401(k) Plan: An employer-sponsored retirement plan that allows employees to make contributions to the plan, and receive tax deductions. Moreover, taxes are deferred until withdrawals are made from the plan.

Annual Meeting: This refers to a yearly meeting held by a company’s management. During the meeting, the company’s management discusses past performance and future projections. Additionally, this is when common stockholders elect directors.

Annual report (10K): This refers to the annual report that all publicly traded companies must file with the Securities and Exchange Commission. These reports are available to the general public.

Back-end load: This is when a seller must pay a sales charge to sell his shares in a mutual fund.

Balance Sheet: The Balance Sheet shows the company’s assets, liabilities, and equity.

Bear market: This is the phrase used to describe a lengthy period of stock price decreases.

Beneficiary: An individual who receives, or may become eligible to receive, benefits under a
retirement plan, college savings plan or other investment vehicle.

Blue-Chip Stocks: These are stocks issued by stable and prominent corporations with very good historical records of profitability. These stocks are considered less risky than other stocks.

Board of Directors: The Board of Directors consists of individuals who are elected by stockholders. The Board of Directors appoints and supervises the management team.

Bondholder: An investor who has given a certain type of long-term loan to a company.

Broker: A professional who charges a fee or commission for executing transactions for investors.

Bull market: This is the phrase used to describe a lengthy period of stock price increases.

Callable bond: Bonds that allow the borrower (government or corporation) to cancel the bond earlier than the maturity date. The borrower must pay the lender (bondholder or investor) the full principal.

Closed-end: After the initial offering period, the fund does not openly sell shares to the public. In order to buy a share in this fund, an investor must purchase a share from a current shareholder. This usually results in a premium or discount.

College Savings Plans (529 Plans): State-sponsored college savings programs. Under certain conditions, the contributions and profits are tax-exempt.

Common Stockholder/Shareholder:
An investor who owns common stock.

Common stocks: A fractional share in a corporation, which represents ownership or equity in the corporation.

Corporate Bonds: A corporation borrows money from the public on a long-term basis.

Cost of Goods Sold (COGS): This is a line item on an income statement, and it represents
manufacturing costs and production expenses.

Debt Securities: An investor gives a loan to an entity in exchange for periodic interest payments, and a promise to repay the loan in the future.

Dividends: A company’s distribution to stockholders.

Discounts: When a bond sells for less than the face value.

Donor: A person who gives a contribution.

Dow Jones Industrial (Dow Jones): An index that includes 30 of America’s most prominent corporations.

Equity: A company’s net worth, which is assets minus liabilities. This represents the amount owed to stockholders.

Financial Planner: A financial advisor who may charge or may not charge a fee for devising a financial plan for an investor.

Financial statements: A written report that shows the financial status of a company. Generally, financial statements include an income statement, a balance sheet, and a statement of cash flows.

Front -end load: This is when a buyer must pay a sales charge to purchase shares in a mutual fund.

Fund manager: A professional who is responsible for managing a mutual fund according to the requirements outlined in the prospectus.

Generally Accepted Accounting Principles (GAAP): A certain set of rules, standards, and procedures for presenting the financial statements.

Gross National Product (GNP): The total market value of all final goods and services produced in a country in a given year plus the income earned by American residents from foreign investments less the income earned by foreign residents from American investments.

Gross Profit: This is a line item on the income statement, and it represents sales less cost of goods sold.

Income Statement: The Income Statement is a detailed report that shows the company’s revenues, expenses, and profits.

Individual Retirement Plan (IRA): A retirement investment created by the federal government.

Initial Public Offering (IPO): The first time a company offers ownership or stock in a company.

Junk Bonds: Risky corporate bonds that have high interest rates to attract investors.

Loads: Loads refer to a mutual fund’s sales charges.

Management Company: A company that organizes a mutual fund, and appoints a fund manager to administer the mutual fund.

Management’s Discussions:
This is when a company’s management team gives an explanation of the prior year and also provides a forecast for future operations. Management’s Discussions are found in the financial statements.

Merger: A merger occurs when one company absorbs another company. The acquired company is discontinued and the surviving company retains its identity.

Mutual fund: A pool of money, contributed by many investors, that is invested in stocks, bonds, and cash. The investors have a pro rata share in each stock, bond, or cash held in the fund.

Net Asset Value (NAV): This is the value of one share of a mutual fund’s investments. The simple calculation is assets less liabilities, divided by total outstanding shares.

Net Income: The residual income after Gross Profit has been adjusted for SG&A, depreciation, amortization, other income and expenses, and taxes.

Open-end: The fund does not impose restrictions on when an investor can buy shares from the fund. Additionally, the investor can purchase the shares at the NAV.

Owner’s equity: This is considered the company’s net worth or shareholders' equity.

Personal Liability: This is when a person is individually responsible or liable for business debts.

Preferred stocks: These are equity investments that are similar to debt securities. These equity securities give an investor a fixed dividend rate. Additionally, a participating preferred stock will allow the preferred stockholder to also share with common stockholders in regular dividends.

Premiums: When a bond sells for more than the face value.

Quarterly Report (10Q): This refers to the quarterly report that all publicly traded companies must file with the Securities and Exchange Commission. These reports are available to the general public.

REIT: A corporation or trust that uses capital to purchase and manage income property. These
investments are similar to mutual funds.

Retained earnings: This refers to the company’s earnings that are kept within the company and not distributed to stockholders as dividends.

Securities: This term refers to debt or equity issued by a corporation, government, or other organization.

Securities and Exchange Commission (SEC): A federal agency that regulates the securities industry. The SEC promulgates rules to ensure the public receives sufficient information concerning securities. Moreover, the SEC protects the investing public from unscrupulous behavior in the stock market.

Selling, General, and Administrative Expenses (SG&A): This is an income statement item that shows expenses incurred for salaries, advertising, travel, and certain other expenditures.

Sole Proprietor: A business structure where an individual is deemed a single entity for tax and
liability purposes.

Statement of Cash Flows: The Statement of Cash Flows is a detailed report that shows how the Company generated cash over a specified period of time.

Stock Dividend: A company makes a distribution to stockholders, which dilutes the value of each outstanding share.

Stock exchange: Any organization, association or group that provides a marketplace where securities can be traded.

Stock Split: The Board of Directors increases the number of stock outstanding. Additionally, the stockholder retains his/her original fractional ownership in the company.

Ticker symbol: A system of letters used to identify a publicly traded stock or mutual fund, and allows the investor to determine the trading price.

Trading price: The price an investor must pay to purchase a certain stock, bond, or mutual fund.

Treasury Securities: These are federal government debt securities with various maturity dates.

Yield: Shows the return on bonds and notes, which is the interest rate divided by the trading price of debt securities.

Zero coupon bonds: This is a bond that is issued at a large discount and does not make periodic interest payments. The bondholder receives the full principal at the maturity date.

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