| Home Page | Saving | Budget | Investment | Websites | Books & Files |

Asset
Anything owned that is convertible into cash.  Usually divided into two broad classes:  1) Real assets/property; house, car, computer, etc.,  2) Financial assets/money; cash, bank account, mutual funds, etc..

Bond (debt security)
A negotiable, long-term debt instrument that carries certain obligations (including the payment of interest and repayment of principal) on the part of the issuer.  Common issuers are the Federal government (Treasuries), State and Local governments (Municipals) and Businesses (Corporates).

Bond, Discounted
Also called Zero-Coupon bonds, no periodic interest payments.  Instead, the bond is sold at some price below (discounted) its face value and returns full face value at maturity.  Because of the IRS's treatment, this type bond is best used in tax deferred accounts such as IRA's.

Budget
An estimate of income and expenses for a specified period.

Capital
Wealth, net worth in money and/or property.  Any form of wealth employed or capable of being employed in the production of more wealth.  A subset of Assets.

Dividend
Distribution of earnings to shareholders, the amount is decided by the company's board of directors and is usually paid quarterly.  Dividends must be declared as income in the year they are received.

Dollar Cost Averaging
A method of purchasing assets by investing a fixed amount of dollars at set intervals (such as $100 per month).  This method automatically buys more shares when the prices are down and overall is a very good way to invest.  Most Mutual Fund companies offer this service, though, they may call it something different.

Earnings
Corporate profit remaining after paying taxes and bondholder interest.

401(k) Plan
An employer sponsored, tax deferred, retirement plan which uses pre-tax contributions from an employees regular compensation to invest for that employee in a number of possible financial instruments.  Many companies that offer these plans will MATCH a portion or all of the employees contributions with cash or securities; this is, in essence, free money fully added to the employees account usually after some set period of time (vesting).

403(b) Plan
A tax deferred retirement plan very much like the 401(k) [above], with the main difference being that the employer is a non-profit organization (school, church, etc.).

Futures
Bonehead Alert - these securities are often speculative.  Currently, they're outside the scope of this Web site.

Futures Option
Also known as an Option on a Futures Contract.  Bonehead Alert - just like Futures and Options separately, these are taboo for nonexperts.

Gambling
To risk money or property on something involving chance or random outcomes.  Basically the riskiest thing you can do with your money, hope you have fun.

Inflation
A sustained rise in the prices of goods and/or services.  Two common measures of the Inflation RATE are: the Consumer Price Index and the Producer Price Index.

Investment
The use of capital to create more money.  Usually includes the idea that safety of principal is important.

IRA - Individual Retirement Account
A personal, tax deferred, retirement account that an employed person can set up with a deposit limited to $2000 per year ($4000 for a couple when both work, or $2250 for a couple when one works and the other's income is $250 or less).  Withdrawals from IRA's prior to age 59 and a half are generally subject to a 10% penalty tax.
Important Note: because of the Taxpayer Relief Act of 1997, there will be significant changes to IRA law that may affect you beginning January 1, 1998.  Until I can provide better information on the changes please search the internet using "New IRA" or "Roth IRA" as the subject.

Money Market Fund
A type of Mutual Fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit, and other highly liquid and safe securities that pay money market rates of interest.  Though these funds are not federally insured, like a bank account, there hasn't been a complete failure to date (there have been two failures, but, the shareholders were reimbursed in the first case and the second is still pending).  A Money Market Mutual Fund is not the same as a Money Market Deposit Account (MMDA's) that you get through a bank.

Mutual Fund
A pooled investment vehicle whose securities are managed for a fee (annual management fee) by a professional investment advisor.  Mutual Funds exist that invest in most investment alternatives available (Stocks, Bonds, etc.).

No-Load (Mutual Funds)
Some Mutual Funds charge additional fees (commissions) to: buy, sell, hold for short periods, etc.  A true No-Load Fund charges no additional fees, other than the annual management fee (which all Funds charge).

Options
Bonehead Alert - these securities are often speculative.  Currently, they're outside the scope of this Web site.

Principal
Face amount of a debt security (Bond or Mortgage) on which interest is owed or earned.  Investment Principal: basic amount invested, exclusive of earnings.

Speculation
Signifies a much higher degree of risk than investment, though often having better "odds" than gambling.

Stock (Equity)
Shares of stock represent a fraction of ownership in a corporation.  As a partial owner the stockholder is entitled to a partial share of earnings and dividends after taxes.

Zero-Coupon Bond
For definition see Bond, Discounted.