 |
A
Account
A collection of investments,
either taxable or tax-deferred. Account can be real (contains
investments actually owned) or model (hypothetical). Account
type can be brokerage, mutual fund, or other (a mutual
fund can be an account if the fund is purchased directly
from fund company or it can be an investment within an
account, if purchased through a broker). Legally, accounts
are set up as taxable or tax deferred. The legal owner
of an account can be an individual, joint , corporate,
custodian, estate, or trust. See Real Taxable Accounts,
Joint Accounts, and Real Tax-Deferred Accounts.
Account Description
Information that includes
Account Type, Tax-deferred, Tax Method, and Account Note.
These items are primarily used to classify accounts for
tax purposes.
Account Note
Descriptive text about
an account that you can enter for your information, such
as "for College."
Account Type
When placing an order
through this site, you must be sure to select the proper
Account Type for the position you wish to trade. If a
particular position resides in your cash account, for
example, this site will automatically reject a sell order
that specifies your margin account, and vice versa.
Accrual Method
Accounting method where
income and expenses are recorded when items are booked
or billed. Contrast with a more common method, cash method,
where income and expenses are logged from the time cash
is actually spent or received.
Accrued Interest
Interest earned but
not yet paid. For most taxpayers, tax is due in year accrued
interest is paid. When buying a bond, buyer pays seller
any interest accrued since the last payment date. When
the buyer eventually sells the bond, the new buyer pays
any accrued interest. The accrued interest is subject
to taxes for the seller, but reduces the tax liability
for the buyer. For example, if a bond buyer paid $30 accrued
interest to a seller, then received $150 interest for
the rest of the year, the buyer needs to pay taxes on
$150 - $30 = $120.
ADR/ADS
Stands for American
Depository Receipts or Shares. These financial instruments
allow stock in a foreign corporation to be traded on a
U.S. stock exchange in U.S. currency by representing the
actual shares from the native exchange.
Advances/Declines
Advances are the number
of issues on the New York Stock Exchange that have risen
in price since the previous trading day's closing price.
Declines represent those that have fallen in price. Sometimes
the advances and declines are expressed as a ratio and
plotted as a line graph. A rising A/D line indicates that
the market has good breadth (a majority of issues are
rising in price) and that a rising trend is more likely
to be sustainable.
After Tax Real Rate of Return
The percentage gain
on an investment, account, or portfolio after taxes and
inflation have been deducted. Note that the after tax
real rate of return for money market mutual funds is frequently
less than zero, so you should use these accounts only
as temporary cash accounts.
All or None Order
In brokerage, order
instruction, particularly for large orders, to execute
the total quantity or none.
Annual Report
Written report to shareholders
summarizing the past fiscal year's financial results and
news items of importance about products, law suits, board
members, etc. Prospective shareholders should also review
the annual report because it provides important balance
sheet information.
Annualized Return
Projects the year to
date return over a full 12 month calendar year. Most useful
for projecting return for money market funds, CDs, and
bonds. Annualized return for equities can be misleading
if YTD return is high and covers a short period of time.
See Total Return.
Annuity
An insurance product
that pays an income benefit on a specific date, for a
specific time, or for the lifetime of the person(s) receiving
the annuity (the annuitant). A fixed annuity guarantees
fixed payments with a constant rate of return. A variable
annuity's value fluctuates with that of the assets that
are backing it. There is no guaranteed rate of return
for a variable annuity; the annuitant bears the investment
risk and receives the return actually earned on invested
assets less charges assessed by the insurance company.
Arbitrage
A financial transaction
where an arbitrageur (arb) simultaneously purchases in
one market and sells in another where there is a slight
price differential. Often it is a full hedge, and therefore,
a risk-free transaction. Arbs play an important role in
keeping markets liquid and efficient.
Ask
The lowest price at
which a seller is willing to offer a security at this
time.
Asset
Something of value that
you own. Appreciating assets, such as stocks, have the
potential of increasing in value and/or producing income.
Depreciating assets, such as a car, lose value over time.
Assets minus liabilities (what you owe) equals net worth.
Asset Allocation
The process of deciding
what kinds of assets you want to own, and the percentage
of each. Tactical asset allocation is a sophisticated
form of market timing in which an investor decides how
much to allocate to each asset class based on market indicators,
particularly interest rates. As conditions change, the
percent allotted to each asset class changes.
Asset Classes
Appreciating assets
are put into 7 asset classes: maximum capital gain equity,
long-term equity, international equity, U.S. government
bond, corporate bond, precious metals, and cash.
Average Annual Return
The cumulative return
divided by the number of years of the life of the investment
or account, with the compounding effect factored in. In
reverse, the average annual return times a given number
of years equals the cumulative return for that time frame.
AAR is used to compare returns of two or more investments
of unequal track records.
Average Daily Volume
The consolidated trading
volume for all exchanges averaged for the last 20 trading
days.
Average Cost
The average price plus
commission.
Average Price
The total cost less
total commission of all lots you own of a particular security
divided by the total number of shares owned.
Average Proceed
The sum of net amounts
received from all short open lots divided by the total
number of shares short for that security. Average proceeds
is for short investments what average cost is for long
investments.
B
Top
Baby Bond
One sold at face amount
less than $1,000 to make it attractive to smaller investors.
See Bond.
Balance Sheet
A listing of all assets
and liabilities for an individual or a business. The surplus
of assets over liabilities is the net worth, or what is
owned free of debt.
Balance Sheet Return
A view in the stock
database that displays Sales/Price Ratio, Price/Book Ratio,
Book/Share, Return on Equity, Profit Margin, and Reporting
Date. These items are all measures of company value and
profitability.
Balance Sheet - Cash & Debt
A view in the stock
database that displays: Fiscal Year End, QuickRatio, Debt/Equity
Ratio, Current Ratio, and Cash/Share. These items measure
the financial health of a company, particularly its assets
and liabilities. Click each item in the Glossary list
for definitions of each of these items.
Balanced Equities
A mutual fund whose
holdings are split fairly evenly between stocks and bonds.
