Ascent Private Capital Management
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A form of college savings accounts the Internal Revenue Code permits universities and states to establish that provides several tax benefits, including a five year acceleration of annual exclusion gifts; also known as a qualified state tuition program (QSTP).
The reduction of a gift (bequest) in a will because the estate's assets are insufficient to satisfy all the gifts after the estate's debts, claims, and taxes have been paid; all gifts of the same class abate proportionately unless provided otherwise.
The actual appreciation or depreciation (return) of a security, expressed as a percentage, in positive (absolute) terms.
Abstract of Trust
A document that briefly outlines a trust's key provisions and existence; also called an affidavit of trust.
Accelerated Return Enhanced Note
A security that provides an investor no downside principal protection against adverse performance of the underlying linked asset or index of the note while providing potential for increased participation (i.e., 200%-300%) additional return linked to the performance of the underlying asset or index if held to maturity. The note is fully exposed to the credit risk of the issuer and their ability to pay (or inability to pay due to credit default/bankruptcy) at expiration.
For individuals, the criteria is met by a net worth of more than $1 million or an income of more than $200,000 for the current and each of the previous two years. Other entities such as corporations, partnerships, trusts, and employee benefit plans with at least $5 million in investments. This criteria is governed by Regulation D of the Securities Act of 1933.
Interest that has accumulated between the most recent payment, and the sale of a bond or other fixed-income security.
An investment management strategy in which an attempt is made to outperform the market,as measured by a particular benchmark or index. The manager takes an active decisionmaking role in choosing which securities to purchase and sell.
The decision of a court with respect to matters of dispute; used most often with regard to judgment of incapacitation or incompetence.
The individual or institution appointed by a court to oversee the settlement of the estate of a person who has died without a will.
Against the Box
A short sale of a security which the seller does own but does not want to close out his/her position in, for tax or other reasons.
Securities issued by federally related institutions and U.S. government-sponsored entities, (GSEs). Such agencies were created to reduce borrowing costs for certain sectors of the economy. Agency securities are backed by the full faith and credit of the U.S. government. Examples include the Federal home Loan Mortgage Corporation, or Fannie Mae (FNMA), and the Student Loan Marketing Association (SLMA).
A statistic measuring that portion of a stock, fund, or composite's total return attributable to specific or non-market risk. Alpha measures non-market return and indicates how much value has been added or lost. A positive Alpha indicates the fund or composite has performed better than its Beta would predict (i.e., the manager has added value above the benchmark). A negative Alpha indicates a fund or composite has underperformed given the composite's Beta.
As used by U.S. Bank, an investment considered to be outside of the traditional asset classes of long-only stocks, bonds and cash. Examples of alternative investments include hedge funds, private equity, options, and financial derivatives.
Payment of debt in regular, periodic installments of principal and interest as opposed to interest only payments.
Annual Percentage Rate (APR)
The cost of credit expressed as an annual rate. It would be higher than the interest rate if there are fees, points and other charges associated with the credit. The APR is disclosed to a consumer as a requirement of federal truth in lending statutes.
An interest-bearing contract between an individual and a life insurance company that guarantees periodic payments to the individual during a specific time period.
The division, distribution, or disbursement of property among two or more accounts or individuals, as between principal and income.
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.
The publicized asking rent price.
The apportionment of one's securities among three classifications: equities, fixed income and cash items.
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity
A lending program created by the Federal Reserve Board on September 19, 2008 that provided new funding to U.S. financial institutions until October 30, 2009. It provided funding that allowed financial institutions to purchase asset-backed commercial paper from money market mutual funds to prevent default on investors' redemptions.
Bonds or notes backed by loans, mortgages, or accounts receivable. Banks or other providers of credit sell the loans or receivables to a special trust that repackages them as securities.
To sign a document transferring ownership of an asset (for example, securities, life insurance) from one individual to either another individual or to a trust.
To serve as a witness, as to a will.
Auction Rate Securities
Variable rate bonds with long-term (usually 30 years) maturities that pay short-term interest rates through a descending price auction for multiple identical items that occurs every 7, 28 or 35 days.
A note that is automatically mature prior to the scheduled maturity date, if predetermined market conditions are realized.
Bank for International Settlements
An international organization fostering the cooperation of central banks and international monetary policy makers. Established in 1930, it is the oldest international financial organization, and was created to administer the transaction of monies according to the Treaty of Versailles. Among others, its main goals are to promote information sharing and to be a key center for economic research.
Bank of England (BOE)
The central bank for the United Kingdom. (The equivalent of the Federal Reserve in the U.S.)
A specified level of an underlying security or index which, if reached, will trigger a "knock in" or "knock out" event within a Structured Note.
A security that provides an investor with returns linked to the performance of an underlying linked asset or index provided that the asset or index has not reached the barrier price, creating a "knock in" or "knock out" event. The note usually provides an investor full principal protection with either no additional return, or a contingent coupon, if the barrier is reached. The note is fully exposed to the credit risk of the issuer and their ability to pay (or inability to pay due to credit default/bankruptcy) at expiration and 100% of principal could be lost in the case of a default or if the note is not held until maturity.
The original price or cost of an asset, usually based on the purchase price or, in the case of assets received from an estate, on the appraised value of the assets at the death of the donor.
A unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
Terms frequently used to describe the outlook for short- and long-term market performance:* bear refers to the expectation that prices will decline;* bull refers to the belief that stock prices are likely to rise.
A debt instrument that is made payable to the bearer.
The sentiment of an investor who believes that a particular security or market is heading downward. The investor is generally pessimistic about the state of a given security and will attempt to profit from a decline in value of a particular security or market.
The commonly used name for the Fed report called the Summary of Commentary on Current Economic Conditions by Federal Reserve District. It is published just before the Federal Open Market Committee (FOMC) meeting on interest rates and is used to inform the members on changes in the economy since the last meeting. Each Federal Reserve bank gathers anecdotal information on current economic conditions in its district.
Pertaining to bond prices, a bond trading below par is trading below its nominal value, or face value.
An individual named as the recipient of the income or principal of an estate or trust.
To give property by will.
Property given as a gift under the terms of a will.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A Beta of 1 indicates that the security's price will move with the market. A Beta of less than 1 means the security will be less volatile than the market. A Beta greater than 1 indicates that the security's price will be more volatile than the market.
The price a potential buyer is willing to pay for a security. In a stock quote, for example, there is a bid/ask spread which, is the difference between what buyers are willing to pay and what sellers are asking. A rule of thumb is that if you are selling a stock, you will generally receive the current bid price.
A ratio that compares the number of bids received in a Treasury security auction to the number of bids accepted. A ratio above 2.0 indicates a successful auction comprised of aggressive bids.
Blue Chip Stocks
High-quality, common stock of well-known companies with extended records of earnings and dividends, well-respected management, and prospects for continued strong performance.
A debt instrument that is a "promise to pay" issued by corporations, federal and state governments, and municipalities to raise capital. The bond issuer promises to pay the holder of the bond the principal amount of the load when the bond matures and a fixed rate of interest periodically during the term of the bond.
The net tangible asset value per share of common stock. It is total assets less intangibles, minus total liabilities, minus the redemption value of preferred stock outstanding, divided by the common shares outstanding.
The lowest point an index or underlying security can fall to in a given period.
Bonds that are issued by the governments of developing countries. Brady bonds are some of the most liquid emerging market securities. They are named after former U.S. Treasury Secretary Nicholas Brady, who sponsored the effort to restructure emerging market debt instruments.
An acronym for the nations of Brazil, Russia, China and India, which are fast emerging economically.
A form of interim loan, generally made between a short term loan and a permanent (long term) loan, when the borrower needs to have more time before taking the long term financing.
Buffered Return Enhanced Note
A security that provides a specified range of protection (the "buffer") against adverse performance of the underlying linked asset or index of the note while still providing potential for additional return linked to the performance of the underlying asset or index if held to maturity. Regardless of the "buffer," the note is fully exposed to the credit risk of the issuer and their ability to pay (or inability to pay due to credit default/bankruptcy) at expiration and 100% of principal could be lost in the case of default or if the note is not held until maturity.
