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Financial Glossary

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12b-1 Marketing Fee 

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. A true no-load fund has neither a sales charge nor a 12b-1 fee.

Acquisition 

The purchase of one company by another, or the attainment of controlling interest through an accumulation of shares.

Adjusted Gross Income (AGI) 

The amount of income, for an individual or a couple filing a joint tax return, subject to federal income taxes. To determine AGI subtract certain, qualified deductions, such as unreimbursed business expenses or contributions to a traditional Individual Retirement Account (IRA), from gross income, which generally includes employment income, interest income, dividends, and capital gains.

Aggressive Growth Fund 

A mutual fund with the objective of achieving maximization of long-term capital growth, rather than dividend income, by investing in narrow market segments and small company stocks. Aggressive growth funds are designed for maximum capital appreciation, and generally invest funds in companies with high growth rates, and usually are accompanied by a higher degree of risk. (Note: Mutual funds are sold by prospectus; a prospectus contains complete information on risks, fees and expenses, and should be read carefully before investing.)

American Depositary Receipt (ADR) 

A receipt from a United States bank for shares of stock of a foreign company. ADRs, which are traded in U.S. dollars on U.S. markets, carry the same risks as the underlying foreign share.

Market Value 

The price at which securities are being traded. Estimated market value refers to the highest potential price a buyer might pay, and a seller would accept.

Maturity 

The date on which a debt becomes due for payment. For example, if a bond has a face value of $1,000 and a 30-year term of maturity, the bondholder should receive $1,000 in 30 years.

Money Market Fund 

A mutual fund, usually no-load, investing in highly liquid short-term securities, such as certificates of deposit (CDs), U.S. Treasury bills, commercial paper, bankers' acceptances, and repurchase agreements. Most money market funds are not federally insured, although some carry private insurance. Many are part of fund families that allow investors to transfer money between accounts at no charge. (Note: An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.)

Municipal Bond 

A tax-exempt bond that may be issued by a state government or agency, or by a town, county, or other political subdivision or district. Interest payments are generally not subject to federal taxes, and may be exempt from state and local taxes if the bondholder is a resident of the state where the bond was issued, although income may be subject to the alternative minimum tax.

Mutual Fund 

A fund managed by an investment company that raises money from shareholders and invests it in stocks, bonds, real estate, money market securities, commodities, or options. Mutual funds offer investors the benefits of professional management and diversification, for which they charge a management fee. Some mutual funds charge a sales fee (load). Mutual funds are sold by prospectus, which contains complete information on the fund's investment objectives, the risks involved, and any fees and expenses associated with the fund. The prospectus should always be read carefully before investing.

National Association of Securities Dealers Automated Quotations (NASDAQ) 

A system quoting current prices for securities traded over the counter (OTC), as well as many listed on the New York Stock Exchange (NYSE).

Net Asset Value (NAV) 

Also called the bid price. The market price an investor pays for a mutual fund share. The NAV is computed at the end of each business day by adding the closing market value of the fund's securities to the value of its other assets, subtracting liabilities, and then dividing the sum by the total number of shares outstanding.

New York Stock Exchange (NYSE) 

Also called The Big Board and The Exchange. The oldest and largest stock exchange in the U.S., listing the country's largest corporations. Memberships are sold to brokers, who buy and sell stocks on the floor of the exchange.

No-Load Fund 

A mutual fund that does not charge a sales fee (load). Investors in no-load funds purchase shares directly from the fund company, rather than through a broker. Because no-load funds do not charge commissions, a salesperson may not be available to offer advice on buying and selling. Some companies selling no-load funds may charge an annual fee for marketing, commonly called a 12b-1 fee. Mutual funds are sold by prospectus, which contains complete information on the fund's investment objectives, the risks involved, and any fees and expenses associated with the fund. The prospectus should always be read carefully before investing.

Offering Price 

The per-share price at which a stock or mutual fund is offered to the public. Companies going public for the first time will issue shares of stock at an offering price, as will companies who are issuing new shares. The market price may be more or less than the offering price. With no-load funds (mutual funds that do not charge sales commissions), the offering price is the same as the market price. With load funds, mutual funds that charge sales commissions, a sales charge is added to the market price to reach the offering price.