Financial Terms Dictionary

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10-K
A public corporation’s detailed business report that is required to be filed with the SEC yearly.
12b-1 fees
A fee (typically less than 1 percent) charged by some funds to cover operating and marketing expenses. Information about 12b-1 fees is disclosed in a fund’s prospectus and can reduce shareholders’ returns over time.
401(k) plan
A defined-contribution retirement plan offered as an employee benefit by a company. It allows the contributor to set aside pre-tax income into a pool that is then invested in securities. Early withdrawals (prior to age 59 1/2) may be subject to a 10% IRS penalty.
403(b) plan
A defined-contribution retirement plan offered as an employee benefit by a qualifying non-profit organization. It allows the contributor to set aside pre-tax income into a pool that is then invested in securities. Early withdrawals (prior to age 59 1/2) may be subject to a 10% IRS penalty.
Accrued interest
Interest earned (but not yet paid) on a bond or fixed income security since the last interest payment.
Acquisition
The process by which a larger company, through stock purchase or exchange, gains control of a smaller company.
All or none
A type of order that requires the order be executed completely or not at all.
Alternative minimum tax (AMT)
A congress-created tax plan that targets high-income individuals who take advantage of deductions, credits, and exemptions.
American Depositary Receipt (ADR)
Stock or securities in a foreign company issued by a U.S. bank or trust. ADRs allow U.S. investors to trade in foreign companies without an international investment account.
American Stock Exchange (AMEX)
Stock exchange in the United States for equities, bonds, options, and derivative securities located in New York City.
Amortization
Eliminating a debt (principle and interest) over time, in installments.
Annual report
A corporation’s yearly, formal financial statement. Reports describe corporate assets, liabilities, revenues, expenses, and earnings, as well as analysis and messages from officers. In accordance with SEC regulations, annual reports are distributed to all company stockholders.
Annuity
An insurance product that pays an income benefit on a specific date, for a specific term, or for the lifetime of the person(s) receiving the annuity. Annuities are long-term investment vehicles designed for retirement purposes. Early withdrawals may be subject to surrender charges. Withdrawals are subject to ordinary income tax, and if taken prior to age 59 1/2, a 10 percent IRS penalty may also apply. Fixed annuities are not insured nor guaranteed by the FDIC. All guarantees are backed by the claims-paying ability of the issuing company.
Arbitrage
The simultaneous purchase of a security in one market and the sale of it or a derivative product in another market to profit from price differentials between the two markets.
Ask (ask price)
The lowest price a dealer or trader will accept to sell stock. Also the quoted offer at which an investor can buy stock. This is sometimes called the offer price.
Assets
Property with financial value that can be used as payment of a debt.
Asset Allocation
Deciding how funds should be allocated among different types of securities.
Asset class
An investment category, e.g., stock, real property, metals, etc.
Auction market
Stock exchanges, like the New York Stock Exchange and the American Stock Exchange are auction markets where buyers and sellers meet through a specialist.
Average
A mathematical method used to measure securities prices trends or other market behaviors. The Dow Jones Industrial Average adds the prices of 30 stocks and then divides that total by a divisor