Glossary of Commonly Used Financial Terminology

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1035 Exchange

  • The tax-free transfer of assets within a life insurance contract to another 1035-eligible contract

401(k) Plan

  • Retirement savings plan sponsored by a private corporation which allows for a tax-free investment to which taxes are not paid until the money is withdrawn from the account.

403(b) Plan

  • A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. Individual accounts in a 403(b) plan can be any of the following types.

529 Plan

  • Type of municipal fund security used for education planning which provide tax advantages. Some notable benefits include tax-free withdrawals when paying for college, tax-deferred growth, flexibility such as change of beneficiary, and other additional tax benefits may be applicable.

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Accelerated Death Benefit (ADB)

  • Benefit that may be attached to a life insurance policy which enables the holder to receive cash advances against the death benefit in case of a terminal illness.

Accrued Interest

  • Interest from a bond or loan that accumulates since the initial investment. Interest may be calculated and paid in intervals (Annually or Semi-Annually).

Accumulation Planning

  • The process of planning the savings of retirement, education, or other large financial goals

After Tax

  • Remaining income after tax deductions have been applied.


  • An agreement between a policyholder and a life insurance company to provide a series of payments for a certain period (e.g series of lifetime payments)


  • Valuable property owned by an individual or company.

Asset Classes

  • Group of securities that behave similarly to each other in the market and are also subject to similar regulations. The main asset classes consist of stocks, bonds or cash alternatives.

Average Cost

  • Also known as unit cost, this is the total cost divided by the quantity.

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Behavioral Finance

  • Financial field which combines behavioral and cognitive psychological theory with finance. Typically used to explain irrational financial decision making.


  • A loan from an investor to a entity (such as the government) over a declared period of time. Interest on a bond may be a variable or fixed rate.

Bond Type

  • Bonds can come in many types; however, there are seven major categories which include: Treasury Bonds, U.S. Government Bonds, Investment-Grade Corporate Bonds, High-Yield Corporate Bonds (Junk Bonds), Foreign Bonds, Mortgage Bonds, as well as Municipal Bonds.


  • A person or company which buys and sells assets for others for a commission. Similar to a middleman.

Buying Power

  • The amount of money available to an investor to buy securities.

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Capital Gains

  • A profit made from selling property or investments.

Cash Flow

  • The total amount of money into or out of a business.

Civil Service Retirement System (CSRS)

  • Benefit consisting of contributory retirement savings based on a civil service position for at least one of the last two years before retirement.

Corporate Bond

  • A debt security issued by a corporation that is sold to investors.

Coverdell Education Savings Accounts (Coverdell ESA)

  • Tax advantaged investment account, comparable to a 529 Plan, except the Coverdell ESA also qualifies for other expenses such as K-12 purchases. One downside is that the maximum contribution per child is lower.


  • The trust between two parties where one party loans the other money and is not reimbursed immediately.

Cumulative Return

  • Aggregate amount of an investment that has gained or lost over time.

CUSIP Number

  • Committee on Uniform Security Identification (CUSIP) numbers are nine digit alphanumeric numbers used to identify securities.

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Debt Securities

  • A negotiable liability or loan that may also be traded.

Debt-Equity Ratio

  • A debt ratio used in measuring a company's financial leverage. This is the total liabilities divided by the stockholder's equity.

Deferred Retirement Option Plans (DROP Plans)

  • Plan for an eligible individual of retirement that keeps working instead. In this case, the individual's employer deposits a lump sum of money into a separate account every continued work year which accumulates interest for as long as the employee works.

Disability Income Insurance

  • A plan which provides perioidic payments of benefits when the insured is disabled or otherwise unable to work.

Discount Rate

  • Sometimes called the internal rate of return, this is the rate required to discount a series of cash flows to have a net present value of 0; Often referred to as the overnight lending rate of the Federal Reserve Bank to banks.


  • The disbursement of assets from a retirement account paid directly to the retiree or beneficiary.


  • A risk management strategy that uses a wide variety of investments instead of only a select few. This is used to minimize losses or to create a balance in market fluctuations.


  • A sum of money regularly paid by a company to their shareholders from the profits or reserves.

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Education Planning

  • Plans, such as a 529 Plan, which consist of a type of municipal fund security that enable savings for education with tax advantages. These plans differ slightly between each state in the U.S.


  • Value of an asset after all liabilities have been deducted.


  • A marketplace where securities, derivatives, commodities, or other financial instruments may be traded.

Exchange Traded Funds (ETFs)

  • A type of investment fund or security that is traded through an exchange. In comparison to a mutual fund, ETFs may typically be seen to have lower fees with higher daily return.

