1099
Reports interest (1099-INT) and dividends (1099-DIV) paid. It is sent to the IRS and to the taxpayer. 1099-OID statements report Original Issue Discount 401(k).

A tax-deferred investment and savings plan that acts as a personal pension fund for employees. (The name refers to the relevant section in the tax code.) This plan lets you defer taxes on a portion of your salary until you retire. In 1999 an employee can contribute up to $10,000. In subsequent years the contribution limit will be adjusted for inflation. You pay taxes on your investment gains when you withdraw money from the plan, which you can begin doing without penalty at age 59?. When you leave a company, you can roll over funds into your new employer's 401(k) or into an IRA. You must start withdrawing funds after age 70?.

Part of what makes this plan such a powerful retirement vehicle is that many employers match employee contributions, usually in the range of 15% to 50%. Plan participants usually have a choice of investments, including stocks, bonds, and fixed income funds. Some employers restrict investments to their own company's stock. Many 401(k) plans allow you to borrow from your nest egg. Generally, you must pay back the loan within five years, but you may owe a 10% penalty and taxes if you haven't paid the money back when you leave the company. The law allows you to make early withdrawals in certain cases of economic hardship, but you will get caught by the 10% penalty unless you are disabled, you leave your company at age 55 or later, or you need the money for medical expenses exceeding 7.5% of your adjusted gross income.

401(k) Eligibility
Any employee can sign up for a company's 401(k). Contributions are automatically deducted from your paycheck. While your own contributions always belong to you, you may have to wait a few years to be fully vested in the company's match.

Accrued interest
The interest a bond has already earned but not yet paid out. When you buy a bond after its original date of issue, you usually have to pay accrued interest to the previous owner.

Adjusted Gross Income (AGI)
Total personal income for the tax year minus allowable adjustments, such as unreimbursed business expenses, contributions to a traditional IRA, and alimony payments. It is the income used to calculate federal income tax. It is also referred to as AGI.

Americans with Disabilities Act (ADA)
A federal law that prohibits discrimination against people with disabilities. Title I of the ADA requires companies with 15 or more employees to make reasonable accommodations for qualified disabled employees so that they can perform their job.

Amortization
A method of debt reduction in which a borrower pays off a portion of the interest and principal periodically. Amortization numbers are found on balance sheets.

Annual percentage rate (APR)
An interest rate based on the cost of credit that consumers pay, expressed as an annual percentage.

Annual percentage yield (APY)
The rate earned or paid in one year, taking the effect of compounding into account. It is expressed as an annual percentage rate.

Annual report
A document sent to shareholders that communicates a public company's version of operations and performance. Information includes earnings, revenues, balance sheet data, an auditor's statement, and management's discussion of the company's track record and future direction. You can obtain a copy of the annual report from the company, usually from the investor relations department.

Asset allocation
The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds, real estate, and cash. Financial planners refer to asset allocation when discussing portfolios. For example, if you are young and single saving for retirement 40 years from now, a planner might recommend an asset allocation heavy in stocks, which tend to have a higher risk and a higher return. But if you are near retirement (or about to cash in some investments to pay for a child's college education), a financial planner might recommend a less risky asset allocation to preserve income and capital.

Assets
Assets are things you own, such as cash, real estate, stocks, and bonds. In the case of a business, assets also include inventory. On a balance sheet, assets contribute to the positive side, and liabilities contribute to the negative side. For example, if you own a $100,000 house with a $60,000 mortage, you would have $40,000 of the house's equity on the assets side of your balance sheet, because you own that portion of the house; the $60,000 would appear on the liabilities side of your balance sheet because you owe that amount to your mortgage lender.

Bear market
A market that is declining; that is, stock prices are falling, and so is the amount of money that companies have to spend on growth. This is the opposite of a bull market, which is growing.

Beneficiary
A person, organization, or trust who will receive the proceeds of a life insurance policy when the insured person dies. If you designate your spouse as the policy beneficiary, he or she will receive payment from your life insurance policy at your death.

