- 401(k): A 401k is a retirement savings plan sponsored by an employer. It lets employees save and invest a part of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.
- 529 Plan: A state-sponsored college savings plan through which a donor can set up an account for children, grandchildren, or other relatives. The donor retains control of the account and can transfer it to another family member. Earnings are not taxed if they are used for college expenses.
- Annuity: An investment product from a life insurance company, providing tax-deferred earnings but often charging substantial fees. The defining characteristic of all annuities is the option for a guaranteed distribution of income for life. However, many people choose to receive the accumulated principal in a lump-sum payment.
- Asset: Anything with commercial or exchange value owned by a business, institution or individual. Examples include cash, real estate and investments.
- Asset Allocation: A method of investing where investors include a range of different investment classes, such as stocks, bonds, and cash equivalents, in their portfolios.
- Asset Class: A group of securities or investments that have similar characteristics and behave similarly in the marketplace. Three common asset classes are equities (e.g., stocks), fixed income (e.g., bonds), and cash equivalents (e.g., money market funds).
- Asset Management: Professional management of both securities (such as stocks, bonds, limited partnerships, and mutual funds) and tangible assets like real estate to meet specified investment goals for the benefit of an investor.
- Asset Protection: Using a set of legal techniques and statutory laws to protect wealth against liability and lawsuits.
- AUM (Assets Under Management): The total market value of the investments managed on behalf of clients.
- Bear Market: A condition of the market during which time the price of securities are decreasing. If the Dow Jones Industrial Average or Standard & Poor’s 500 Index drop 20% or more over a two-month period, many consider this entry into a bear market.
- Beneficiary: A person who inherits proceeds from assets.
- Bond: A debt security which represents the borrowing of money by a corporation, government, or other entity. The borrowing institution repays the amount of the loan plus a percentage as interest.
- Certified Financial Planner (CFP®):A professional designation attained by a financial planner or advisor who has successfully completed the requirements set by the Certified Financial Planner Board. The CFP designation is awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
- CEFEX: CEFEX is a global independent organization that evaluates whether an investment fiduciary is being managed according to international industry best practices, and is therefore trustworthy.
- Chartered Financial Analyst (CFA): A designation for investment and finance professionals that certifies their expertise across a wide range of finance- and investment-related topics. They are awarded by the CFA Institute.
- Diversification: A technique to reduce risk by investing in a variety of asset classes.
- Dividends: Shares of a company’s profits paid to investors.
- DOW (Dow Jones Industrial Average): An index showing the values of 30 large publicly-traded U.S. companies. Reports that the DOW is up or down refer to the average increases or decreases in stock prices of those companies.
- Estate: Everything you own; all of your assets and liabilities.
- Estate Planning: Making decisions about distributing one’s assets at death, and the strategies to carry out those decisions.
- Fee-based financial advisor: Fee-based advisors can be compensated in different ways, including through commissions on the products they can sell to you. This can introduce conflicts of interest since it gives advisors incentives to sell you funds whether they’re right for you or not.
- Fee-only financial advisor: Fee-only advisors can only be compensated by the client. The benefit of this is that it reduces conflicts of interest when making recommendations to you.
- Fiduciary: An individual or organization that is legally and ethically bound to act in the best interest of the client.
- Financial Planning: Comprehensive advice and assistance to a client for the purpose of meeting the client’s financial needs and life goals. This includes, but is not limited to, these major areas: retirement planning, investment planning, risk management and insurance planning, tax planning, and estate planning.
- Hedging: The strategy of offsetting potential losses from an investment by taking an opposite position in a related asset.
- Inflation: Refers to a general and sustained increase in prices over time.
- Individual retirement account (IRA): An IRA permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). The exact amount depends on the year and your age. IRAs can be established at a bank, mutual fund, or brokerage. A traditional IRA allows the amount deposited to be deducted from current income, but any distributions are fully taxable.
- Mutual Fund: A type of investment vehicle funded by shareholders for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
- NASDAQ: The National Association of Securities Dealers Automated Quotation, also called the “electronic stock market.” The NASDAQ composite index measures the performance of more than 5,000 U.S. and non-U.S. companies traded “over the counter” through NASDAQ.
- Net Worth: Everything you own minus liabilities (everything you owe to others).
- Portfolio: A collection of investments such as stocks and bonds that are owned by an individual, organization, or investment fund.
- Privately Held: A company whose shares cannot be bought by the general public.
- Retirement Planning: A plan made and kept by an individual for setting aside income for life after you leave the workforce.
- Registered Investment Advisor (RIA): An RIA is an investment advisor registered with the Securities and Exchange Commission or a state’s securities agency.
- Roth IRA: A type of individual retirement account that you fund with after-tax income.
- Securities: Assets bought and sold via financial markets such as stocks and mutual funds.
- Securities and Exchange Commission (SEC): Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors. The SEC is responsible for ensuring that the securities markets operate fairly and honestly.
- Stock: Also referred to as “shares” or “equity,” stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. There are two main types of stock:
- Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends.
- Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares.
- Trusts: A legal arrangement whereby a person gives property to another person to be managed for the benefit of the giver, another person, or an entity such as a charitable organization. Trusts are often used in estate planning and for asset protection.
- Volatility: The degree to which the price of an investment fluctuates.
Disclosure:
This glossary is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
