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.
|
||
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. |
Q-U |
Qualified plan: A retirement plan that satisfies the requirements of Internal Revenue Code Section 401(a) and is thus eligible for tax-deferral or tax-exempt status.
Quarter: A three-month period for which publicly held companies must report their financial results to the Securities and Exchange Commission.
Quoted price: Highest bid and lowest offer (asked) price currently available on a stock, or a commodity, such as an agricultural product or metal being offered in a futures contract.
Raider: Individual or corporation investor who intends to take control of a company by buying a controlling interest in its stock and installing new management.
Rate of interest: The rate, as a proportion of the total amount being borrowed or lent, at which interest is computed.
Rate of return: For stocks, the value of the stock now, plus dividend rate, minus value when purchased, and then divided by the value when purchased.
Rate risk: The risk that profits may decline or losses occur because a rise in interest rates forces up the cost of funding fixed-rate loans or other fixed-rate transactions where a rise in loan interest rates is prohibited from use as an offsetting remedy.
Real Estate Investment Trust (REIT): A managed trust organized to invest in real estate or loans secured by real estate and issue shares in such investments. Real interest.
Rate: The rate of interest excluding the effect of expected inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars.
Receiver: A bankruptcy practitioner appointed to oversee the repayment of debts.
Record date: Date by which a shareholder must officially own shares in order to be entitled to a dividend, vote at a shareholder meeting, or exercise some other right as a shareholder.
Record keeper: A company or individual that tracks the status of your retirement benefits. The record keeper should send you a financial statement at least once a year.
Red herring: A preliminary prospectus containing information about a company that intends to issue stock.
Redemption: Repayment of a debt or preferred stock before the payment is due, at a premium price. Mutual fund shares are redeemed at net asset value when a shareholder's holdings are liquidated.
Redemption charge: A charge imposed by a mutual fund when redeeming shares within a certain period of time after purchase. For example, a 2% redemption charge on the sale of shares valued at $1000 will result in payment to the investor of $980 (or 98% of the value).
Redemption or call: Right of the issuer to force investors on a certain date to redeem their holdings for cash on a certain date.
Refunded bond: Also called a pre-refunded bond, one that originally may have been issued as a general obligation or revenue bond but that is now secured by an "escrow fund" consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders.
Refunding: The redemption of a bond with proceeds received from issuing lower-cost bonds.
Regional stock exchanges: Securities exchanges located outside of New York City and registered with the S.E.C. They include: Boston, Cincinnati, Intermountain (Salt Lake City - dormant, owned by COMEX), Midwest (Chicago), Pacific (Los Angeles and San Francisco), Philadelphia (Philadelphia and Miami), and Spokane (local mining & Canadian issues, non-reporting trades).
Registered bond: A bond whose issuer records ownership and interest payments. Differs from a bearer bond, which is traded without record of ownership and whose possession is the only evidence of ownership.
Registration statement: Filed with the Securities and Exchange Commission, registration statements outline a company's financial details, a history of the company's operations and management, and other facts of importance to potential buyers of the firm's stock.
Repurchase of stock: Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A company does this to pay cash to the firm's shareholders under an arrangement that provides more preferable tax treatment for shareholders than dividends.
Restricted stock: Stock that is granted subject to specified conditions on the stockholder's ability to sell or borrow against the shares. As a general rule, these condition, or restrictions, lapse at a future date or upon the occurrence of specified events.
Revenue bond: A bond issued by a municipality to finance either a project or an enterprise where the issuer pledges to the bondholders the revenues generated by the operating projects financed. Examples are hospital revenue bonds and sewer revenue bonds.
Reverse stock split: A proportionate decrease in the number of shares, but not the total value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price.
Revolving line of credit: A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years.
Rights offering: When current shareholders receive "rights" allowing them to purchase additional shares, usually at a discount to market price.
Right of accumulation: When calculating the size of the sales fee on new shares, some mutual funds grant shareholders the right to count their existing holdings along with their new purchases. In this way, high-volume customers can save fees on subsequent investments.