Balanced funds can change their asset allocation according
to market conditions. Balanced funds seek a relatively
steady return.
Bank Information
Descriptive information
about a given bank. A view in the CDs and Money Markets
database that displays: Minimum Deposit, City, State,
Phone, Out-of-state Indicator.
Basis
An accounting term that
refers to the cost of an asset including all adjustments
and improvements. For tax purposes, it is the amount you
subtract from the net sale price to determine the realized
gain or loss. For example, if you paid $150,000 for your
home, but added a porch for $25,000, your basis is now
$175,000. You have stepped-up the basis.
Basis Point
The smallest measure
used in quoting yields and interest rates. One basis point
equals .01%, so a 100 basis point move in a U.S. Treasury
bond yield is 1%.
Bearer Certificate
A security whose owner
is not registered on the books of the issuer and which
is, therefore, payable to the person possessing the certificate.
A bearer bond has coupons attached, which the bondholder
sends in or presents on the interest date for payment.
Bearer stock certificates are negotiable without endorsement.
Beta
A measure of risk
commonly used to compare the volatility of mutual funds
or stocks to the overall market . The S&P 500 Index
is the base for calculating beta and carries a value of
1. Securities with betas below 1 are less risky than the
market as a whole. Betas above 1 are more risky. A beta
of 1.3 is 30% more volatile than the S&P 500. Betas
with negative values are inversely related to the S&P
500.
Note: The beta
of precious metals can be low but these funds have high
price volatility. You cannot compare the beta of bond
funds against the beta of equity funds, because the
bond fund beta is calculated using the Shearson Long
Bond Index rather than the S&P 500 Index.
Bid
The highest price a
buyer is willing to pay for a security at this time.
Block Trade
Usually, a trade of
10,000 shares or more. For bonds, a $200,000 face amount
or more. Block trades are often executed through a special
section of a brokerage firm called the Block Desk. Using
the Block Desk may result in a better price.
Bond
A debt security that
represents the obligation of the issuer to pay interest
to the creditor or bond holder and return the principal
at maturity. Bonds backed by collateral are termed secured
while those that are not secured are called debentures.
A sinking fund bond obligates the issuer to set aside
some of its earnings to retire bonds periodically. A bond
is usually identified by its maturity date and its coupon
rate, which is the interest rate stated on the bond. The
price of the bond is equal to its face value when issued,
which is called the par price. After that, the price fluctuates
in the market. Bonds selling above original price are
selling at a premium to par while those selling below
original price are selling at a discount to par. Prices
vary inversely with interest rates, as the prices of old
bonds must adjust so that their current yield will stay
competitive with those of newly issued bonds. A bond does
not represent ownership. See Baby Bond, Callable, Junk
Bond, Municipal Bond, US Gov't Issues, Zero Coupon Bond,
Convertible Bond, Corporate Bond.
Bond Prices
View in the bond database
that displays: Maturity, Outstanding Bond Amount, Latest
Price, Current Year High and Low Prices. For latest price,
see Price (Trade) Bonds.
Bond Type
The bond pays fixed
interest amounts over its term. The bond price, however,
can change as prevailing market interest rates change
over time. Zero coupon bonds, or zeroes, do not pay interest.
They are sold at deep discount to their par value, which
is returned at maturity. Interest is internally compounded
to produce the stated yield to maturity. With floating
rate, the interest rate paid on the bond can change as
prevailing market interest rates change.
Book/Share
The current fiscal year
book value (or net equity for the corporation) per share
of common stock.
Broker/Dealer
In the broadest sense,
an agent who facilitates trades between a buyer and a
seller and receives a commission for his services. Dealers
buy and sell for their own account and keep their own
inventory of securities on which they can profit or incur
losses. Most stock brokerage firms really act as brokers
and dealers. Brokers are also classed as Full Service
or Discount, the former using a commission-based sales
force and the latter using salaried brokers only.
Broker Call Rate
Interest rate at which
brokerage firms borrow from banks to finance their clients'
security positions.
Business
Describes the primary
product or service offered by a given corporation.
Buy(s)
A transaction type for
the purchase of a security. A buy creates an open lot
which is part of a holding of a given security that you
currently own. Buy(s) is also a filter for displaying
only buy transactions.
Buy-to-Cover
A transaction type that
is a closing transaction for a short sell and which creates
a closed lot. Buys-to-Cover is also a filter for displaying
only buy-to-cover transactions.
Buying Power
Value of margin eligible
securities that may be purchased in a margin account.
Determined by doubling the sum of the cash held in the
brokerage account and the loan value of margined securities.
C Top
Call Option
A call option gives
the owner the right, but not the obligation, to buy the
underlying stock at a given price (the strike price) by
a given time (the expiration date). The owner of the call
is speculating that the underlying stock will go up in
value, hence, increasing the value of the option. The
purpose can be to speculate with the option (hope it goes
up and sell for a profit), to invest in the underlying
stock at a locked in price if the stock price goes high
enough, or to generate income. Each option contract equals
100 shares of stock. For example, an AAA MAR 65 call,
would give the owner the right to buy 100 shares of AAA
at $65 (strike price) per share between now and the third
Friday in March (expiration date).
Callable
A security redeemable
by the issuer before the scheduled maturity. The issuer
must pay the holder a premium price if the security is
retired early. Most Corporate and Municipal Bonds are
callable. US Government issues are generally not callable.
They are called when interest rates fall so significantly
that the bond issuer can save money by floating new bonds
at the lower rate. The first call date is the date to
or after which a specific call price will be offered by
the issuer, usually a premium price to par, as an incentive
to the bondholder to redeem the bond.
Canceled Order
A buy or sell order
that is canceled before it has been executed. In most
cases, a Limit Order can be can be canceled at any time
as long as it has not been executed. A Market Order may
only be canceled if the order is placed after market hours
and is then canceled before the market opens the following
day.
Capital Gains
The buying and selling
of a security or other appreciating asset that has increased
in value during the time you owned it. It is subject to
capital gains tax, as listed on IRS Form 1040, Schedule
D.
Capital Stock
Amount of money or property
contributed by stockholders to be used as the financial
foundation for the corporation. It includes all classes
of common and preferred stock.