Build America Bonds (BAB)
A product of a provision in the Obama Administration stimulus package; volume is expected to reach $100-$150 billion between the period of mid-2009 to late 2010.
Terms frequently used to describe the outlook for short- and long-term market performance:* bull refers to the belief that stock prices are likely to rise;* bear refers to the expectation that prices will decline.
The sentiment of an investor who believes that a particular security or market is heading upward. The investor is generally optimistic about the state of a given security and will attempt to profit from an increase in value of a particular security or market.
Bureau of Census
A division of the U.S. federal government. Data collected by the Bureau of Census is analyzed and used by policymakers who govern the country and make economic decisions that affect businesses on a day-to-day basis.
Bureau of Economic Analysis (BEA)
An agency of the U.S. Department of Commerce, and one of the world's leading statistical agencies; responsible for producing and communicating economic data.
Business Confidence Index
A measure of the level of optimism of people who run U.S. companies have about the performance of the economy and how they feel about their company's prospects.
The risk that an investment will decline in value as a result of developments within the issuing entity or within the issuing entity's industry.
A provision of a bond indenture, which obliges the issuer the right to redeem an outstanding bond prior to its scheduled maturity. If called, a bond may be redeemed at Par, or at a slight premium to par. It is important to a purchaser to know a bond's call date because it cannot be assumed that interest will be paid on a bond beyond that date.
An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares (usually 100) of the underlying stock at a given strike price, on or before the expiration date of the contract.
Money used to create income, either as investment in a business or income property.
Capital Gains and Losses
For tax purposes, the difference between the purchase price and selling price.
Market capitalization of a company is calculated by multiplying the number of shares outstanding by the price per share.
Capitalization Rate Compression/Expansion
The shrinking or growing environment of the capitalization rate which is operating income/capital cost.
Cash & Cash Equivalents
Cash and cashlike items such as short-term investments that can be quickly converted to cash. Typical items including: cash, certificates of deposit, commercial paper, short-term investments, temporarily cash investments and time deposits.
An entity responsible for overseeing the monetary system for a nation (or group of nations). In the U.S., this is the Federal Reserve System (commonly known as "the Fed").
Certificate of Deposit (CD)
An arrangement between an investor and a financial institution which calls for the financial institution to pay a specific rate of interest over a set period of time. Certain deposits are FDIC insured up to applicable limits.
A gift of property by a will to a legal charity.
Charitable Lead Annuity Trust (CLAT)
A charitable lead trust in which an annuity is paid to one or more charities for a set term or the life or lives of one or more individuals with the remainder passing to one or more individuals (non-charitable beneficiaries).
Charitable Lead Trust
A trust wherein a charity is the beneficiary of an annuity or unitrust payment during the donor's life with the remainder going to a non-charitable beneficiary upon the grantor's death.
Charitable Lead Unitrust (CLUT)
A charitable lead trust in which a fixed percentage of the trust assets, valued annually, is paid to one or more charities for a set term of years or the life or lives of one or more individuals with the remainder passing to one or more individuals.
Charitable Remainder Annuity Trust (CRAT)
A trust that provides a sum certain, not less than five percent of initial fair market value of all property placed in the trust, to be distributed at least annually to a non-charitable beneficiary, with the remainder to a qualified charity.
Charitable Remainder Unitrust (CRUT)
A trust that provides a fixed percentage, not less than five percent of net fair market value of property, valued annually, to be distributed at least annually to a non-charitable beneficiary, with the remainder to a qualified charity.
A United States bank holding company which provides commercial financing and leasing products, and management advisory services to clients in a variety of industries.
Class is usually used in conjunction with commercial real estate and refers to the quality of property. Class definitions fall with the following guidelines. Class A+: Landmark quality, highrise building with prime central business district location (the best of the Class A buildings). Class A: Generally 100,000 sf or larger (five or more floors), concrete and steel construction, built since 1980, business/support amenities, strong identifiable location/access. Class B: Renovated and in good locations. Newer building are smaller in size, wood frame construction, and/or in non-prime location. Class C: Older, unrenovated of any size in average to fair condition.
A group of indexes made up of 25 branches of commercial mortgage-backed securities (CMBS), each with different credit ratings.
An addition or other change to an existing will.
Coincident Economic Index (CEI)
An index published by The Conference Board, a private-sector consulting firm. It is a broad-based measurement of current economic conditions, helping economists and investors to determine which phase of the business cycle the economy is currently experiencing.
A protective options strategy created by purchasing an out of the money put option while simultaneously writing an out of the money call option.
Property pledged as security for a debt, such as real estate as security for a mortgage.
Commercial Mortgage-Backed Securities (CMBS)
A type of mortgage-backed security that is secured by the loan on a commercial property.
Unsecured, short-term (usually a maximum of nine months) bearer obligations in denominations from $100,000 to $1 million, issued principally by industrial corporations, finance companies and commercial factors at a discount from face value.
Commercial Paper Funding Facility (CPFF)
An institution created by the Federal Reserve Board on October 27, 2008 as a result of the credit crunch faced by financial intermediaries in the commercial paper market. The CPFF provides liquidity to U.S. issuers of commercial paper registered with the CPFF through a special purpose vehicle that is funded by the Federal Reserve.
Commercial Real Estate
Property that is solely used for business purposes.
An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to compliance with stated conditions.
Commitments of Traders (COT)
A report published every Friday by Commodity Futures Trading Commission (CFTC) that seeks to provide investors with up-to-date information on futures market operations.
Raw materials and unprocessed goods that are either consumed directly or are processed and resold. Commodities usually fall into the following categories: energy, industrial metals, precious metals, agriculture, and livestock.
Commodity Futures Trading Commission (CFTC)
A U.S. federal agency responsible for ensuring the open and efficient operation of the futures market.
Commodity Research Bureau Index (CRB)
Measures the overall direction of commodity sectors.
Units of ownership that give voting rights to shareholders. (See Preferred Stock.)
An individual or institution appointed by a court to care for and manage the property of an incompetent individual who is not a minor. Also called a tutor.
Consumer Confidence Index (CCI)
A survey conducted by The Conference Board, a private-sector consulting firm. The survey gathers responses from 5,000 households on questions regarding expected business and employment conditions and measures how optimistic or pessimistic consumers are with respect to the economy in the near future.
Consumer Price Index (CPI)
A measure of the average change in prices over time in a market basket of goods and services and is one of the most frequently used statistics for identifying periods of inflation and deflation.
Contest of Will
Legal proceedings to prevent or alter distribution of estate assets as described in a will.
A one-time payment at maturity that may be received on a Barrier Note if a barrier is breached during the holding period. The coupon rate is established prior to trade date and is a percentage of only the principal amount invested.
An indicator of underlying long-term inflation. It is a measure of inflation that excludes certain items that face volatile price movements. It is most often calculated by taking the Consumer Price Index (CPI) and excluding certain items from the index, usually energy and food products.
A debt instrument issued by a corporation, in contrast to that issued by a government agency or municipality. Corporate Bonds typically have a par value of $1,000.00, are taxable, and have specified term maturities. They trade on major exchanges or via the over-the counter market.
In the context of investing, cost basis is the original price, or average price paid for an asset, used to determine the profit/loss, or capital gain.
Covered Call Writing
Selling call options on stocks owned, giving the buyer the right to purchase an investor's shares at the options' strike price if the market price of the stock exceeds the strike price. Seller earns a premium on sale and retains appreciation up to strike price. Option seller maintains exposure to potential price declines in underlying stock.
Credit Default Swaps
An over-the-counter derivative designed to transfer credit risk from one party to another. Two parties enter into an agreement whereby one party pays the other a fixed periodic coupon for the specified life of the agreement. The other party makes no payments unless a specified credit event occurs. Credit events are typically defined to include a material default, bankruptcy or debt restructuring for a specified reference asset.
A rating given a person or company to establish credit worthiness based upon present financial condition, experience and past credit history.
Also known as the default risk, it is the risk associated with a bond issuer failing to repay principal and interest in a timely manner.
The annual dollar interest paid by a bond dividend by its market price. It is the actual return rate, not the coupon rate.