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Face Value

  • Nominal value of a security state by the issuer. Face value of a stock is the original value. Face value of a bond is the value at maturity.

Federal Call

  • A type of margin call that requires a trader to deposit a sum of cash in order to meet federal requirements on an amount of credit set by brokers.

Federal Employees Retirement System (FERS)

  • A retirement plan that provides benefits with three sources that include a basic benefit plan, a Thrift Savings Plan (TSP), and Social Security. Social Security and TSPs are eligible to transfer if the employee changes their line of work to be outside of a government job.

Fiscal Policy

  • Spending levels or tax rates adjusted by a government to influence an economy.

Fiscal Year

  • In the United States, the fiscal year is usually denoted by the ending year and is a twelve month period that may differ between the states. However, the Federal government is from October 1st until September 30th.

Fixed Indexed Annuity

  • Type of annuity that grows at the greater of two options: annual, guaranteed minimum return rate OR return from a specified stock market index after reduction of expenses.

Floating Rate

  • A variable or adjustable rate of interest applied to any debt instrument such as mortgages, bonds, loans or credit.


  • Also known as futures contract; an agreement traded on an exchange to sell or buy assets, such as shares, at a fixed price with a delivery date that is not immediate.

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Global Bonds

  • A type of bond which may be issued in multiple countries simulataneously. Usually large multinational corporations are the issuers.

Global Equities

  • A category of funds invested in both U.S. and international stocks.

Government Bonds

  • A debt security issued by a government. In the U.S. Federal government bonds include treasury inflation-protected securities (TIPS), savings bonds, and treasury bonds.

Growth Rate

  • Rate of growth, usually represented by a percent within a time period, of revenues or dividends.

Guaranteed Minimum Withdrawal Benefit (GMWB)

  • A guarantee that a percentage of the invested amount may be withdrawn annually until the full amount has been recovered with no regard to the market performance.

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Health Insurance

  • Insurance which allows for reimbursement of the insured for incurred expenses from illness, injury, or other unexpected health concerns.


  • An investment strategy which consists of minimizing risk by investing in coverage. An example of this would the use of financial derivatives.

Hidden Asset

  • An asset that is not shown on a balance sheet for a company. An example of this would be a trademark or patent, sometimes a hidden asset could be the most valuable.


  • Contents of an investment portfolio held by an entity, examples may include bonds, stocks, mutual funds or pensions.

Hybrid Investment

  • Form of investment, also known as derivatives, that combines debt features with equity which can protect against financial risks from securities.

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Imputed Interest

  • Interest that is considered to have been paid for tax purposes by the IRS. In other words, the IRS uses this interest to collect tax revenues on loans with little to no interest.


  • Incoming monetary gains from work or investment returns.


  • Adjustment of asset weights in an investment portfolio to ensure matching performance.


  • Plural of index.


  • Increase in prices alongside the fall in purchasing value of money.

Inflation Rate

  • Rate of inflation, usually expressed as a percentage over an annual time period.


  • Establishment that conducts financial transactions which may include investments, deposits, currency exchange, or loans.


  • Policies used to hedge risk of financial losses which may result in unexpected damages or injuries.


  • Money paid at a fixed or variable rate in addition to the repayment of a debt as a cost of delaying the repayment.

Interest Dates

  • Dates when bondholders receive coupon payments. In other words, it is the dates in which interest is received on current debt.


  • Allocation of monetary funds with the expectation of positive return or financial benefit in the future.

Investment Management

  • The professional asset management of various securities (shares, bonds and other securities) and other assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors.


  • An entity that develops, registers and then sells securities to finance their operations. Examples may include corporations, governments, or trusts.

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Junk Bond

  • A security that is high-risk and high-yield issued by a company that is looking to quickly raise capital.

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Life Insurance

  • Insurance which provides death benefits, premium payment, and (if permanent) a cash value account. This can ensure that beneficiaries receive the insured amount from the insurer.

Limit Order

  • Direction given to a broker to buy or sell a security at a set price or higher.


  • Availability of liquid assets to an entity; liquid assets being assets that consist of or can quickly be converted to cash. Liquidity also may describe how quickly a security can be bought or sold without having an effect on the price of the asset.

Loan Value

  • An amount lent against an asset that is used as collateral to secure a loan. Typically the asset will be worth significantly more than the amount lent.

Long Investments

  • An investment made with no plan of selling it in the near future, usually purchased with the anticipation of a rise in price.

Long-Term Care Insurance

  • Insurance product which covers costs usually not eligible for health insurance which are typically for care over an extended period of time.

Long Term Growth

  • An investment strategy which consists of a security appreciating in value over a long period of time, whether the growth is immediate or not.