Risk: Degree of uncertainty of return on a stock, mutual fund, or other financial asset.
Risk averse: A risk-averse investor is one who, when faced with two investments with the same expected return but different risks, prefers the one with the lower risk.
Roll over: When an investor reinvests funds received from a maturing security, such as a bond or a money-market certificate, in a new issue of the same or a similar security.
Round lot: A trading order typically of 100 shares of a stock or some multiple of 100.
Roth IRA: An alternative to a traditional IRA. The most notable thing about a Roth IRA is that withdrawals are tax-free if the account has been open for at least five years and you're at least 59 1/2 when you start to withdraw money. Contributions to a Roth are not tax deductible, however.
Q-U |
Sales charge: The fee charged by a mutual fund when purchasing its shares.
Sand Hill Road: A term used in many financial periodicals which refers to the name of a street in Menlo Park, CA., that is home to major venture capital firms.
Savings and Loan Association: National- or state-chartered institution that accepts savings deposits and invests the bulk of their money in mortgages.
Secondary market: The market where securities are traded after they are initially offered in the primary market, such as through Initial Public Offerings. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets.
Secondary issue: Sale of already issued stock.
Securities & Exchange Commission (SEC): A federal agency that regulates the U.S. financial markets and also oversees the securities industry.
Security deposit: A cash amount of funds that must be deposited with the broker for each trade as a guarantee. These arrangements enable investors to borrow money from a broker to buy securities.
Sector: A group of securities that are similar with respect to maturity, type, quality rating, or industry sector of the companies involved.
Sector fund: A mutual fund that predominantly invests in a particular industry, or with a group of companies that share similar financial traits.
Selling short: If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Serial bonds: Corporate bonds arranged so that specific payments are made on specified dates.
Settlement date: The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs in the U.S. the day following the trade. Settlement rate. The rate at which the pension benefits could be effectively settled if the company sponsoring pension plan wished to terminate its pension obligation.
Shares: Ownership interests in a corporation or mutual fund.
Share repurchase: Program by which a corporation buys back its own shares. It is usually done when shares are undervalued.
Shareholders: Persons or entities, such as institutional investors like insurance companies or pension plans, that owns shares in a corporation.
Shareholders equity: A company's total assets minus total liabilities.
Sharpe ratio:Named after Nobel Laureate economist and Financial Engines founder William F. Sharpe, the Sharpe ratio is designed to measure an investment's return relative to its risk. To calculate a fund's Sharpe ratio, you divide the fund's returns in excess of the risk-free rate (e.g. the 90 day Treasury bill rate) by its standard deviation. If a fund produced a return of 5% with a standard deviation of 10%, while the T-bill returned 5%, its Sharpe ratio would equal 0.
Shelf registration:A procedure that allows firms to file one registration statement covering several issues of the same security.
Short: A term describing a person who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase.
Short bonds: Bonds with minimal time periods until they mature.
Short position: Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will go down.
Simple interest: Interest calculated only on the initial investment.
Simplified Employee Pension (SEP-IRA): SEP-IRA is a retirement plan where the employer, not the employee, generally makes the contributions. SEP-IRAs are geared to smaller businesses including sole proprietorships, partnerships and corporations as well as self-employed persons.
Simulation: The use of a mathematical model to imitate a situation many times in order to estimate the likelihood of various possible outcomes, such as the price of a mutual fund or stock at a given date in the future.
Socially responsible fund: A mutual fund with an investment objective to invest in companies consistent with stated principles, such as those that operate ethically, provide social benefits, and don't manufacture products or offer services that the fund managers consider objectionable.
Special dividend: Also referred to as an extra dividend, one that is unlikely to be offered again in the foreseeable future.
Split: Sometimes, companies split their outstanding shares into a larger number of shares. If a company with 1 million shares did a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of ownership in the company remains the same, and the price of the stock he owns is one-half the price of the stock on the day prior to the split.