Customers' Inventories Index
Based on a survey conducted by ISM of manufacturing supply managers and tracks levels of the inventories maintained by manufacturers.
During trading hours, the highest price at which an issue has traded. During non-trading hours, the highest price at which an issue traded during the most recent trading day.
During trading hours, the lowest price at which an issue has traded. During non-trading hours, the lowest price at which an issue traded during the most recent trading day.
In terms of Structured Products, the chance that a Note's value will decline as the credit rating of the issuer is downgraded, or that the dealer will not be able to pay the final payoff value at maturity due to credit default or bankruptcy of the issue.
A general term used to refer to taxes against property or the transfer of assets upon the death of the owner, including all estate and inheritance taxes. Sometimes referred to as estate taxes.
A written instrument evidencing the transfer of ownership of real property from one owner to another; the owner(s) may be individuals or institutions.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.
Also known as the credit risk, it is the risk associated with a bond issuer failing to repay principal and interest in a timely manner.
Sections of an economy, such as healthcare and utilities. These sections historically have shown stable and predictable earnings (therefore reliable dividend payments) both in good and bad times, although they do not show spectacular growth.
Defined Benefit Plan
A plan that ensures the payment of a specified, predetermined pension benefit at the time of retirement; the plan requires annual contributions that are actuarially determined to meet the benefit.
Defined Contribution Plan
A plan that provides a non-determined pension benefit at the time of retirement; the benefit depends on the fixed, annual contributions, gains or losses, and expenses.
The opposite of inflation and is a general decline in prices, often caused by a reduction in the supply of money and credit.
A financial instrument whose characteristics and value depend upon the characteristics and value of an underlying instrument or asset. An example of a derivative is a stock option because its value derives from an underlying stock or stock index. Futures contracts, forward contracts, and options are common types of derivatives.
Direct private ownership and management of physical asset.
A rate of interest associated with borrowing reserves from a central bank by member banks in the Federal Reserve district. The rate is set by the officials of that central bank.
The practice of investing among several asset classes and geographies with the goal of enhancing return and reducing risk.
The predetermined distribution of earnings to equity shareholders, as determined by security class (common, preferred). Dividends may be paid in the form of cash, stock, or (rarely) corporate products or property, and are typically paid quarterly.
The latest indicated dividend rate divided by the latest closing price. The dividend yield is important to common stockholders because it indicates the percentage of the latest closing price that was received as a dividend payment.
Dollar Cost Averaging
The practice of buying the same dollar amount of a security at regularly scheduled intervals. Dollar cost averaging facilitates the purchase of different quantities of an underlying security at set intervals, so that the overall cost is potentially lower then if a constant number of shares were bought at set intervals.
The recipient of a gift; the giver of a gift.
Dow Jones Industrial Average (DIJA)
The Dow Jones Industrial Average is the price-weighted average of 30 actively traded blue chip stocks.
Dow Jones Transportation Average (DJTA)
The most widely recognized gauge of the transportation sector and is composed of 20 stocks that are chosen to represent the transportation industry.
Performance for a security, index or market that is negative or going down in value.
Durable Goods Orders
An economic indicator released monthly by the Bureau of Census that reflects new orders placed with domestic manufacturers for delivery of factory hard goods in the near term or future.
A measure of the sensitivity of the price (the value of the principal) of a fixed-income investment to a change in interest rates; expressed as a number of years.
A dynasty trust, also known as a perpetual or generation-skipping trust, is an estate-planning tool that provides income and support to children and future generations of your family. Instead of wealth passing directly to your children, the assets reside in the trust, which helps protect them from estate taxes, the consequences of divorce, creditors and uncontrolled spending, while remaining in the family for generations.
Earnings Per Share (EPS)
Defined as a company's profit divided by the number of shares outstanding, or a portion of the company's profit allocated to each outstanding share of common stock. For example, a corporation that earned $10 million last year and has 10 million shares outstanding would report earnings of $1.00 per share.
Earnings Per Share (EPS) from Net Income (Fully Diluted)
The earnings for the most recent fiscal year from total operations as reported by the company (continuing operations + discontinued operations) + the fully diluted shares outstanding - shares outstanding given any dilutive effects of convertible debentures, warrants, etc. This excludes income from extraordinary gains/losses.
Earnings Per Share (EPS) from Net Income (Primary)
The primary EPS from continuing operations plus the primary EPS from discontinued operations as taken from the annual income statement.
The difference between the actual rent price and the concessions received.
The transition from being of minor age to being of majority age.
Employee Stock Ownership Plan (ESOP)
A qualified retirement plan in which all or a majority of the plan's assets are securities issued by the employer.
Energy Information Administration Report
Provided by the Energy Information Administration (EIA), a report containing information regarding important energy-related factors such as future energy inventories, demand, and prices.
Energy Information Administration (EIA)
The statistical agency of the U.S. Department of Energy and the nation's premier source of unbiased energy data, analysis and forecasting.
In real estate, the difference between fair market value and current indebtedness, usually referred to as the owner's interest.
Equity collars are a strategy which uses both put and call options as a way to lower the cost of protecting a stock from downside market risk. The strategy utilizes buying a put option on a stock, which gives the right to sell the underlying stock at a stated exercise price. This provides the investor with known downside protection. To offset the cost of the put, a call option is sold. With the call option, one must sell the underlying shares at the predetermined or exercise price. Hence, the term collar refers to the stated range set by the options strike or exercise prices (puts and calls) in which the return on the underlying stock investment can travel.
Equity Futures Contract
Counterparties commit to buy or sell a specified amount of an individual equity or a basket of equities or an equity index at an agreed contract price on a specified date.
The final reporting and distribution of an estate by an executor or administrator.
Europe, Australasia, Far East (EAFE)
An acronym referring to the geographical area that includes these three regions. These regions represent the most developed areas outside of North America.
European Central Bank (ECB)
The central bank responsible for the monetary system of the European Union (EU) and the euro currency.
European Union (EU)
A group of European countries that participate in the world economy as one economic unit and operates under one official currency, the euro. The EU has become one of the largest producers in the world, in terms of GDP.
One of the largest economic regions in the world and consists of all European Union countries that have fully incorporated the euro as their national currency.
Arises when an investment is made in foreign securities. An increase in the dollar in relation to the currency in which the foreign security is denominated can result in a loss because the investor will receive fewer of the now-more-valuable dollars on a sale of the investment.
Exchange Traded Fund (ETF)
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.
Exchange Traded Note (ETN)
Unsecured debt securities that are linked to the total return of a market index. Investors can trade on an exchange at market price or receive a cash payment at the scheduled maturity or early redemption, based on the performance of the index less investor fees.
The individual named in a will charged with carrying out the provisions specified in the will. A co-executor serves as executor along with one or more designated individuals.
In the context of option trading, the exercise price is the price per share at which the underlying stock may be purchased (call option) or sold (put option) over a specified period. Also know as the Strike Price.
A sub-index of The Conference Board's Consumer Confidence survey. It measures overall consumer sentiments toward the short-term (six months) future economic situation.
Family Limited Partnership
A limited partnership made up of family members (owners related by blood or marriage) and created to limit certain partners' control over the partnership; the partnership is used to consolidate management of the assets of the family and pass property to junior family members, thereby effecting a reduction in certain partners' value in the partnership via valuation discounts.
Fannie Mae (FNMA)
An acronym for Federal National Mortgage Association (FNMA). FNMA is a government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans.
Fed Funds Target Rate
A short-term rate objective of the Federal Reserve Board. The actual Fed Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. The real rate changes daily, but is usually close to the target rate desired by the Federal Reserve.
Federal Deposit Insurance Corporation (FDIC)
A federal agency that insures customers' deposits in member commercial banks in the event of the bank's insolvency; the member banks pay an insurance premium for this coverage based on the amount of bank deposits. All national banks are required to provide FDIC insurance; most state banks and savings and loan associations subscribe to FDIC coverage.
Federal Funds Rate
The interest rate charged by banks with excess reserves to other banks for overnight loans. The Fed Funds rate is the most sensitive indicator of interest rates, since it is set daily.