Cash Account
Orders placed in a cash
account are settled on a cash basis, meaning that cleared
funds must be in the account within three (3) business
days to cover purchases.
Cash Available
The amount that may
either be withdrawn in cash, or used to purchase additional
securities without creating a debit balance. It is a combination
of credit balances in all accounts and excess credit balances
in margin accounts.
Cash Balance
Whenever a transaction
occurs that affects cash, the cash balance is debited
or credited. The cash balance is usually invested in a
money market mutual fund that pays interest. Money market
funds can be taxable or tax-exempt. In brokerage accounts,
the balance in cash is swept into the money market daily.
Cash Flow
Net income plus depreciation
and other non-cash charges. A strong cash flow is important
for covering interest payments, particularly for highly
leveraged companies.
Cash/Share
The amount of cash divided
by total number of common stock shares outstanding for
a given stock. A corporation with a high cash/share amount
relative to the current price per share is said to be
"cash rich" and may be considered low risk or undervalued.
Cash Market
A market in which security
or commodity transactions occur within a few days of the
trade date. Also called the spot market. The opposite
is the futures market, where transactions are completed
at a specified future date, price, and quantity, which
is determined in the present. Stock, bond, and mutual
funds trade in the cash market.
Cash Percent
The percentage of a
given mutual fund's total assets invested in cash and
equivalents. A high cash percent is usually good in a
declining market but can result in under performance in
a rising market.
CD Rate
The current interest
rate for a given CD (certificate of deposit).
Certificate of Deposit
Investment created by
banks, which pays stated interest at either fixed or variable
rates. If sold directly by banks, principal is returned
at maturity subject only to penalties for early cashing
in. If sold through brokers (called Broker CDs), principal
value can vary like with bonds, and early cashing in can
fetch a principal lower than amount paid.
Change (in NAV)
The change in the
net asset value since the close of the previous trading
day. Negative values means the mutual fund has dropped
in price; positive values means the mutual fund has appreciated
in price.
Note: A way to
calculate previous day's closing price, is to subtract
the Change from the Current Price - add negative values.
Class A/Class B Shares
Shares of stock issued
by the same company but having some difference, such as
voting rights, or a dividend preference or participation.
Clearinghouse
A computerized facility
that compares and reconciles both sides of a brokerage
trade.
Closed to New Accounts
The mutual fund is currently
closed to new investors. To be sure, call the mutual fund
for the latest information.
Closing Commission
The commission deducted
from the proceeds before calculating realized gain or
loss. It is the fee charged by your broker to execute
your trade. It may be a composite of several fees &
charges.
Closing Price
The market price you
receive when you sell or buy-to-cover your security.
Commercial Paper
Unsecured short-term
debt, usually from 2 to 270 days, issued by banks and
corporations, which is generally safe and flexible. It
is usually a major component of money market fund investment
portfolios.
Commission
Fee charged by broker
to execute your trade. May be a composite of several fees
& charges. Commission is taken into account when calculating
realized gain or loss. The buy, or opening commission,
is added to the cost basis and the sell, or closing commission,
is deducted from the proceeds before calculating realized
gain or loss, therefore commissions reduce taxable gains
and increase losses. Total commission is the sum of both
buy and sell commission. Commission rates take into account
the quantity of the purchase, the unit price of the security
(low priced stocks may have higher commission rates),
and the type of investment (options have higher commissions).
Common Shares
Represents the total
number of common shares outstanding, excluding treasury
stock (stock issued but re-acquired by the company through
buy-backs). This number is expressed in thousands, so
add three zeros.
Common Stock
Security representing
partial ownership interest in a corporation. Ownership
may also be shares with Preferred Stock, which has prior
claim on any dividends to be paid and, in the event of
liquidation, to the distribution of the corporation's
assets. Common stockholders assume the primary risk if
business is poor, and realize greater gains in the event
of success. They also elect the board of directors that
controls the company.
Confirmation
A written notification
from a broker to a client specifying the details of a
securities' transaction
Conversion Price
The price at which convertible
securities, such as bonds and preferred stock, can be
converted into common stock at a set conversion ratio.
For example, if the conversion ratio is 25 to 1, and you
own a $1000 face value convertible bond, then the conversion
price is $40 per share. The conversion value is the value
of 25 shares at the current price per share. If you assume
$32 per share, then the current value is 25 x $32 = $800.
In this example, it is clearly better not to convert.
Convertible Bond
A debt security that
is exchangeable for a set number of shares of another
type of security, usually common stock, at a predetermined
price. See Bond.
Corporate Bond
A
debt security investment in obligations of U.S. corporations.
Corporate bonds are taxable and have a specific maturity
date. They are often traded on major exchanges. See Bond.
Covered Calls
A covered call seller
or writer is an investor who owns a stock and sells a
call option against it to generate additional income,
which comes from the premium received for selling the
option. If things work out right for the writer, the stock
price will stay below the strike price and the writer
will retain both the premium and the stock. However, if
the stock price rises enough, the stock will be called
away by the call buyer who has exercised the option and
now gets the stock and pays the writer the strike price
. Whether the writer makes a profit or loss on the stock
that is called away depends on the purchase price (the
cost basis). See Call Option.
Credit Balance
For cash accounts, it
is the uninvested money in your account. In a margin account,
it is the money on deposit against a short position.
Cumulative Return (12-Month, 10-Year)
Measures the price change
over the period of time indicated, ending at the current
date (or the date the price was last updated). This measure
includes any dividends paid and reinvested during the
period measured. Cumulative return can also be referred
to as total return. It is the most useful measure of performance
among different asset classes, such as stocks, bonds,
cash, and so forth.
Current P/E Ratio
The ratio of current
price divided by last two quarters earnings per share
(EPS) plus next two estimated quarters EPS. See Price/Earnings
Ratio.
Current Year High & Low Prices
The highest and lowest
price for a given bond during the current calendar year.
Cumulative Return Through (Year)
Includes the price change
over the period of years indicated, ending at the year
shown, plus any dividend paid and reinvested over the
period shown. The bar graph represents the total value
of your portfolio.