Spot interest rate: Interest rate fixed today on a loan that is made today.
Spot markets: Markets that involve the immediate delivery of a security or instrument to a purchaser.
SPDRs (Spiders): SPDRs (Spiders) are designed to track the value of the Standard & Poor's 500 Composite Price Index. They are known as Spiders which is short for Standard & Poor's Depositary Receipt. One SPDR unit is valued at approximately one tenth (1/10) of the value of the S&P 500.
Spread: The gap between the highest price an investor is willing to pay to buy a security and the lowest price an investor will accept to sell a stock.
Stafford Loan: There are two kinds of this student loan program. A subsidized Stafford Loan is awarded based on financial need. An unsubsidized Stafford Loan is available to all students regardless of need.
Standard & Poor's 500 (S&P 500): A market weighted index of leading stocks, in which the total market value of each stock gives a corresponding weight to its mathematical importance in computing the index. For example, the price of a stock with a market cap of $10 billion will be given twice the weight, or importance, of a stock of a company with a market cap of $5 billion.
Standard deviation: A statistical measure of the degree that a value in a probability distribution varies from the mean of the distribution. A measure of how far a value can deviate from the statistical mean.
Stock: Ownership of a corporation, which is represented by shares that represent a piece of the corporation's assets and earnings.
Stock dividend: Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders.
Stock exchanges: Organizations where shares of stocks, representing ownership of publicly traded corporations are bought and sold.
Stock market: A market for trading shares or stock in a corporation.
Stock option: A stock option is a contract that gives the holder the right to buy or sell shares of a company's stock, such as those of the corporation you work for. Frequently, these are offered as part of employee benefit packages, and as a recruiting incentive. Options can be accumulated through payment plans, or awarded outright. The two types of options are call options, which give you the right to purchase shares at a predetermined price for a specified period of time, and put options, which give you the right to sell shares at a certain price, also during a specified time period.
Stock repurchase: A firm's repurchase of outstanding shares of its common stock, which, at the time of purchase, were owned by investors.
Stock split: Occurs when a firm issues new shares of stock but in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a 2-for-1 split, after the split it will trade at $50 and holders of the stock will have twice as many shares as they had before the split.
Stock ticker: A lettered symbol assigned to securities and mutual funds that trade on U.S. financial exchanges. One example is MSFT, which signifies shares of Microsoft Corp. (sold on Nasdaq).
Stockholder equity: A company's book value, or the total amount of shares held by investors, multiplied by the current stock price.
Stop order: An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the per-share price in effect when the order was given.
Stop-limit order: A stop order that designates a price threshold to buy a stock at or below a specified price or to sell a stock at or above a specified price.
Stop-order loss: An order to sell a stock when the price falls to a specified level.
Strike index: For a stock index option, the index value at which the buyer of the option can buy or sell based the underlying stock index.
Strike price: The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract that gives the buyer the right to buy or sell shares of a stock at a set price on or before a given date.
Style analysis: Style analysis is a technique for evaluating your portfolio by comparing its historical return to that achieved by a set of basic investment categories called asset classes (such as cash, bonds, large-cap, and so forth.) Style analysis focuses on how a fund behaves, not on what the fund currently owns. Read more about style analysis (link to style analysis article).
Subscription price: Price that the existing shareholders are allowed to pay for a share of stock in a rights offering, usually at a discount off market price.
Subscription warrant: Entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance.
Subsidiary: A corporation that is wholly or partially owned by another corporation.
Suspended trading: Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell.
Symbol: Letters used to identify companies whose shares are traded on stock exchanges or over the counter.
Syndicate: A group of banks that acts jointly, on a temporary basis, to loan money in a bank credit (syndicated credit) or to underwrite a new issue of bonds.
Q-U |
Takeover: Transfer of control of a firm from one group of shareholders to another.
Tangible asset: An asset whose value depends on particular physical properties. These include reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art.