Federal Home Loan Mortgage Corporation (FHLMC/FREDDIE MAC)
Commonly referred to as Freddie Mac, FHLMC is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.
Federal Housing Finance Agency (FHFA)
A U.S. government agency created by the Housing and Economic Recovery Act of 2008 that regulates the secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. The agency was established to act like a bank regulator in order to strengthen and improve oversight of the U.S. housing finance system because of the secondary mortgage market's major role in the overall economy.
Federal National Mortgage Association (FNMA/FANNIE MAE)
Commonly referred to as Fannie Mae, FNMA is a government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans.
Federal Open Market Committee (FOMC)
The branch of the Federal Reserve Board that determines the direction of monetary policy. They meet eight times per year to set key interest rates and to decide whether or not to increase or decrease the money supply.
An individual or institution responsible for acting in the best interests of another party. A fiduciary is bound by law and duty to put aside personal interests and act in good faith when making decisions for the benefit of another.
Refers to the amount of debt that is used to finance an entity. The greater the amount of debt, the higher the financial risk.
Along with Moody's and Standard and Poor's, Fitch is one of the top three credit rating agencies.
An investment contract typically sold by insurance companies, which guarantees a fixed payment, usually at retirement. In a fixed annuity, the amount is paid out in regular installments, and varies only with the payment method elected. The investor takes both the investment and mortality risks in a fixed annuity, and capital grows tax deferred.
Debt obligation issued by corporations, governments or government agencies which pay a fixed rate of interest over a defined time period. Bonds and certain mortgage-backed securities are the most common examples of fixed income investments.
An interest rate or dividend that changes on a periodic basis. Flexible or variable rates are often used for convertibles, mortgages, and certain other kinds of loans. The change is usually tied to movement of an outside indicator such as the prime interest rate. Movement above or below certain levels may be prevented by a pre-determined floor and ceiling for a given rate.
The floor, or bottom is the lowest acceptable limit (or minimum) when charting a stock, commodity, index or economic cycle.
Foreign Exchange Contract
Commitment to buy or sell a specified amount of foreign currency on a fixed date and rate of exchange.
Similar to a futures, a forward contract - or forward - is an over-the-counter derivative. In its simplest form, it is a trade that is agreed to at one point in time, but will take place at some later time. The difference between a future and a forward is the fact that futures are traded on exchanges, where forwards are traded over the counter.
Freddie Mac (FHLMC)
An acronym for Federal Home Loan Mortgage Corporation (FHLMC). FHLMC is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.
The debt security in a company capital structure that will result in equity control through a bankruptcy or reorganization. The fulcrum security is the point in the capital structure where the enterprise value no longer fully covers the claim.
Similar to a forward, a future represents an agreement to buy/sell some underlying asset in the future for a specified price. The difference between a future and a forward is the fact that futures are traded on exchanges, where forwards are traded over the counter.
Eleven industrialized nations that meet on an annual basis to consult each other, debate and cooperate on international financial matters. The member countries are: France, Germany, Belgium, Italy, Japan, the Netherlands, Sweden, the United Kingdom, the United States and Canada, with Switzerland playing a minor role. Although Switzerland became the eleventh member in 1994, the original name remains.
Refers to seven of the world's leading industrialized countries that meet periodically to achieve a cooperative effort on international economic and monetary issues. The countries include Canada, France, Germany, Italy, Japan, United Kingdom, and United States.
A restriction placed by a hedge fund manager on a hedge fund limiting the amount of withdrawals from the fund during a redemption period.
General Obligation Bond (GO)
A municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project. General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.
Ginnie Mae (GNMA)
The nickname for the Government National Mortgage Association (GNMA). Ginnie Mae is a government-sponsored agency which buys mortgages from lending institutions, securitizes them, and then sells them to investors. The U.S. government implicitly guarantees these securities. For investors, the rate of return on a GNMA pass-through is uncertain. When interest rates fall, principal is repaid faster, since homeowners refinance. When interest rates rise, principal is repaid more slowly, since homeowners hold on to the underlying mortgages.
Global Manufacturing Employment Index
Monitors the levels of worldwide manufacturing employment and is based on results of surveys carried out by ISM in the U.S. and other firms in a number of international countries which together account for an estimated 80% of global manufacturing output.
Government Stress Tests
Involve a process of examining banks' ability to withstand future losses. Any bank holding company with more than $100 billion in assets was required to undergo the tests, which are largely being conducted by the Federal Reserve. Their purpose was to ensure that major financial institutions have enough capital to continue lending if the economy worsened through 2010.
An individual who gives property outright or in a trust.
Grantor Retained Annuity Trust (GRAT)
A trust in which the grantor retains the right to an annual dollar amount (the annuity) for a fixed term and gives the principal to others, such as the grantor's children, at the end of that term; if the grantor survives until the end of the annuity term, all of the trust principal will be excluded from the grantor's estate for death tax purposes.
Grantor Retained Income Trust (GRIT)
A trust in which the grantor retains the right to all of the trust income for a fixed term and gives the principal to others, such as the grantor's children, at the end of the term' if the grantor survives until the end of the income term, all of the trust principal will be excluded from the grantor's estate for death tax purposes; the principal of the trust is limited to the grantor's personal residence. Also called a house GRIT or a qualified personal residence trust (QPRT).
For purposes of income taxation, this is a trust in which the grantor, because of certain rights to income or principal or certain power over the disposition of income and principal, is treated as the owner of the trust and is taxed on the income thereof; a grantor trust is not treated as a separate entity for income tax purposes.
Gross Domestic Product (GDP)
The total market value of all final goods and services produced in a country in a given year.
Group of 20 (G-20)
A group of finance ministers and central bank governor for 19 of the world's largest economies and the European Union. The G-20 was formed as a forum for member nations to discuss key issues related to the global economy and to promote growth and economic development across the globe. The members consist of the countries from the G-7, 12 other nations (including China, India, Brazil and Saudi Arabia), and rotating council presidency from the European Union.
Group of 7 (G-7)
The name given to the seven industrialized nations that meet periodically to achieve cooperative effort on international economic and monetary issues. The group consists of the world's leading countries: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
Growth stocks are companies that offer above average prospects for capital growth due to their strong earnings and revenue potential. Growth stocks also tend to offer relatively low dividend yields because these companies prefer to reinvest earnings in research and development.
Growth investments focus on stocks of companies whose earnings/profitability are likely to accelerate in the short term or have grown consistently over the long term. Such investments may provide minimal dividends which could otherwise cushion stock prices in a market decline. Stock value may rise and fall significantly based, in part, on investors' perceptions of the company, rather than on fundamental analysis of the stocks.
Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation is not performed.
An individual or institution named by a court to manage the property of a person who is adjudged incapable of handling his or her own affairs.
Refers to the raw inflation figure as reported through the Consumer Price Index (CPI).
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. Not registered with SEC as mutual funds are, generally require that investors be accredited or qualified purchasers.
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. Not registered with SEC as mutual funds are, generally require that investors be accredited or qualified purchasers.
An investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, such as an option or a short sale.
One who inherits from the estate of a person who has died.
High Water Mark
The hedge fund high water mark is designed to make sure that managers do not take a performance fee when the fund has had negative performance over previous performance fee periods. The manager will only receive performance fees on a pool of invested money when its value is greater than its previous greatest value. Should the investment drop in value, then the manager must bring it back above the previous greatest value before they can receive performance fees again.
A bond with a rating of BB or lower, as rated by Standard and Poor's. Because of their lower credit rating, high yield bonds must pay a higher yield to compensate for the greater risk of default assumed by investments. May also be referred to as a junk bond.
House Financial Services Committee
Oversees all components of the nation's housing and financial services sectors, including banking, insurance, real estate, public and assisted housing, and securities.
The established minimum return an investor's investment must make prior to the application of performance/incentive fees.
Term referring to the condition when an option contract on a stock or index has a market price above the Strike Price for a Call Option or below the strike price for a Put Option.
A statistical composite which measures changes in financial markets. Typically referenced as a benchmark to measure performance of a particular asset class, investment vehicle, or financial sector. Well known indexes including the Dow Jones Industrial Average, the Standard and Poor's 500, and NASDAQ Composite.