Cumulative Return (1-Yr, 3-Yr, 5-Yr, 10-Yr)
The price change over
the time period shown, plus any dividend, interest, or
capital gains paid and reinvested over the period shown
for any given security. Note that for stocks, the periods
are complete calendar years, but for mutual funds, periods
are rolling up to the current month.
CUSIP Number
An industry code which
uniquely identifies nearly all traded stocks and bonds.
Current Ratio
A company's current
assets divided by its current liabilities.
Current Yield
For stock, the annual
dividend divided by the current price per share. For bond,
the annual interest payment divided by [current price
divided by 100 times quantity]. A measure in percentage
terms of how much income you can derive from the security.
Of great importance to fixed income investors and of minimal
importance to growth investors. See Yield to Maturity.
D
Top
Date
The date at which
the offering price and NAV prices apply. Date is usually
one day before the Last Update, more if Last Update falls
after a weekend or holiday. However, if there have been
no trades since the previous day, Date will display the
Date of the last trade.
Note: Mutual
fund net asset values are calculated at the end of each
trading day. Usually the results are obtainable around
one or two hours after the market closes, 4:00 PM ET,
depending on the size of the mutual fund. If a fund's
total assets and holdings are large, it might take longer
for the fund to calculate it's net asset value. This
is why current mutual fund quotes are only available
for previous trading day's close.
Date of Record
Date on which a shareholder
must own shares to be entitled to a dividend payment.
From the following day, until the day the dividend is
actually paid, the stock trades ex-dividend.
Debenture
A bond issued by a corporation
which is secured by the general credit or promise to pay
of the issuer. It is not backed by collateral such as
tangible assets.
Debit Balance
Money owed by the client
to the broker.
Debt/Equity Ratio
Long-term debt plus
current liabilities divided by the last fiscal year net
equity per share of common stock for a given corporation.
A ratio above 2:1 or 200% may be excessive and a sign
of strained corporate finances.
Debt Securities
Securities representing
money borrowed by an issuer that must be paid back at
a specific date. The security pays interest or is purchased
at a discount to face value.
Debt Service
Cash required by a corporation
or municipality to cover all interest and principal payments
due in a given year, including sinking fund payments.
Discount Rate
The lending rate that
the Federal Reserve Bank charges on loans made to other
banks and financial institutions. Changes in this rate
tend to have large ripple effects on the rates banks in
turn charge their customers. The bond market and sometimes
the stock market react sharply to changes in this rate.
You can create market timing alerts with it.
Distributions
Capital gains (long
or short term), interest, or dividends paid to bond holders
and shareholders. These can be received as cash or stock
and they are treated as closed lots for tax purposes.
Return of capital is also a type of distribution, but
it is usually tax exempt. Distributions from mutual fund
shares are easily reinvested into more shares and the
compounding of reinvested shares can add substantially
to the cumulative return of a fund.
Dividend
The periodic, usually
quarterly, payment made by a corporation to its shareholders,
generally expressed as dividend per share. Dividends represent
earnings that are not reinvested by the corporation. Some
stocks pay no dividends and others, such as utility companies
pay substantial ones that represent a large portion of
the total return a shareholder will get from his investment.
Dividends are a type of distribution and are usually taxable
in year received.
Dividend Frequency
Shows how often a given
mutual fund pays a dividend distribution.
Dividend Growth Rate (3 Yr and Current Year)
The unweighted average
annual growth rate of annual fiscal year dividends for
the last three fiscal years for a given security.
Dividend/Share
Indicates the annual
dividend payment for the next 12 months for a given security.
Most companies pay dividends quarterly.
Dividend Year Started
The year in which a
given corporation started paying dividends to stockholders.
Dow Jones Indices
Indices tracked by the
Dow Jones company, a highly reputable information services
company; publisher of The Wall Street Journal, Barron's
National Business and Financial Weekly, and other influential
publications.
Dow Jones Industrial Average (DJIA)
The most commonly
followed index of the U.S. stock market. It is comprised
of 30 corporations spanning many different industries.
It is price weighted, meaning that a $2 change in a $100
per share stock will have a greater affect than a $2 change
in a $20 per share stock.
The Dow Jones
Industrial Average measures (also defined in the glossary)
can be used to gauge the health and direction of the
stock market; see DJIA 200-Day Moving Average, DJIA
Price/Earnings, DJIA Yield, DJIA Price/Book.
DJIA 200-Day Moving Average
This value is calculated
by averaging all the closing values of the DJIA for the
last 200 days. You can use this and the following measures
to create market timing alerts.
DJIA P/E (Price/Earnings)
The latest DJIA value
divided by the estimated current year earnings per share
(EPS), with the index multiplier taken into account. Readings
above 24 and below 8 are considered sell and buy signals
respectively by many analysts.
DJIA Yield
The sum of all dividends
of all stocks in the DJIA divided by the latest value
of the DJIA, adjusted by the multiplier. Readings below
3 and above 6 are considered sell and buy signals respectively.
DJIA Price/Book
The latest value of
the DJIA divided by the book value for all DJIA stocks,
adjusted by the multiplier. Readings above 2.5 may be
a sell signal.
Dow Jones Transportation Average (DJTA)
A index of 20 corporations
in the transportation sector, including air, rail, and
truck.
Dow Jones Utilities Average (DJUA)
An index of 15 major
utility corporations.
Duration of an order
In brokerage, when trading
stocks or options, it designates whether a limit trade
is valid for Good Until Canceled or Day Only. Market orders
all have a duration of Day Only by definition, since they
are executed as soon as possible at the market price.
It is possible that a market order could arrive after
the market close, in which case, it may remain valid at
the next market opening.
DVP/RVP Account
If you have not taken
special steps to establish a DVP/RVP account with us,
you must not select this account type. DVP/RVP accounts
relate mainly to institutional trading accounts.