Tax basis: Used in the context of investments, this is the purchase price of a stock or bond plus the broker's commission.
Tax deferral option: The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset, such as shares of a company's stock, is payable only when the gain is realized by selling the asset.
Tax-deferred retirement plans: Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits.
Tax-exempt sector: The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes.
Tax-free acquisition: A merger or consolidation of two companies in which each seller who receives only stock does not have to pay any tax on the gain he or she realizes until the shares are sold.
Tax Reform Act of 1986: A 1986 law involving a major overhaul of the U.S. tax code.
Tax swap: Exchanging two similar bonds to receive a tax benefit.
Taxable income: For individuals, taxable income can be defined as "gross income" less.
Taxable savings plans: Personal savings plans that are not tax exempt or tax deferred.
Tender offer: General offer directly made to a firm's shareholders to buy their stock at a price above the current market price.
Term bonds: Bonds whose total value is payable at maturity.
Term life insurance: A contract that provides a death benefit but no cash build-up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term.
Term to maturity: The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed.
Terms of sale: Conditions on which a firm proposes to sell its products or services for cash or credit.
Third market: Another term for securities trading in the Over-The-Counter market.
Thrift Savings Plan (TSP): The Federal Thrift Savings Plan, commonly referred to as the "TSP," is a defined contribution retirement plan for employees of the federal government. Both FERS (Federal Employees' Retirement System) and CSRS (Civil Service Retirement System) employees can participate in the TSP.
Ticker tape: Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded. At one time, ticker tape signified actual tape; now the information is delivered electronically, either through private lines or the Internet.
Time deposit: Interest-bearing deposit at a savings institution that has a specific date when it is to be paid.
Time horizon: An evaluation period for computing a rate of return on an investment.
Time order: An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. A time order self-cancels if the price criteria can't be met or is not available in a given period of time.
Time value of an option: The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, based on the concept that the underlying components that determine the value of the option may change during that time.
Tombstone: Advertisement listing the underwriters of a stock -- party or parties that guarantees proceeds to the firm from a sale of its stock.
Trade: A verbal (or electronic) transaction involving one party buying stock from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.
Transfer agent: Individual or institution appointed by a company to oversee the transfer of its stock.
Treasury bills: Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks.
Treasury bonds: Debt obligations of the U.S. Treasury that have 10 years or more until they expire.
Treasury notes: Debt obligations of the U.S. Treasury that expire in more than 2 years but less than 10 years.
Treasury securities: Securities issued by the U.S. Department of the Treasury.
Treasury (U.S. Department of): Branch of the U.S. Government that issues Treasury bonds, notes and bills.
Triple witching hour: The four times a year when the Standard & Poor's (S&P) futures contract expires at the same time as the S&P 100 index option contract and option contracts on individual stocks. This occurs on the last trading hour on the third Friday of March, June, September, and December.
Turnover: A measure of trading activity in a specific mutual fund during a period of time, expressed as a percentage of the average total portfolio value of the fund. A turnover ratio of 25% means that the value of trades represented one-fourth of the fund's investments.
Underwrite: To guarantee a company a specific price for its stock by entering into an agreement to purchase the stock at that price. Investment banks frequently do this when a company issues a new block of stock.
Underwriter: A firm, usually an investment bank, that buys a large block of stock from a company at a guaranteed price, and then resells it to investors.
Underwriting fee: A fee charged by an investment bank that buys stock from a company at a guaranteed price, and then resells it to investors. The fee is charged to help defray costs associated with the sale, as well as to account for the risk involved if the underwriter cannot make a profit on the sale of stock he has guaranteed with purchase.
Unemployment rate: The ratio of the number of people classified as unemployed to the total labor force set by the U.S. Government.
Unfunded pension Plan:A pension plan funded out of the employer's current income on an as-needed basis whenever funds are required by retiring employees or beneficiaries -- rather than by money regularly set aside regardless of current need.
Utility bond: A bond issued by a public utility, such as an electric or natural gas company.
Q-U |