A fund managed with the objective of duplicating the performance of securities in a broad-based index by investing in all or most of the securities included in that index.
Industrial Production and Capacity Utilization
A monthly report produced by the Federal Reserve consisting of industrial products and related capacity utilization rates covering manufacturing, mining, and electric and gas utilities.
The risk that the value of a dollar of savings will be eroded by inflation.
Initial Public Offering
Commonly referred to as an IPO, an initial public offering represents a company's first sale of stock to the public. Investors who purchase IPOs are generally assumed to be accepting of considerable risk in return for the possibility of a sizable gain.
Institute of Supply Management (ISM)
The largest supply management association in the world and publishes several indexes.
Interest Rate Futures Contract
Allows the buyer of the contract to lock in a future investment rate. Interest rate futures are based off an underlying security which is a debt obligation and moves in value as interest rates change.
Interest Rate Risk
Refers to the tendency for the prices of existing fixed-income securities to rise and fall in an inverse relationship with interest rates.
International Monetary Fund (IMF)
An international organization which plays three major roles in the global monetary system. The Fund surveys and monitors economic and financial developments, lends funds to countries with balance-of-payment difficulties, and provides technical assistance and training for countries requesting it.
Dying without a will.
Invasion of a Trust
Refers to a distribution of assets made from the principal of a trust.
Investment Company Institute (ICI)
A national association of U.S. investment companies.
A rating that indicates that a municipal or corporate bond may have a relatively low risk of default compared to other bonds.
An Investment Management Account is an account whereby a financial institution is given discretionary power with regard to investment decisions on behalf of the investor. Fees for this service vary, but usually are based on a percentage of the overall value of the funds under management.
Investment Management Account
An account whereby a financial institution is given discretionary power with regard to investment decisions on behalf of the investor. Fees for this service vary, but usually are based on a percentage of the overall value of the funds under management.
Irrevocable Life Insurance Trust (ILIT)
An irrevocable trust funded with a life insurance policy transferred to it by the grantor or cash (for the purpose of purchasing life insurance on the life of the grantor); when properly structured, the life insurance death proceeds will not be includable in the estate of the grantor (insured) by virtue of the policy not being owned by the grantor.
A type of trust that cannot be revoked or changed in any way.
Also called joint tenancy, this phrase refers to ownership of property by two or more persons, generally with right of survivorship (upon the death of one owner, the surviving owner or owners assume ownership).
Ownership of property by two or more persons, related or not; upon the death of the first owner, by act of law the survivors take possession of the property absent probate proceedings; joint tenancy property is not controlled by the dispositive provisions of a tenant's will; the ownership of the property converts to sole ownership when there is only one surviving tenant.
JPMorgan Global All-Industry Business Activity Index
Compiled by Market Economics, a specialist compiler of business surveys and economic indices, and is based on the results of surveys covering over 11,000 purchasing executives in 26 countries. Together these countries account for an estimated 81% of global GDP. An index reading above 50 indicates an increase in the variable since the previous month and below 50 a decrease.
A loan which is larger (more than $417,000) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loads cannot be funded by these two agencies, they usually carry a higher interest rate.
A bond rated "BB" or lower because of its high default risk (below investment grade).
A type of barrier option which begins to function as a normal option ("knocks in") only once a certain price level of an underlying security or index is reached before expiration.
A type of barrier option which expires worthless ("knocks out") only once a certain price level (usually closing price level) of an underlying security or index is reached before expiration.
Large Cap Stocks
Large capitalization investments involve stocks of companies generally having a market capitalization between $10 billion and $200 billion.
Literally, the will last executed by an individual, which revokes any former existing wills.
Leading Economic Index (LEI)
An index that is compiled by The Conference Board, a private-sector consulting firm. The index is designed to indicate the future direction of economic activity. A rising index signals that economic activity can be expected to increase in the near future.
The degree to which an investor or company is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on the debt. They may also be unable to find new lenders in the future. Leverage is not always bad, however, it can increase the shareholders' return on their investment.
The takeover of a company using borrowed funds. The target company's assets serve as security for the loans taken out by the acquiring firm which repays the loans out of the cash flow of the acquired company.
Life Insurance Trust
A living trust consisting primarily of life insurance policies that will fund the trust by way of beneficiary designation upon the insured's or grantor's death.
The flexibility of being able to obtain the cash value of investments without incurring significant loss.
The risk stemming from the lack of marketability for an investment; not being able to buy or sell an asset quickly enough to prevent or minimize a loss.
A trust which is in effect during the life of the settler, rather than upon his/her death (testamentary trust).
A legal document in which an individual states, in advance of final illness or injury, his or her wishes regarding procedures and equipment designed to extend life.
A commission, charge, or fee paid by a buyer for participation in an open-end mutual fund.
Hedge funds typically limit opportunities to redeem, or cash in, an investor's shares (e.g., to four times a year), and often impose a "lock-up" period of one year or more, during which you cannot cash in your shares.
London Gold Market Fixing Limited P.M. Fix Spot Price
The afternoon setting of the price of gold by specialists in London. The specialists gauge market demand and supply in order to set the prices.
London Interbank Offered Rate (LIBOR)
An average of interest rates offered in the London interbank market for three-month dollar-denominated loans.
The ownership of a security, established by its purchase in an account. A long position represents an investor's stake in a security.
Long-only or Long Trade
Stocks or other securities that you own. If you buy a stock you are "long the stock." A long trade creates a long position when the trader thinks the price will go up. Long-only is used to define a fund that only holds long positions.
Long-Term Capital gain
Realized profit or gain on the sale of a security that has been held for more then one year.
A category within the money supply that includes all physical money such as coins and currency, demand deposits (checking accounts), negotiable orders of withdrawal (NOW) accounts, time-related deposits, savings deposits, and non-institutional money market funds. This is used as a measurement for economists trying to quantify the amount of money in circulation and trying to explain different economic monetary conditions.
Released monthly by ISM and tracks the amount of manufacturing activity that occurred in the previous month.
A brokerage account in which the brokerage lends the customer cash with which to purchase securities. Unlike a cash account, a margin account allows an investor to buy securities with money that one does not have, by borrowing the money from the broker.
The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same.
The risk that the value of an investment will decline in value as a result of a decline in the market as a whole.
The highest price a willing buyer would pay and a willing seller accept, both being fully informed and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time.
Refers to the category of companies with the lowest of capitalizations. Most of these companies are not listed on exchanges but are instead traded in the Over The Counter (OTC) market.
Mid Cap Stocks
Middle capitalization investments involve stocks of companies generally having a market capitalization between $2 billion and $10 billion and are considered more volatile than large cap companies. Mid cap investments are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps), although performance is not guaranteed.
Represents the actions of a central bank, currency board, or other regulatory committee that determines the size and rate of growth of the money supply, which in turn affects interest rates. In the U.S., the Federal Reserve is in charge of monetary policy.
The principal repayment on a bond.
The market for short-term debt instruments. Money market investments include Treasury bills, short-term certificates of deposit, commercial paper, and other, similar instruments.
Money Market Fund
Refers to mutual funds investing solely in money market instruments.
Moody's /REAL Commercial Property Index (CPPI)
Designed to track same-property realized roundtrip price changes based purely on the documented prices in completed, contemporary property transactions within the U.S. commercial investment property market.
An independent, unaffiliated research company that rates fixed income securities. Moody's assigns ratings on the basis of risk and borrower's ability to make interest payments. In general, high ratings indicate lower default risk. Ratings on long-term debt (rated Aaa to C), preferred stock (rated aaa to c), short-term debt (rated Prime1-3 to Not Prime), currency issuers, derivative product companies (rated Aaa to C), and money market and bond funds (rated Aaa to B).
A security backed by a pool of mortgages. Investors receive payments out of the interest and principal on the underlying mortgages.
An indicator frequently used in technical analysis to show the average value of a security's price over a set period.
A term that measures some aspect of a company's financial well being.
A bond issued by a state, city, or local government to finance operations or special projects. The interest paid to investors is generally tax-free at the federal level and in state of issuance.
An investment company that enables investors to pool their funds in order to invest in a managed portfolio of securities.