E
Top
Earnings Per Share
The fiscal year earnings
divided by common shares outstanding for any given year
for a given corporation. The estimated current fiscal
year earnings per share includes the actual EPS for quarters
that have already been reported plus estimates calculated
by the S&P Corporation for any quarters remaining
in the fiscal year. Earnings are the principal force behind
stock price appreciation. This view displays: Earnings
Per Share, Mean Estimate, and Projected 5-Year Growth
Rate.
Effective Tax Rate
The flat percentage
rate equivalent of a given tax payer's progressive rate.
For example, if your taxable income is $55,000 in 1993,
the first $22,100 would be taxed at 15%. the next $31,400
at 28%, and the last $1,500 at 31%. The effective rate
is approximately 24% applied to the entire $55,000.
Equity
The generic term for
ownership interest in an asset. In real estate, it is
often used to describe the net of the current value and
the mortgage balance. It is also used to describe stock
and mutual funds, that is, investments that issue ownership
shares.
Equity Security
Instrument representing
fractional ownership in a corporation. Stocks are equity
securities.
Exchange
The principal exchange
in which the stock is traded: NYSE = New York Stock Exchange;
AMEX = American Stock Exchange; and OTC = Over the Counter.
The OTC, unlike the other two, does not have a physical
location. It is a network of security dealers, most of
whom are connected by a computer link called NASDAQ (National
Association of Securities Dealers Automated Quotation
System). OTC stocks are found under the NASDAQ listings
of your newspaper.
Exchange Call
NYSE requires a margin
account to maintain 25% equity. Equity consists of funds
and margin eligible securities in a margin account. When
the market value of margined securities is less than the
minimum equity, a margin call goes out to the client requesting
additional equity, i.e. securities or cash. Exchange calls
are due immediately.
Ex-Dividend
When a stock trades
ex-dividend (without dividend), it means that a new buyer
of the security will pay the price with the dividend deducted.
Also, the new buyer will not have a tax liability for
that dividend as does the buyer who bought on or before
the record date (the official date declared by the board
of directors to determine who is eligible for the dividend).
The actual payment date of the dividend may be a couple
of weeks after the record date. If a stock pays a large
dividend, you should try to make a purchase after the
record date, so to avoid the tax liability on the dividend.
Executed Order
Completed buy or sell
transactions.
Exit Fee
A service charge that
equals a percent of a share's NAV, which you pay when
you sell your mutual fund shares. Sometimes the exit fee
is a flat dollar charge.
Extended Hours Trading
An extended trading
session (on a matched order basis) for NYSE and AMEX.
Lasting from 4:15 p.m. to 5:00 p.m. EST, it uses the closing
price of a security at the conclusion of the regular trading
day to determine the transaction price of the matched
orders. Only securities listed on NYSE and AMEX are eligible
for the extended session.
F
Top
Face Value
The stated value of
a bond certificate when issued and when they are redeemed
at maturity. Same as par value or principal. The face
value never changes but the current value does. Current
value for a bond is (face value x price) divided by 100.
Bonds are purchased as units of face value. For example,
you buy a $10,000 bond where the current value can be
more or less than $10,000, depending on market conditions.
Federal Call
When a client makes
certain types of transactions in their margin account,
the brokerage firm will issue a call notifying the client
if additional equity is required by the settlement date
in order to satisfy Federal Regulation T.
Fees & Charges
These items relate to
the costs of owning mutual fund shares. This view displays:
if it is a Closed fund, Sales Charges, Exit Fee, Expense
Ratio, 5-Year Fee, Phone Switch options.
First Call Provisions
Some bonds can be called
prior to the maturity date at the issuer's discretion.
These bonds are callable. The first call provision describes
the time period and the price offered for the first call
by the issuer.
Fiscal Policy
A method where governments
use taxes and budgeting to raise revenue for public purposes.
Another method is monetary policy, which seeks to influence
the money supply by raising or lowering interest rates
and thereby changing credit demand.
Fiscal Year
Any continuous 12 months
which is used by a business or government as its annual
accounting period. The U.S. government fiscal year ends
on September 30. A fiscal year is designated by the year
it ends. For example, an April - March fiscal year 1993
ended on March 31, 1993 and began on April 1, 1992.
Fiscal Year End
Shows the last month
of a corporation's fiscal year.
Five-Year Fee
The total cost you might
have to pay over 5 years for every $1,000 investment in
a given mutual fund. Five-year fee is the best over-all
measure for comparing fund costs if you intend to hold
onto the fund for at least 5 years.
Flexible Equities
A mutual fund whose
holdings can vary between a preponderance of stocks or
bonds, depending on market conditions. Flexible funds
seek to take advantage of changing market conditions.
Floating Rate
Rather than a fixed
interest or coupon rate, some bonds and CDs have a floating
interest rate which is adjusted periodically to market
conditions. It is also called Variable Rate.
Front-end Load
The percentage of the
purchase price that is charged and deducted from the investment.
Same as Sales Charge. For example, if you invest $1000
in a 4% front-end load mutual fund, you only purchase
$960 worth of shares.
Futures
Investment contracts
which specify the quantity and price of a commodity to
be purchased or sold at a later date. On contract date,
the buyer must take physical possession or make delivery
of the commodity, which can only be avoided by closing
out the contract(s) before that date. Futures can be used
for speculation or hedging.
G
Top
General Obligation Bond
A municipal bond which
is backed by the full faith and credit of a municipality.
It includes the authority to raise taxes and/or borrow
to pay back interest and principal. See Bond.
Ginnie Mae
Nickname for Government
National Mortgage Association (GNMA), a wholly-owned corporation
of the U.S. Government that functions as part of the Department
of Housing and Urban Development (HUD). Also means a security
that represents a pool of mortgages exceeding $1 million
that is packaged from individual home mortgages and resold
to investors who receive both principal and interest,
just like a bank that holds a home mortgage. These securities
are liquid and U.S. Government insured.
Glamour Stock
A stock with a wide
public and institutional following. You may want to avoid
investing in these stocks because they are over-hyped
and extremely vulnerable to a downward slide.
Global Bonds
Mutual fund investing
primarily in debt obligations (i.e. bonds) of foreign
governments and/or corporations. Global bond funds can
also be subject to foreign currency exchange risks.