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Margin Account

  • Type of account in which investors are allowed to purchase securities with borrowed funds. Instead, collateral is required to cover the risks.

Margin Balance

  • A negative number representing a debit balance. In other words, the remaining balance on a loan. This amount is subject to change in interest rates.

Margin Debt

  • A debt taken by a brokerage customer from trading securities using a margin account.

Marginal Tax Rate

  • The amount of tax paid on additional income; the marginal tax rate increases for the individual as their income increases. This is to ensure fair taxes throughout the income brackets.

Market Value

  • The value of an asset in any given market.


  • A U.S. insurance program that provides health insurance to low-income Americans, the elderly, or those with disabilities. The program is funded by both the state and federal governments, but is administered by the states with federal requirements.


  • A U.S. government social insurance program that provides health insurance for Americans whom are aged 65 or older and have paid payroll tax. It may also pay to younger Americans that have disabilities.

Minimum Deposit

  • The smallest amount of money that must initially be deposited into a new brokerage account. May also be known as "Minimum to open account".

Minimum Investment

  • The smallest amount of money that must initially be invested into a mutual fund.

Money-weighted Return

  • Rate of return of an investment or portfolio. Contrasting to a time-weighted return, a money-weighted return may be sensitive to contributions or withdrawals.

Municipal Bond

  • A security that is issued by a local entity.

Mutual Fund

  • An investment vehicle funded by shareholders that trade in diversified holdings and is operated by money managers.

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  • A stock market index of common stocks and securities. It is one of the most popular indices in the U.S.

Net Amount

  • Amount remaining after adjustments have been made for deductions or other expenses.

Net Income

  • Taxable income calculated by subtracting all allowable deductions or exemptions from total income.

Net Return

  • The net income from an investment after all deductions have been applied to the gross income generated from the investment.

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Open Price

  • The price at which a security is traded upon at the opening of a trading day on an exchange.

Opportunity Cost

  • The potential gain lost from choosing an alternative option.


  • A financial derivative which represents a contract sold by one entity to another. In which case, the contract offers the buyer to call (buy) or put (sell) a security or other financial asset at a strike price given an exercise date.

Option Premium

  • Income received by the investor selling an option contract.

Option Schedule

  • A list of options to an employee that contain the date and quantity of shares with an expiration date, exercise price, and vesting schedule.

Outstanding Bond Amount

  • Value of bonds that have been issued but have not yet been redeemed or matured.

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  • Allocation of financial assets such as stocks, bonds, or cash alternatives and where they are invested.

Preferred Stock

  • A stock that entitles the investor to a fixed dividend with a higher payment priority than common stock dividends.


  • Refers to the original sum of money invested, loaned, or borrowed.


  • Money obtained from an activity, after commissions, expenses and other fees have been deducted.

Projected Growth Rate

  • Rate which something is expected to grow based on historical data.

Projected Yield

  • Percentage of stock price that is projected to pay out as dividends.

Property and Casualty and Liability Insurance

  • Multiple types of insurance which covers unexpected scenarios such as injury on property or inability to work.

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Real Estate Investment Trust (REIT)

  • Company that owns, and sometimes operates, real estate that produces an income.


  • Process in which weightings of an investment portfolio are realigned which may include periodically buying or selling assets in order to maintain a desired allocation.

Return on Investment (ROI)

  • Measure of investment efficiency or to compare different investments carried out by measuring the amount of return of an investment in relation to the investment's cost. Typically expressed as a percentage.

Required Minimum Distributions

  • The minimum amount you must withdraw from your retirement account each year. You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.

Risk Adjusted

  • Type of return which measures how much risk is involved producing the return. Typically applied to individual securities or investment portfolios.

Risk Analysis

  • A process in which uncertainty of investments is assessed to determine the probability of success or failure. This is done to minimize risks and maximize returns.

Risk Management

  • Forecasting of financial risks to assess investments and minimize or avoid losses.


  • A rollover is the process of moving your retirement savings from your retirement plan at work (401(k), profit-sharing plan, etc.) into an Individual Retirement Account (IRA). Rolling over to an IRA allows you to keep your savings tax-deferred and typically gives you a broader choice of investments.

Roth IRA

  • Individual retirement account that allows after-tax income to be invested where earnings are tax-free. Withdrawals after age 59.5 will also be tax free. Some other notable advantages for a Roth IRA are that after having an account for 5 years you may withdraw funds (up to $10,000) for a first time home (Not owned a house for at least 2 years) purchase without penalty of taxes or early withdrawal fees.

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S&P 100 Index

  • A U.S. stock market maintained by Standard & Poor's. A subset of the S&P 500. Includes the largest companies in the S&P 500.