National Association of Realtors
Provides a facility for professional development, research and exchange of information among its members and to the public and government for the purpose of preserving the free enterprise system, and the right to own, use, and transfer real property.
National Bureau of Economic Research (NBER)
A private, non-profit, non-partisan research organization whose primary aim is to promote greater understanding of how the economy works. It disseminates economic research among public policymakers, business professionals and the academic community.
In the context of a mutual fund price, the net asset value, or NAV is the total value of assets, including stocks, bonds, and other securities, owned in a fund, less all liabilities, divided by the number of outstanding shares. The NAV does not include sales charges or loads, and is calculated once each day after the close of the market.
Total income less total expenses.
New York Mercantile Exchange (NYMEX)
The world's largest physical commodity exchange.
A mutual fund with no sales charge for executing transactions.
A bond that cannot be called by the bond issuer (e.g., the corporation) for the purpose of redemption or conversion.
Based on their credit ratings, corporate bonds are arbitrarily divided into investment-grade bonds and non-investment grade bonds. The dividing line is the BBB rating, which is the lowest credit rating considered to be investment grade. Below BBB- bonds are considered non-investment grade.
Non-Manufacturing Index Report
Published monthly by ISM and reflects data compiled from purchasing and supply managers nationwide related to business activity, new orders, employment, and prices.
Loan that is in default or close to being in default.
Non-Qualified Retirement Plan
A supplemental, deferred compensation retirement plan established by an employer for certain select employees; employer contributions to the plan are not currently taxed to the participant(s) and are not tax deductible to the employer; the plan's earnings before distribution may be taxed to the employee, depending on how the plan is structured; based on how the plan is structured, the assets may or may not be subject to the claims of the company's creditors. Also called a supplemental employee retirement plan.
As used by U.S. Bank, an investment considered to be outside of the traditional asset classes of long-only stocks, bonds and cash. Examples include such investments as hedge funds, private equity, commodities, options and financial derivatives.
Legal documents offering securities for sale, required by the Securities Act of 1933. They explain the offer, terms, issuer, planned use of the money, historical financial statements, and other information that could help an individual decide if the investment is appropriate for him/her. Also called private placement memorandum or circular.
A company's profit divided by its number of shares after subtracting expenses such as marketing, cost of goods sold, administration, and general operating costs from revenue.
The risk associated with missing out on the potential opportunity to earn greater returns in alternative investments.
An option is a security which gives the owner the right, but not the obligation, to buy (call) or sell (put) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (strike price) during a specified period of time.
Organization for Economic Cooperation and Development (OECD)
A group of 30 member countries who discuss and develop economic and social policy. Its member nations account for two-thirds of the world's goods and services. This composite leading indicator index time series provides early signs of turning points between expansions and slowdowns in the economic activity.
Organization of Petroleum Exporting Countries (OPEC)
An organization consisting of 11 of the world's major oil-producing nations. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
Original Issue Discount (OID)
The discount from par value at the time that a note is issued. It is the difference between the stated redemption price at maturity and the issue price. OID notes require special tax treatment on the discounted portion of par value.
Term referring to the condition when an option contract on a stock or index has market price below the strike price for a call option or above the strike price for a put option.
An informal network of brokers and dealers who negotiate sales of securities; not a formal exchange.
See Price/Earnings Ratio
For common stock, par value is set at the time of issuance, and is defined as the original investment underlying each share, in goods, cash and services. Recently however, par value has come to be defined as an assigned amount, used to compute the dollar accounting value of the common shares on the company's balance sheet. Par value has no relation to market value, which is determined by market conditions, and investor's expectations. For bonds, par has more importance, as the interest paid is based on a percentage of a bond's par or face value.
Pension Benefit Guaranty Corporation (PBGC)
A government corporation that provides insurance programs to guarantee payment of basic retirement benefits to participants of defined-benefit pension plans in the event the plan does not have sufficient funds to pay all benefits.
Term often used to sum up all holdings in an account, defined as a collection of investments.
Power of Appointment
The power given by an individual to another in a will or trust document to determine which persons will receive an interest in his or her estate.
Power of Attorney
An authority by which one person (principal) enables another (attorney in fact) to act for him or her. (1) General power - authorizes sales, mortgaging, etc. of all property of the principal. Invalid in some jurisdictions. (2) Special power - specifies property, buyers, price and terms. How specific it must be varies in each state.
A class of stock that has preference over common stock in the event of the liquidation of a company's assets. Typically, preferred stockholders do not have voting rights. (See Common Stock)
Price/Book Ratio (P/B)
A company's book value is the total assets of a company, less total liabilities. A company's P/B ratio is calculated by dividing the market price of its outstanding stock by the company's book value, and then adjusting for the number of shares outstanding. Within a portfolio, this is the weighted average of the price/book ratios of all the stocks in the portfolio.
Price/Earnings Ratio (P/E)
The P/E ratio of a company is calculated by dividing the price of the company's stock by its trailing 12-month earnings per share. A high P/E usually indicates that the market is paying a premium for current earnings because it believes in the firm's ability to grow its earnings. A low P/E indicates the market has less confidence that the company's earnings will increase. Within a portfolio, P/E is the weighted average of the price/earnings ratios of the stocks in the portfolio.
Based on a survey conducted by ISM of manufacturing supply managers and tracks prices manufacturers are paying for goods.
The base-lending rate used by banks in pricing commercial loans to creditworthy customers. Determined by the Federal Reserve's decision on raising or lowering short-term borrowing rates, the rate is a key interest rate, and tends to become the standard across the banking industry whose loan rates are often tied to the prime rate.
In the case of a loan or debt: Amount of debt, not including interest. The face value of a note, mortgage, etc. In the case of a trust: The property that comprises the trust is the principal. In the case of a principal-agent relationship: The party affected by agent decisions.
Principal Protected Note
A security that guarantees full return on an investor's principal at expiration, along with the potential for additional return linked to the performance of an underlying asset or index. Regardless of "principal protectedness," an investor may lose some or all of their principal investment. The note is fully exposed to the credit risk of the counterparty and their ability to pay at expiration due to credit default events such as bankruptcy. A Principal Protected Note may not return 100% of the invested principal in the case of default or if sold prior to maturity.
The potential to lose capital.
Includes contracts, exchange-traded funds (ETFs), exchange-traded notes (ETNs), mutual funds investing in futures, structured notes, and other derivative instruments.
Private equity investments consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.
A security requiring an "Accredited Investor" or "Qualified Purchaser" status. Private placement offerings are exempt from registration under the Regulation D of the Securities Act of 1933, partly due to utilization only by investors able to assess and endure the risks of unregistered securities.
The process through which a will is proved to be valid.
Producer Price Index (PPI)
A family of indexes that measure the average change in selling prices received by domestic producers of goods and services over time; specifically measures price change from the perspective of the seller.
A document whose primary purpose is to provide shareholders with sufficient information to vote in an informed manner on issues up for review at a stockholder's meeting. Shareholders often given management their "proxy" to represent them, and vote their shares as specified in the proxy statement.
Public-Private Investment Program (PPIP)
A plan designed to value and remove troubled assets from the balance sheet of troubled financial institutions in the U.S. Essentially, the program's goal is to create partnerships with private investors to buy toxic assets. The program is designed to increase liquidity in the market and to serve as a price-discovery tool for valuing troubled assets.
Purchasing Managers Index (PMI)
An indicator of the economic health of the manufacturing sector. PMI is based on five major indications: new orders, inventory levels, production, supplier deliveries, and the employment environment.
An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a set price within a specified time.
A tax-deferred plan set up by an employer for its employees. Such plans, including profit sharing and pension plans, typically provide for employer contributions and may allow employee contributions as well.
For individuals, the criteria is met by a net worth of more than $5 million in investments. Other entities such as corporations, partnerships, trusts, and employee benefit plans with at least $25 million in investments.
A monetary policy tool used by the Federal Reserve to flood the market with cash in an attempt to stimulate the economy during a recession. On Market 18, 2009, the Fed announced their intent to purchase $300 billion in longer term Treasuries.