Global Equities
Stocks purchased from
companies all over the world, including the Unites States.
Global equities can also expose you to foreign currency
risk.
Gold
A precious metal usually
sought after during times of rapidly rising inflation.
For mutual fund investors, gold can also refer to the
stock of gold mining companies, as well as bullion.
Government Bonds
Mutual fund investing
primarily in debt obligations (i.e. bonds) of the U.S.
government. Government bond funds can be short-term, intermediate-term
or long-term, reflecting the average maturity of the bonds
held in the portfolio.
Gross Domestic Product (GDP)
A measure of the economy
which includes the value of all products and services
produced by a nation in a given year. The growth rate
of GDP is used to compare the economic progress of various
nations.
Growth & Income
A security purchased
for long-term price appreciation (similar to long-term
growth) and also for potential dividend (or interest)
income.
Growth Rate
The percentage rate
of change in some financial characteristic of a company.
See Historical 5-year Growth Rate, Projected 5-year Growth
Rate, Dividend Growth Rate, Sales 3-year Growth Rate,
and Net Income 3-year Growth Rate.
H
Top
Hedging
An investment strategy
of lowering risk by buying securities that have offsetting
risk characteristics. A perfect hedge eliminates risk
entirely. Hedging strategies lower return since there
is a cost involved in hedging. For example, a portfolio
manager could short a futures contract which will perfectly
offset any decrease in the value of the portfolio. Options
and short selling stock can also be used for hedging.
Hedge funds are investment pools that are free to use
any hedging techniques they desire and they often make
large bets in a relatively small number of different holdings.
Hidden Asset
An asset that is
omitted or understated in the balance sheet of a company.
Discovering hidden assets before the market does can lead
to appreciable price gains for savvy investors.
A highly speculative
stock with a rising price and high volatility which
makes it vulnerable to dramatic downswings.
High Flyer
A highly speculative
stock with a rising price and high volatility which makes
it vulnerable to dramatic crashes.
Holding
All the shares (mutual
funds & stocks), contracts (options), or face amount
(bonds) you own of an investment.
House Call
A brokerage firm's notice
to the client that the equity in a margin account is below
the firm's maintenance level and needs additional funds
immediately.
Hybrid Investment
An investment which
has the major characteristics of two or more other investments.
For example, a convertible preferred stock generally pays
a steady dividend and has steady principal like a high
quality corporate bond, but it can be converted into common
stock. Hybrids can be complicated to understand and are
best left to sophisticated investors.
I
Top
Imputed Interest
Interest which is not
actually paid to bond holders but which the IRS may tax
anyway. Common with zero coupon bond interest. See Interest
and Bond.
Income
Dividends or interest
received by owners of equity or bonds respectively. Dividends
represent a portion of earnings paid to shareholders while
interest is compensation to bondholders in the form of
cash or more bonds for the lending of capital. Reinvested
income can significantly add to returns. See Projected
Income.
Income Account
An account that receives
interest from bonds and credit balances, or dividends
from stock positions.
Indexing
Constructing a portfolio
to match the performance of a specific index, such as
the S&P 500. Individuals can do this by purchasing
shares in an index mutual fund.
Indices
Click Dow Jones Indices
and S&P Indices in the Glossary list for these definitions.
Information
See Stock Information
for these definitions.
Institution
The name of the institution
issuing a CD or money market.
Institutions Holding
The percentage of outstanding
shares held by institutions for investment purposes. Includes
charitable trusts, pension funds, mutual funds, brokerage
firms, and banks.
Interest
Compensation to bondholders
in the form of cash or more bonds for the lending of capital.
Accumulated or accrued interest is the interest due to
the seller of a bond from the day after the last interest
payment to the day before the settlement date. It is paid
by the buyer of the bond. Imputed interest is not paid
to the bondholder but it is calculated as if it was so
that taxes can be paid on it anyway. Reinvested interest
can significantly add to returns.
Interest Dates
Displays the frequency
and dates that interest on a given bond is paid. By carefully
selecting interest dates, you can receive income monthly
from a group of bonds, with staggered interest dates.
Investment
An appreciating or income
producing asset. An open investment is one you currently
own. A closed investment is one you once owned. A long
investment is an open investment that you bought. A short
investment is an open investment that you sold short -
i.e., you borrowed the investment from someone else, sold
it, pocketed the proceeds, you hope it decreases in value,
and you are obliged to buy it back in the future and return
it to the original owner. An investment can be short and
long at the same time if it contains both long and short
lots. All investments are classified by type as a way
of organizing your investments. See Holding.
Individual Retirement Account (IRA)
An Individual Retirement
Account is a personal, tax-deferred, retirement account
in which an employed person can contribute a maximum amount
per year. There are specific rules concerning level of
participation and eligibility for an a IRA and whether
an employee's contributions are tax-deductible. Consult
a financial consultant or tax advisor.
Inflation - CPI
The rise in price of
goods and services, or Consumer Price Index (CPI), when
too much money chases too few goods on the market. Moderate
inflation is a result of economic growth. Hyperinflation
(CPI rising at rates of 100% or more annually) causes
people to lose confidence in their economy and put their
money in hard assets such as gold and real estate.
Inflation Rate
The annual percentage
change in the price of goods and services. At the consumer
level, it is the Consumer Price Index (CPI) and at the
wholesale level it is the Producer Price Index (PPI).
Intermediate Government Bonds
A U.S. government debt
instrument having a maturity of between 3 to 10 years.
International Equities
Stocks purchased from
companies based in countries other than the Unites States.
International equities can also expose you to foreign
currency risk.
Issuer
The official name of
the company issuing a given bond.
J
Top
Joint Account
A bank or brokerage
account that two or more people own jointly. Some joint
accounts are set up so that all owners of the account
must sign checks and approve all withdrawals or brokerage
transactions. In others, any one party can take these
actions on his or her own. Joint accounts usually include
rights of survivorship (upon the death of one party ,
the other gets complete ownership) or with tenants in
common (the ownership of the deceased party's half goes
to his estate, not the other party).