S&P 500 Index

  • A U.S. stock marked maintained by Standard & Poor's consisting of 500 stocks. It is a market value weighted index and is one of the most common benchmarks for the stock mark in the U.S.


  • A negotiable financial instrument that holds monetary value and represents ownership in a publicly-traded corporation through stock, credit, or option.

Series E Bond

  • A U.S. government savings bond issued from 1941 to 1980.

Series EE Bond

  • A U.S. government low-risk security. Those issued after May 2005 have a fixed interest (coupon) rate. Rates are set twice a year which occur in May and November and are applied for six months following.

Series HH Bond

  • A U.S. government current-income security. This savings bond pays semi-annually based on an interest (coupon) rate that is locked in at a fixed rate for the first 10 years of investment, after which is adjusted by the U.S. Treasury for the remaining life. This bond is exempt from all taxes except Federal.


  • A portion of ownership in a corporation or financial asset that ensures equal distribution of profits, if any, in the form of dividends. Types of shares include preferred as well as common shares.

Short Value

  • Market value of securities sold short to an individual through a brokerage account. The value is represented as negative as it represents a future obligation to buy back shares.

Simple Return

  • Incremental amount of net income expected from an investment divided by the amount invested.

Social Security

  • Government insurance program which provides monetary assistance to those with little to no income, more commonly those that are retired, unemployed, or disabled.

Stock Split

  • Issue of new shares in a company to existing shareholders with proportion to current holdings.


  • Type of security based on partial ownership in a corporation and represents a claim on a portion of the corporation's earnings and assets.

Stop Order

  • Order to buy or sell securities when the price exceeds a specific point, ensuring high probability of the entry or exit price meeting the goal. This limits the investor's risks and ensures their profit. It should also be noted that once the price exceeds the defined entry/exit price, the stop order is known as a market order.

Strike Price

  • Price at which a call or put option can be exercised before the expiriation date


  • Arrangement of letters, or in some cases numbers, representing a security listed on an exchange. Also known as ticker symbol.

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  • Also known as treasury bills, are short-dated government securities which yield no interest but are issued at a discount on its redepemption price.

Tax Deduction

  • Reduction of taxable income. In other words, reduces the amount of income in which an individual is taxed upon.

Tax Deferred

  • Status referring to investment earnings that are able to accumulate tax-free until the investor takes constructive receipt of the gains. An example is an individual retirement account (IRA).

Tax Exempt

  • Status similar to a tax deduction, but may provide complete tax relief instead of only reduced or deferred rates.

Tax-Loss Harvesting

  • The practice of selling a security at a loss in order to offset taxes on gains as well as income.

Thrift Savings Plan (TSP)

  • A retirement savings and investment plan created for Federal employees. Similarly to 401(k) plans offered by private corporations.

Time Horizon

  • Amount of time which an investment is held before being liquidated.

Time-weighted Return

  • Rate of return which measures the compound rate of growth in an investment portfolio.

Total Assets

  • Amount of all gross investments, cash, receivables, or anything else that has value. In short, it is the sum of all liabilities and equity.

Total Liabilities

  • Aggregate debt and obligations owed by an entity.

Total Return

  • Actual rate of return of an investment over a period of time, including interest, dividends, capital gains, and distributions.


  • Most commonly referred to as the issued debt of the federal government.

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Undistributed Earnings

  • Amount of earnings after dividends have been subtracted.

Unites States Savings Bond

  • Bond issued by the U.S. government. Several types exist and include: E, H, EE, HH, and I.

Unpaid Dividend

  • Dividend owed to stockholders that has yet to be distributed.

Unsecured Debt

  • Debt or obligation that is not protected by a guarantor or backed by collateral in case of bankruptcy, liquidation, or failure to meet repayment terms.

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Variable Annuity

  • A tax-deferred retirement investment vehicle with a wide selection of investments, then paying the retiree an income during retirement that is based on the performance of the investments chosen.

Variable Interest Rate

  • Interest rate which varies based on the current market interest rates which may or may not fluctuate in the investors favor.


  • Tendency of market value to change rapidly or unpredictably, which is typically related to high-risk investments.


  • Also known as trading volume, is the amount of a security traded during a period of time.

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  • A security that entitles the holder to buy the stock of an issuing company at a fixed priced (exercise price) until the expiration date.

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Year End

  • End of a fiscal year.

Year Issued

  • Year in which a security is issued.

Year to Date (YTD)

  • Time period starting from the beginning of the current year up to present day.


  • Amount of return on a security, different from total return due to yield not including price variations.

Yield to Call

  • Yield of a bond or note if the security is held until the call date. Only valid if called prior to maturity.

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