Real Estate Investment Trust (REIT)
Securities that sell like a stock on the major exchanges and invest in real estate directly, either through properties or mortgages.
Real Estate Roundtable
Comprised of senior principals from America's top public and privately owned real estate entities. It is responsible for addressing key national policy issues relating to real estate and the overall economy.
Registrar of Deeds
A term used in some states to describe the person in charge of recorded instruments. More commonly called a recorder.
Generally refers to the risk that the rate of return on a short-term investment vehicle will decline so that reinvesting in the same type of asset will yield a lower return than an investor is seeking.
Residential Mortgage-Backed Security (RMBS)
A type of security whose cash flows come from residential debt such as mortgages, home equity loans and subprime mortgages. This is a type of mortgage-backed security that focuses on residential instead of commercial debt.
An amendment to a trust that alters (changes) all provisions of the original trust and any previous amendments; a restatement does not cancel the original trust; it serves as a rewriting of the trust, thereby leaving the original trust date intact. The pour-over provision of a will, asset titling, and beneficiary designations of employee benefit plans and life insurance do not have to be changed to reflect the restatement because the restatement does not cancel the original trust.
Retail Price Index (RPI)
An index that gathers the prices of several retail goods in outlets across the U.S. in order to give an indication of the rate of inflation.
Reuters/University of Michigan Survey of Consumers
A twice monthly assessment that covers consumers' feelings about their personal financial situation, overall economic conditions and buying attitudes.
Reverse Convertible Note
A security that provides a higher coupon rate than the current dividend yield on an underlying stock while sharing characteristics of both bonds and stocks. It provides an investor contingent downside protection and a consistent stream of income if held to maturity. The note is fully exposed to the credit risk of the issuer and their ability to pay (or inability to pay due to credit default/bankruptcy) at expiration. Despite downside protection, 100% of principal can be lost in the case of default or if not held to maturity.
A type of trust that can be terminated by the settler (the opposite of an irrevocable trust).
An uncertainty that an investment vehicle will earn an expected rate of return or that a loss may occur; types of risk include interest rate risk (risk that interest-bearing securities, such as bonds, will decline in value as market interest rates rise), liquidity risk (the risk that the attractiveness of securities will fall, therefore affecting their liquidity), exchange risk (the possibility that a loss will occur because of the appreciation or depreciation of a foreign currency in relationship to the U.S. dollar), credit risk (a risk that a bond rating will fall due to the obligor's financial condition or the possibility of default), inflation risk (the possibility that an increase in the rate of inflation will affect the relative return of securities), volatility risk (a risk associated with the erratic rising and falling of a stock's price over a period of time), and market risk (the risk that an entire market may fall).
A nontaxable transfer of assets from one qualified retirement plan to another.
S&P/Case-Shiller - Composite of 10
A value-weighted index average of 10 metropolitan regions (Boston, New York, Washington, D.C., Miami, Chicago, Denver, Los Angeles, San Diego, San Francisco, Las Vegas).
S&P/Case-Shiller - Composite of 20
A value-weighted index average of 20 metropolitan regions (Boston, New York, Washington, D.C., Miami, Chicago, Denver, Los Angeles, San Diego, San Francisco, Las Vegas, Charlotte, Atlanta, Tampa, Cleveland, Detroit, Minneapolis, Dallas, Phoenix, Portland, Seattle).
S&P/Case-Shiller Home Price Indexes
A group of indexes that tracks changes in home prices throughout the United States. Case-Shiller produces indexes representing certain metropolitan statistical areas (MSA) as well as a national index.
A trust beneficiary that follows a primary beneficiary; a secondary beneficiary is sometimes called a remainderman.
Any market that deals in the resale of existing securities, such as a centralized trading exchange and the over-the-counter (OTC) market.
A group of securities that are similar with respect to industry, rating, maturity, type and/or coupon.
Securities Act of 1933
The first law enacted by Congress to regulate the securities markets by requiring registration of securities prior to public sale and disclosure of financial data and other information in a prospectus to allow informed analysis by potential investors.
An investment instrument that signifies ownership in a corporation (stock), a creditor relationship with a corporation or governmental entity (bond), or the right to ownership, which may be represented by an option, right, or warrant.
Senior Loan Officer Survey
Gathers information on how officials fee about policy changes made, possible future policy changes, and changes in supply/demand for certain products.
Senior Unsecured Debt
Debt/loan of an issuing company that is not secured by an underlying asset or collateral. It carries more risk than secured debt, however, takes priority over other debt securities issued by the dealer and must be repaid before other creditors receive any payment.
The real estate industry's most comprehensive measure of senior executives' confidence in the real estate environment.
Separately Managed Account (SMA)
A portfolio of individual securities owned directly by a client and managed according to the investment advice of a professional money manager.
The sale of a security not owned by the seller. This transaction type is used to take advantage of an anticipated decline in the price of a security. To sell short, an investor must borrow stock from his or her broker at the time of the short sale. If the seller is able to buy to cover the short position at a lower price, a profit results, if not the seller incurs a loss. Short sales must be transacted in a margin account and are subject to specific requirements.
A transaction in which one party borrows assets from another party and in turn sells the assets to a third party. Often the party selling the securities short ("short seller") speculates that a security's price will decline. Short selling is also often used to hedge long positions in related securities.
Small Cap Stocks
Small capitalization investments involve stocks of companies with smaller levels of market capitalization (generally less than $2 billion) than large cap stocks. Small cap stocks are subject to considerable price fluctuations and are historically more volatile than large company stocks.
Bonds issued by a national government in a foreign currency, in order to finance the issuing country's growth.
Taking risks, especially with respect to trying to predict the future, in the hopes of making quick, large gains.
The conversion of securities from larger units into smaller ones (e.g., the changing of 1,000 shares of stock into two 500-share units); this may be done for the purpose of selling a portion of the stock or for a distribution in kind to several legatees.
The difference between the yields of two bonds with differing credit ratings (most often, a corporate bond with a certain amount of risk is compared to a standard traditionally lower risk Treasury bond); the bond spread will show the additional yield that may be earned from a bond which has a higher risk.
A period of rising inflation, high or rising unemployment and weak economic growth, characterized by a lack of growth in consumer and business activity.
Measures the total volatility or range of a fund or composite's return. It explains how much a fund or composite's rate of return fluctuates compared to its average rate of return for the measured period. Standard deviation measures total risk. The larger the standard deviation, the greater the fund's volatility.
An employee's right to purchase stock of the employer; a stock option is usually limited to a specific number of shares, at a specific fixed price, and within a certain period of time.
An increase in a corporation's number of outstanding shares of stock, without any initial change in shareholder equity or the aggregate market value at the time of the split. When a stock split requires an increase in the number of authorized shares, or a change in par value, shareholder approval is required. Stock splits are frequently authorized in an effort to make shares more affordable to a potentially broader investor base.
In the context of option trading, the strike price is the price per share for which the underlying stock may be purchased (call option) or sold (put option) over a specified period. Also know as the exercise price.
A debt security with special features, such as making payments based on an underlying index. For instance, a structured note is a bond which instead of paying the typical interest payments, will use an index, such as the S&P 500, to determine the amount of the interest payment.
Packaged securities with a fixed maturity that derive their value based on the return of another security, typically combining downside risk protection with some form of upside market participation through the use of embedded options. Despite downside risk protection, 100% of principal can be lost in the event of default, or if not held until maturity.
For equity managers, style refers to the manager's orientation towards value, growth or core holdings. For fixed income managers, style refers to the general credit quality of the holdings in the fund or private account.
Successor Trustee or Executor
An individual or institution taking the place of a trustee or executor unable to continue the responsibilities designated in the trust agreement or will.
An exchange of streams of payments over time according to specified terms. The most common type is an interest rate swap in which one party agrees to pay a fixed interest rate in return for receiving an adjustable rate from another party.
An investment function of an accounting system provided by financial institutions to clients whose accounts receive funds that temporarily await reinvestment; such funds are swept into an interest-bearing account until the reinvestment occurs.
A type of investment that is created artificially through a combination of financial instruments or components designed to behave like bonds.
An investment whose earnings are not subject to state or federal tax until the investor assumes possession of them. Individual Retirement Accounts are common examples.
TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract. The TED Spread shows the price difference between 3-month futures contracts for U.S. Treasuries and 3-month contracts for Euro dollars having identical expiration months.
Temporary Liquidity Guarantee Program (TLGP)
Instituted in 2008 by the FDIC during the worldwide banking crisis. Under the program, the FDIC increased its insurance coverage for depository accounts held at certain financial institutions, and also lent its guarantee to certain unsecured credit obligations of those institutions.
Tenants In Common
A form of brokerage or bank account registration, whereby two or more individuals share ownership. As opposed to a joint tenant account, however, ownership is not passed over to the other tenant(s) at death, but is part of the deceased owner's disposable estate.
A proposal to buy shares of stock from the stockholders of a corporation, made by an entity that desires to obtain control of the corporation.
Term Asset-Backed Securities Loan Facility (TALF)
A program created by the U.S. Federal Reserve in November 2008 to boost consumer spending to help jump-start the economy. This was accomplished through the issuance of asset-backed securities and backing for these loans comes from the up to $1 trillion provided by the New York Federal Reserve Bank. The program is in place until December 2009.
A type of trust that is established under the will of a deceased individual.
Making and leaving a valid will; an individual who dies without having made a will is said to have died intestate.
The Conference Board
A not-for-profit research organization for businesses that distributes information about management and the marketplace. It is an often-quoted private source of business intelligence and is best known for its widely followed economic indicators, such as the Consumer Confidence Index.
Total Return Swap
Two parties enter an agreement whereby they swap periodic payments over the life of the agreement. One party makes payments based upon the total return - coupons plus capital gains or losses - of a specified asset. The other makes fixed or floating payments as a vanilla interest rate swap. Both parties' payments are based upon the same notional amount. The asset can be almost any asset, index, or basket of assets.
A completed transaction of buying or selling a security. Trades are consummated when buyers and sellers agree on a trade execution price.
A legal claim against a company in bankruptcy by a debt holder of the company. Holders of this claim can sell it to purchasers, often at a discount. Purchasers acquire this claim in hopes of it having increased value after a successful reorganization or settlement from the company's bankruptcy.
A document which provides all details of a security trade. Brokerage firms are required to send either a written or electronic trade confirmation to clients who complete securities transactions.
As used by U.S. Bank, an investment made in equity, fixed income or cash securities, mutual funds, or exchange-traded funds (ETFs).
Usually a commercial bank, transfer agents are appointed by corporations to maintain investor records/certificates, and to issue and cancel or resolve problems resulting from lost or stolen certificates.
A shortened, generic name for a U.S. government bond.
A negotiable debt obligation issued by the U.S. government and backed by its full faith and credit. Treasury bills usually have a maturity of one year or less and the interest paid is exempt from state and local taxes.
A negotiable, coupon-bearing debt obligation issued by the U.S. government and backed by its full faith and credit. Treasury bonds have a maturity of between 10 and 30 years. Interest on bonds is paid semi-annually and is exempt from state and local taxes.
Treasury Inflation-Protected Securities (TIPS)
A special type of Treasury note or bond that offers protection from inflation. Like other Treasuries, an inflation-protected security pays interest every six months and pays the principal when the security matures. The difference is that the coupon payments and underlying principal are automatically increased to compensate for inflation as measured by the Consumer Price Index (CPI).
A negotiable debt obligation issued by the U.S. government and backed by its full faith and credit. Treasury notes have a maturity of between 1 and 10 years and the interest is exempt from state and local taxes.
The effective rate of interest paid on a debt obligation issued by the U.S. Treasury for a specified term, e.g., two years.
A legal, fiduciary relationship in which an individual or institution (the trustee) holds legal title to property with the responsibility for keeping or managing this property for the benefit of another person or beneficiary.
An account type whereby a trustee holds title to property or assets for the benefit of others, called beneficiaries. A trust agreement is required to establish a trust, which contains all provisions, and sets forth the powers of the trustee.
A legal document that establishes a trust and outlines the rules and guidelines affecting its management and disposition.
Property held in trust. This term originally applied only to money held in trust, but is frequently used when referring to all property held in trust.
The individual or institution with responsibility for management of property placed in trust for the benefit of another individual.
U.S. Treasury Securities
Debt obligations secured by the full faith and credit of the U.S. government. Income generated by these securities is subject to federal tax, but exempt from state and local tax.
Uniform Gifts to Minors Act (UGMA)
A simplified law that enables provides a way to transfer property to a minor without the complications of a formal trust. UGMA accounts typically have a donor who may or may not be the custodian of the account, and who oversees it until the minor reaches the age of majority, specified in the UGMA statues of the state in which the gift account was established.
Uniform Transfer to Minors Act (UTMA)
Similar to UGMA, the UTMA was enacted to provide a way to transfer property to a minor without the complications of a formal trust and will typically have a donor who may or may not be the custodian of the account in contrast to a UGMA account. However, the definition of an eligible gift, per UTMA, extends beyond cash and securities to include real estate, and minors are prohibited from taking ownership of the assets until age 21 (25 in California).
Performance for a security, index or market that is positive or going up in value.
A stock with a lower than market (usually measured against the S&P 500 Index) price/book ratio, a lower price/earnings ratio, and a higher than market dividend yield. A value stock usually has a lower earnings per share growth rate than a growth stock.
Value investments focus on stocks of income-producing companies whose price is low relative to one or more valuation factors, such as earnings or book value. Such investments are subject to risks that their intrinsic values may never be realized by the market, or, such stocks may turn out not to have been undervalued.
An investment contract typically sold by insurance companies, which guarantees a variable payment usually at retirement. Payout is based on a guaranteed number of units, unit values, and payments, dependent on the value of the underlying investments. All capital in a variable annuity grows tax-deferred, and the return to investors may be in the form of a periodic payment which varies with the market value of the portfolio, or a fixed minimum payment with add-ons based on the rate of appreciation.
With respect to qualified retirement plans, this pertains to a point in time in a participant's employment when the employee's benefits in the retirement plan become partially and eventually fully non-forfeitable; the vesting formula used in the plan determines at what point the benefits are fully or partially forfeitable or completely non-forfeitable regardless of whether the employee leaves.
VIX - Volatility Index
VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) "Volatility Index." VIX shows the market's expectation of 30-day volatility and is a widely used measure of market risk and is often referred to as the "investor fear gauge." There are three variations of volatility indexes: VIX tracks the S&P 500, VXN tracks the NASDAQ, and VXD tracks the DJIA.
The characteristic magnitude and frequency of changes in a security's value within a short-term period of time. Volatile stocks are typically aggressive investments, with higher risk but a greater potential for return.
Issued in conjunction with a bond or preferred stock, a warrant allows the holder to purchase a proportionate amount of common stock at a predetermined price. In contrast to a right, the subscription price for a warrant is usually above the market price at the time of issuance. Warrants are typically transferable and exchange-traded.
West Texas Intermediate (WTI)
Refers to light, sweet crude oil and is the underlying commodity of the New York Mercantile Exchange's oil futures contracts.
A legal document expressing the wishes of an individual regarding distribution of his or her property after death.
An international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement.
The annual rate of return on an investment, expressed as a percentage. For bonds, it is the coupon rate divided by the market price. For a stock, it is the annual dividend divided by the market price.
Yield (Rate of Return)
The annual rate of return on an investment, expressed as a percentage. For bonds and bonds, it is the coupon rate divided by the market price. For a stock, it is the annual dividend divided by the market price.
A curve that shows the relationship between yields and maturity dates for a set of similar bonds at a given point in time.
Yield to Maturity (YTM)
The percentage rate of return paid on a bond, note or other fixed income security if the investor buys and holds it to its maturity date. The calculation of YTM is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.
Zero Coupon Bond
A security that makes no periodic interest payments but is sold at a deep discount from the face value. The most common zero coupon bonds are issued by corporations or government entities, or created by brokerage firms by stripping the coupons off a bond and selling the coupons separately. This technique is used frequently with Treasury bonds. The dollar amount difference between the purchase price and the bond's value at maturity represents a zero coupon bond's yield.
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