Joint and Survivor Annuity
An annuity that pays
two or more beneficiaries. When one of them dies, the
payments continue to the survivors but the deceased's
share is no longer paid.
Jumbo CD
A certificate of deposit
with a high minimum deposit required, often $90,000 or
more. They carry a slightly higher interest rate; however,
if the value of the CD plus interest held in the account
exceeds $100,000, this excess is not insured by the FDIC.
To be safe, you can hold several jumbo CDs at different
banks.
Junior Security
A security with a lower
claim on assets in the event of a company's liquidation.
Normally, common stock is most junior to all other corporate
issues. Then, from junior to senior, the order is preferred
stock, debentures, and mortgage bonds. This last item
is a direct claim on real property and is the most senior.
Junk Bond
A junk bond (or high-yield
bond) is one with a S&P credit rating of BB or lower
and that carries higher risk of interest or principal
default than better rated investment grade bonds. Junk
bonds are issued in leveraged buyouts and other takeovers
by companies without long track records of sales and earnings,
or by those with questionable credit strength.
K
Top
Keogh Plan
Tax-deferred pension
account designated for employees of unincorporated businesses
or for persons who are self-employed, either full -time
or part-time.
Kicker
A provision for equity
participation which is often added to a new debt issue
to make it more attractive in the market. Rights, warrants,
and convertibility are common examples. Also called sweeteners.
L
Top
Leverage
A company is leveraged
when it has a high ratio of debt to equity. If the company
can use the extra debt to expand and generate more than
enough additional revenue to cover the higher interest
costs, then the leverage is beneficial to the current
shareholders, that is, each share has been leveraged.
Liabilities
Total liabilities is
the sum of your Short Market Value plus your Debit Balances
from the prior trading day. Short Market Value is the
market value of short positions held in your short account
as of the prior day's market close. Increases in this
figure mean that positions you have sold short are moving
against you, or up. Each Monday, your short account will
be marked to the market. The Short Market Value of the
account is used to recalculate the proper level of collateralization
to secure the short positions in the account. The Debit
Balance reflects the closing debit balance as of the close
on the prior trading day.
Limit Order
Order that sets a specific
price (Limit Price) that is the highest a buyer will pay
or the lowest a seller wants to receive. Buyer will accept
price lower than limit and seller higher than limit. It
may be a Day or GTC (Good Until Canceled) order. If no
price is indicated, the order is a market order by default.
Limited Partnership
A business or investment
where limited partners provide capital, share in profits,
have limited legal liability, and leave the management
of the business to general partners. Can be tradable and
listed on an exchange, packaged and sold by brokers and
not exchange tradable, or tradable to other partners only.
REITS (real estate investment trusts) are popular LPs.
Most LPs provide both income and appreciation. Some are
highly liquid and others not.
Liquidity
The ability to turn
an asset into cash. A highly liquid asset is easy to sell
because an active market exists that sets prices which
are continuously adjusted for supply and demand. An example
is a listed stock or mutual fund. A less liquid asset
is real estate or a collectible.
Loan Value
Maximum percentage of
current market value of margin eligible securities that
a brokerage firm can lend a margin account client.
Long Investments
Includes: Cash Balance,
Current Value, Total Cost, and Unrealized Gain/Loss. Long
investments are investments that you have bought with
the goal of price appreciation and/or income generation.
Short investments, on the other hand, are first sold and
then bought back.
Long Position
Securities owned by
the client and held in the client's account at the brokerage
firm.
Long-Term Growth
Securities whose price
appreciation is anticipated over the long term; i.e.,
a year or more. Long-term growth securities tend to be
more stable and appreciate at a slower, albeit steadier
rate than do maximum capital gains securities.
Lot
A group of identical
UNITS (for securities) or nearly identical units (for
collectibles) of an investment that are traded at the
same time and price. Open lots are the contents of open
investments and can be long (buys) or short (short sell).
Closed lots are the contents of closed investments and
can be long (sell) or short (buy to cover).
M
Top
Maintenance Requirement
The level of equity
that must be maintained in a client's margin account.
When the market value of a margined security is less than
maintenance levels, a margin call is issued for the investor
to increase equity.
Margin Account
An investment account
which allows you to purchase securities with funds borrowed
from the broker at a specified interest rate.
Margin Balance
A debit in your account
secured with stocks and/or bonds which regulators have
authorized for use as collateral.
Margin Call
A firm's demand of a
client for additional equity in order to meet maintenance
requirements. If a client fails to deliver more equity
in the account, positions in the account may be liquidated.
There are three types of margin calls: House, Exchange,
and Federal. See House Call, Exchange Call, Federal Call.
Margin Debt
A debit in your account
that is owed to the broker. The debit is secured with
stocks and bonds which regulators have authorized for
use as collateral. It excludes funds due which are debits
resulting from purchases in a cash account.
Margin Loan Availability
The amount of money
you may withdraw from your account using margin eligible
securities in your margin account as collateral.
Marginal Tax Rate
The combined federal,
state, and local tax rate applied to the next additional
dollar of income. For example, if your federal tax bracket
is 28%, and your state tax rate is 5%, when you earn another
dollar of income, it would be taxed at a 33% tax rate.
Mark to Market
Determination of securities'
value within a margin account to ensure that the account
is in compliance with maintenance requirements.
Market Order
An order to buy or sell
a security at the next available price.
Market Timing
Attempting to buy and
sell securities to ride up trends and avoid down trends
in the stock, bond, currency, or commodity markets. In
theory, this can dramatically increase your rate of return,
but practically, it is extremely difficult or impossible
to consistently make the right decisions at the right
time over the long term.
Market Value
Maturity
The date a given bond
will mature and pay off its principal in full. A bond
issued for $1,000 will pay off the $1,000 at maturity.
A single company can issue more than one series of bonds.
These bond series can be differentiated by their maturities.
Maximum Capital Gains
The attempt to maximize
the positive difference between the buying and selling
price of a security. Maximum capital gains securities
are typically more risky, or volatile, than the average
(S&P 500) security. They rise more during bull markets
but also fall more during bear markets and are typically
stocks of fast-growing small companies.
