401k account: A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.
APR (Annual percentage rate): The cost of credit as expressed as a yearly interest rate. This amount does not include the added cost of compounding interest (for example monthly as in the case of credit cards or mortgages).
APY: The effective annual rate of return taking into account the effect of compounding interest.Adjustable rate mortgage, ARM: A type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific benchmark. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month.
Balance: The amount of money in an account at a given time. This may be positive or negative. An outstanding balance is the amount you owe.
Bonds: A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.
Certificate of Deposit: A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years.
Compounding: The addition of interest to the principal. From the point that this interest is added, it earns interest along with the principal.
Corporate Bonds: A debt security issued by a corporation and sold to investors.
Coupon Rate , yield: The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate".
Deduction: Something that is, or may be subtracted. (as in items from taxable income)
Deferred Load: A sales charge or fee that is assessed when an investor sells certain classes of fund shares before a specified date.
Depreciation: 1. A decline in value of an asset, as a result of wear, age or obsolescence. 2. In accounting. An allowance made for loss in value of property.
Depreciated value: The current value of an asset when that value is less than the original cost.
Dividends: A valuation ratio of a company's current share price compared to its per-share earnings.
Earning per share (EPS): The portion of a company's profit allocated to each outstanding share of common stock. Equivalently, the total profit of a company divided by the number of shares of stock.
Equity: The difference between the current market value of a property or asset and the amount still owed toward that property or asset.
Escrow : A financial instrument held by a third party on behalf of the other two parties in a transaction.
Exchange Traded Funds: A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
Expense Ratio: A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors.
Exponential growth: A rate of growth that causes a quantity to increase like an exponential function. In exponential growth the rate of increase is proportional to the function's current value.
Face value: The nominal value or dollar value of a security stated by the issuer. For bonds, it is the amount paid to the holder at maturity (generally $1,000). Also known as "par value" or simply "par".
Front End Load: A commission or sales charge applied at the time of the initial purchase for an investment.
Gross income: An individual's total personal income before taxes or deductions.
Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
Interest: A fee charged by a lender for borrowed money. Usually a percentage of the amount borrowed over a specified period of time. An interest rate is the price you pay for borrowing money.
Housing expense ratio: A ratio comparing housing expenses to before-tax income that is used by lenders to qualify borrowers for a mortgage. The housing expense measure includes mortgage principal, interest payments, property taxes, hazard insurance, mortgage insurance and association fees. The limit is generally 28%.
Index fund.: A type of mutual fund with a portfolio constructed to match or track the components of a market index.
Initial Public Offering, IPO: The first sale of stock by a private company to the public.
Linear growth: A rate of growth that causes a quantity to increase in a straight line. In linear growth the rate of increase is constant.
Marginal tax rate: The tax rate that applies to the last dollar of the tax base.
Market capitalization: The total dollar market value of all of a company's outstanding shares.
Mortgages: A special form of loan to purchase assets that must be fixed property such as a house.
Municipal Bonds: A debt security issued by a state, municipality or county to finance its capital expenditures.
Mutual fund: An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
NAV: A mutual fund's price per share or exchange-traded fund's (ETF) per-share value.
Net income: For an individual this is gross income minus taxes, allowances, and deductions
NPER: Number of periods per year.
Opportunity cost:. The cost of passing up the next best choice when making a decision. The benefits you could have received by taking an alternative action.
Pension Plan: A type of retirement plan, usually tax exempt, in which an employer makes contributions toward a pool of funds set aside for an employee's future benefit. These funds are then invested on the employee's behalf, allowing the employee to receive benefits upon retirement.
Period: With regard to interest, the time between interest payments.Periodic Rate: The interest rate charged on a loan or realized on an investment over a specific period of time, called the period.
Points: In real estate mortgages, the initial fee charged by the lender, with each point being equal to 1% of the amount of the loan.
Price to earnings (PE ratio): A valuation ratio of a company's current share price compared to its per-share earnings.
Prime Rate: An index that represents the interest rate most banks charge their most credit-worthy customers. The prime rate is used often as an index in calculating rate changes to variable rate short term loans. Many credit cards and home equity lines of credit with variable interest rates have their rate specified as the prime rate (index) plus a fixed value.
Principal: The sum of money borrowed or the amount still owed on a loan, separate from interest.
Sector Funds: A stock mutual, exchange-traded or closed-end fund that invests solely in businesses that operate in a particular industry or sector of the economy.
Share Price: Price of a single share of a mutual fund or stock.
Simple Interest: Simple interest is determined by multiplying the interest rate by the principal by the number of periods.
Taxable Gross income: the portion of income subject to taxes
Term: Regarding bonds, the length of time to maturity.
Total expense ratio: Regarding mortgage loans, a ratio that indicates what portion of a person's monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments, credit-card payments, child support and other loan payments.
Treasuries:
One of three types of bonds issued by the U.S. federal government.
T-bill: A short-term debt obligation backed by the U.S. government with a maturity of less than one year.
T-bond: A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years.
T-note: A marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years.