (Ginnie Mae): An agency wholly owned by the U.S. government within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VA-guaranteed, or Farmers Home Administration (FmHA)-guaranteed mortgages.
Graduated-payment mortgages: A type of stepped-payment loan in which the borrower's payments are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule, which will be higher than the level of a level-rate mortgage for the equivalent time since the loan was issued.
Greenmail: Situation in which a large block of stock is held by an unfriendly company, forcing the target company to repurchase the stock at a substantial premium to prevent a takeover.
Gross domestic product (GDP): The market value of goods and services produced over a year including the income of foreign corporations and foreign residents working in the country, plus the value of exports minus the value of imports.
Gross interest: Interest earned before taxes are deducted.
Gross national product (GNP): Measures an economy's total income. It is equal to G.D.P. plus the income from abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.
Gross profit margin: Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold.
Growth mutual funds: These funds buy shares in companies that are expected to grow rapidly.
Growth rates: Compound annual growth rate over a fixed period of time.
Guaranteed insurance contract: A contract promising a stated nominal interest rate unadjusted for inflation, over some specific time period, usually several years.
Guaranteed investment contract (GIC): A contract promising a stated nominal interest rate unadjusted for inflation, over some specific time period, usually several years.
Guaranteed Mortgage Certificates (GMC): Bond-like investments issued by the Federal Home Loan Mortgage Corporation for institutions that own a group or pool of residential mortgages. Interest on GMC investments is paid twice a year, and the principal is returned annually.
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Hedge fund: A fund that may employ a variety of techniques to enhance returns, such as both buying and selling stocks the fund does not yet own, based on a valuation model. The minimum investment is typically $1 million because these funds are restricted by law to less than 100 investors.
Hidden load: A type of sales charge or transactional fee that is charged to an investor, often without their knowledge, such as a mutual fund 12b-1 fee.
Hidden values: Assets that are owned by a company but not reflected in the balance sheet. These assets can be owned by their subsidiaries or through joint ventures with other public (or, even private) companies.
Highs (52 week highs): The highest close-of-trading-day price of a stock over the past 52 weeks, adjusted for any stock splits.
High-technology stock: The stock of a company that makes products for, or offers services to, the computer software, computer hardware, advanced telecommunications, life sciences, or electronics sectors.
Historical yield: The yield produced by an investment over a specified period of time.
Hold: To own a stock for a specific period of time, in the belief that the stock's value will grow stably.
Holding company: A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.
Holding period: Length of time that an individual holds a security, this undermines for tax purposes if the gain or loss on the security is long- or short-term.
Imbalance of orders: Stocks that are experiencing too many market orders of one kind -- to buy or to sell or limit orders to buy up or sell down, without matching orders of the opposite kind. An imbalance usually follows a dramatic event such a takeover, research recommendation, death of a key executive, or a government ruling that will significantly affect the company's business. This may cause a temporary trading halt of the stock.
IMF - International Monetary Fund: An organization founded to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems or developing countries.
Incentive stock option (ISO): Stock options issued by companies that grant employees an opportunity to purchase stock at some time in the future at a specified price. If certain purchase/holding period requirements are met, the ISO option holder will enjoy favorable tax treatment.
Income bond: A bond on which the payment of interest depends on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business.
Income fund: A mutual fund providing for current income from investments.
Income statement: A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.
Income stock: Stocks with a high dividend yield, but with low realistic prospects for rapid growth in value.
Indenture: Document spelling out the specific terms of a bond as well as the rights and responsibilities of both the issuer of the security and the holder.
Index: A set of statistics that measure changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Used to measure performance.
Indexing: An investment strategy that calls for an investor to build a portfolio of stocks whose return is comparable to an established stock index.
Index mutual fund: An index fund buys and holds an entire basket of stocks like the Standard & Poors 500 stock index. A stock index fund based on the S&P 500 index, for example, would buy shares in the 500 stocks that make up the S&P, only buying or selling shares as needed to keep the portfolio in balance with the makeup of the index, to invest new money, or to cash out departing investors.
Index option: An option that gives the right to buy or sell a set amount of securities in the future at a price based on a stock market index.
Index warrants: A stock index option issued by a company or sovereign entity as part of a security offering.
Indexed bond: Bond whose payments are linked to an index, e.g. the consumer price index.
Individual Retirement Account (IRA): A self-directed retirement account in which earnings on contributions (which may be tax-deductible) grow tax-deferred until withdrawal. Withdrawals are later taxed as ordinary income.
Inflation: The rate at which the general level of prices for goods and services is rising.
Inflation risk: The risk that changes in the real return the investor will realize after adjusting for the rate of inflation at a given point in time.
Initial margin requirement: When buying securities with money borrowed from a broker, the proportion of the total market value of the securities that the investor must pay for in cash.
Initial margin: The amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
Initial public offering (IPO): A company's first sale of stock to the public.
Insiders: Directors and senior officers of a corporation - in effect those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares of a company.
Insider information: Information about a company that has not yet been made public. Examples can be if a company is negotiating to be acquired, or is planning a stock split. It is illegal for holders of this information to make trades based on it.
Insider trading: Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock. Trading illegally by insiders based on insider information.
Insolvent: A firm that is unable to pay debts (liabilities are greater than assets).
Insured bond: A municipal bond backed both by the credit of the municipal issuer, such as a city or county, as well as by commercial insurance policies.
Interest:The price paid for borrowing money. It is typically expressed as a percentage rate over a period of time.
Interest payments: Contractual debt payments based on the contracted rate of interest and the principal amount.
Interest rate risk: The risk that a security's value changes due to a change in interest rates. For example, a bond's price drops as interest rates rise.
International Monetary Fund (IMF): An organization founded to oversee currency exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems or to developing countries.
International mutual fund: As a rule of thumb, a fund labeled "international" will buy primarily foreign securities - companies outside the U.S. These come in several flavors. A "regional" international fund concentrates on markets in one part of the world. "Emerging market" international funds focus on developing countries and the securities listed on exchanges in those countries.
Inventory: Securities bought and held by a broker or dealer for resale.
Investment bank: Financial intermediaries who perform a variety of services, including aiding in and financing the sale of securities, facilitating mergers and other corporate reorganizations and acting as brokers.
Investment grade bonds: A bond that is assigned a rating in the top four categories by commercial credit rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moody's classifies investment grade bonds as Baa or higher.
Investment policy statement: Investment Policy Statement – An Investment Policy Statement or IPS is a document that clarifies your account investment decisions. It includes your investment objectives and risk tolerance that you have selected.
Once you become a member the NetInvestmentAdvisor.com tools will help you choose your own strategy and then electronically sign your own Investment Policy Statement. Your needs may change over time and if your strategy changes the NetInvestmentAdvisor.com tools will require you to electronically sign a new Investment Policy Statement.
Members may review their Investment Policy Statement by logging in, going to the member home page, navigating to the bottom of the page and selecting the view/print Investment Policy Statement link. Your latest Investment Policy Statement will be the only one available.
Investor: The owner of shares of securities such as stock, mutual funds, or bonds that have tangible exchange value.
Invoice: Bill written by a seller of goods or services and submitted to the purchaser for payment.
IRA - Individual Retirement Account: A self-directed retirement account in which earnings on contributions (which may be tax-deductible) grow tax-deferred until withdrawal. Withdrawals are later taxed as ordinary income.
IRA/Roth accounts: An account that allows taxpayers, subject to certain income limits, to save money for use in retirement while allowing the savings to grow tax-free.
Issuer: An entity, such as a publicly traded corporation, that issues an asset (such as stock) that can be bought or sold.
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