Mean Estimate
The average of analysts'
earnings per share estimates for the current fiscal year
for a given corporation.
Minimum Deposit
The minimum deposit
accepted by the Institution for the particular CD. Jumbo
and MiniJumbo CDs indicate minimum deposits of $100,000
for Jumbos and $25,000 and $50,000 for MiniJumbos.
Minimum Investment
Minimum Initial indicates
the minimum deposit required to open a regular or IRA/SEP/Keogh
tax-deferred account with the mutual fund. Minimum subsequent
indicates the minimum required to make deposits in an
already opened regular or tax-deferred account with the
mutual fund.
Mixed Lot
The combination of round
lot (100 shares) or multiple round lots and an odd lot
(99 shares or less), e.g. 163 shares.
Money Market Fund
A mutual fund that invests
in cash and equivalents. Generally, has a stable $1 per
share net asset value (NAV) and a variable rate of return.
Not federally insured but short term nature of investments
plus private insurance make them quite safe. Dividends
are paid periodically and are automatically reinvested
in more shares. Available from banks, mutual fund companies,
and brokerage firms, these funds are used as a convenient
place to park cash and earn "interest" (really dividends,
as mentioned above). Most brokerage and mutual accounts
have an associated money market fund account. Money market
funds can be taxable or tax-exempt. Each day, the balance
in the cash / margin account, which comes from the proceeds
of trades and distributions, is swept into the money market
fund. See Account.
Municipal Bond
A bond issued by state
or local government. Interest from these bonds is generally
tax-free to residents but in some cases, interest is federally
taxable if subject to Alternative Minimum Tax. Note that
any capital gain realized by trading a municipal bond
is subject to capital gains tax. Because of this hybrid
tax situation, municipal bonds are normally put in taxable
brokerage accounts since there is no special account for
them. See Bonds.
Mutual Fund
A company that pools
money of individual investors and purchases securities
which become jointly owned by its shareholders. The shareholders
receive interest, dividends, and capital gains (but not
losses) from the ownership and sale of the fund's securities.
The fund's portfolio is managed by a professional money
manager. Open-end funds offer shares to the public continuously
(except when temporarily closed) while closed-end funds
offer a limited number of shares which then trade on an
organized exchange. A no-load fund charges no up front
or back end sales fee while a load fund may charge one
or both. Virtually all mutual funds charge annual expense
fees that reduce the investment return. Mutual funds can
invest in equity, debt, cash, real estate, options, and
futures. There are over 4,000 mutual funds. Closed end
funds are purchased just like stocks. Full service brokers
usually sell their own funds while discount brokers sell
mostly funds of other companies.
Mutual Fund Cash Level
Measures the average
percentage of cash held by managers of mutual funds in
their funds. When levels are over 11%, managers are holding
onto a lot of cash because they are bearish on the market.
Levels below 6% means they are bullish as they have spent
all their cash; fund managers usually need to keep about
5% cash just to meet daily redemption requirements. This
indicator is usually considered a contrary indicator,
as fund managers tend to be wrong at market extremes.
N
Top
NASDAQ Composite Index
A market value weighted
index comprised of about 3,500 stocks traded on the NASDAQ
exchange. Large technology stocks have a major effect
on this index value. NASDAQ represents the top tier of
the over-the-counter (OTC) market.
Net Amount
Quantity times price,
plus or minus commission.
Net Asset Value (NAV)
The per share price
of a mutual fund. For a no-load fund, NAV is the price
received by both buyers and sellers. For front loaded
mutual funds, NAV is equivalent of the bid price (what
shareholders can get for selling a share), while the offering
price is the price buyers must pay per share (and includes
front load). The NAV is usually calculated at the end
of each trading day by taking the closing prices of all
securities owned plus cash and equivalents and subtracting
all liabilities then dividing by the number of shares
outstanding, which for open-end funds, fluctuates depending
on daily number of redemptions and purchases. Many new
funds are issued at a NAV of $10. After a distribution,
the NAV falls by the amount equal to the distribution.
Net Income
The net income after
taxes but before payout of common and preferred dividends
for the indicated fiscal year for a given corporation.
Net Income 3-Yr Growth Rate
The unweighted average
of the growth rate for net income over the last three
fiscal years for a given corporation.
No-load funds
Mutual funds that have
no initial sales charge. Beware that some no-loads have
other charges and expenses. The best measure of all fees
and charges is the five year fee. See Mutual Fund.
Non-callable Bonds
Bonds which cannot be
taken back by the issuer before maturity. Most U.S. Treasury
issues are non-callable. This is an advantage to the lender
since there is no interest rate risk. With callable bonds,
there is the risk of having to reinvest before maturity
at a potentially lower interest rate.
Non-marginable Securities
Securities that may
not be purchased or sold in a margin account. All transactions
involving them must be done on a full cash basis.
O
Top
Odd Lot
Purchase or sale of
less than the round lot unit of 100 shares.
Offering Price
The net asset value
plus the sales charge. Offering price is what a buyer
(you) would have to pay to buy one share of a given mutual
fund. See Mutual Fund.
Out-of-State Deposit
Indicates whether an
institution will accept out of state deposits from customers.
Open Lot
Open lots are the components
that make up open investments and can be long (buy) or
short (short sell). A lot in general is a group of identical
units (for securities) or nearly identical units (for
collectibles) of an investment that are traded at the
same time and price. See lot.
Open Order
Orders that have been
placed with the broker but have yet been executed or canceled.
Open Price
The price at which a
given stock opened for the current trading day. For weekend
days or holidays, this would be the opening price for
the previous trading day.
Opening Commission
The commission added
to the proceeds before calculating realized gain or loss.
It is the fee charged by broker to execute your trade.
May be a composite of several fees & charges.
Opportunity Cost
The rate of return you
likely would have achieved for capital in an alternative
investment from the one you chose. If the current investment
under performs the foregone investment, then you have
paid an opportunity cost greater than the current rate
of return and you made a bad choice.
Option
A contract that gives
the owner the right, if exercised, to buy or sell a security
or basket of securities (inde |