Before-tax earned income
Income earned from your employment before you pay your taxes. It includes salaries, commissions, wages, tips, self employment income, etc. -- basically, what you get from working. It does not include income from your savings and investments (which is called unearned income).

Blue-chip stocks
Stocks of seasoned companies that have paid regular dividends in both good and bad years. Investments in blue-chip stocks are relatively conservative. Some examples of blue-chip stocks are the 30 securities used to calculate the Dow Jones Industrial Average.

Board of Directors
A group of individuals, elected by the shareholders, that direct and oversee the affairs of the corporation and monitor the actions of corporate officers.

Bond
A type of security that pays a fixed amount of interest at a regular interval over a certain period of time. Bonds are essentially loans given to companies and government entities who promise to pay back the loan at a specified interest rate. Bonds are considered less risky investments than stocks. A bond's rating is like a person's credit rating. It gives you an idea of whether the company that issued the bond will be able to make its payments on the loan. As a bond holder, you receive that interest payment periodically.

For example, suppose you own a municipal $1,000 bond that pays 7% interest over 10 years. In this case, assuming you bought the bond at its par value of $1,000 and held it for 10 years, you would receive $70 a year (7% of $1,000) for 10 years. At the end of the 10 years, you would have received $700 in interest ($70 x 10 years), and you would also get the $1,000 back. When interest rates are rising, bond prices go down; when rates are falling, bond prices go up.

Bond Broker
A broker is someone who handles the transfer of a security from a seller to a buyer. Brokers must be licensed by the Securities and Exchange Commission (SEC).

Bull market
A market in which prices are moving upward. This is the opposite of a bear market, in which prices are declining.

Bypass trusts
Simply put, for estate planning purposes, you can exclude assets from someone's estate by putting the assets into a trust. For example, to keep assets out of your spouse's estate after you die, you can put the assets in a trust such that the spouse gets the income from the trust, but upon the spouse's death, the body of the trust goes to the children. In essence, the spouse's estate has been "bypassed." For large estates, this can reduce estate taxes significantly.

Capital expenditures
The payment of money by a business to purchase or improve assets such as buildings or machinery.

Capital gain
The difference between an asset's purchase price and selling price. (The difference is called a "capital gain" only if it's a positive amount.) For example, if you buy 100 shares of a stock at $35 per share and sell them for $45 per share, your capital gain is $1,000 ($4,500 - $3,500).

Capital loss
A loss an investor suffers after selling an asset. Investors can write off capital losses on their taxes. The rules are that you can write off any capital loss against an equal amount of capital gain. If you use up all of your gains, you can offset up to $3,000 of losses a year against ordinary income. Additional losses beyond the $3,000 yearly limit can be carried forward into subsequent years.

Cash
In an investment portfolio, the relatively stable investments that can be easily changed into currency, such as a checking account, Treasury bills, a money market account, or a money market mutual fund.

Cash flow
A measure of the cash receipts and cash payments a company makes over a given time period.

Closing costs
Expenses incurred when real estate is transferred from a seller to a buyer.

Commercial Paper
Short term debt typically issued by a company to raise cash. These instruments mature in less than one year and are backed by the issuer's credit line.

Compound interest
When interest is earned on both the principal amount and any interest already earned. Because of compound interest, money grows much faster if the income from an investment is left in the account.

Consumer Price Index (CPI)
The most widely accepted indicator of inflation in the United States. The index is based on the aggregate price of a weighted "market basket" of goods, including food, housing, apparel, transportation, and medical care. Employers often use the CPI to determine how much of a raise to give their employees. Social security payments are tied to the CPI so that recipients will not lose buying power. Investors must pay particular attention to the index. While building a nest egg, they must make sure that their investments beat the annual rate of inflation. After retirement, they need to factor the rate of inflation into their calculation of how long their nest egg will last.

Consumer debt
Debt incurred for consumable or depreciating assets that aren't considered investments. This includes credit card debt, store-financed consumer purchases, car loans, family loans that will be repaid, etc. It doesn't include routine bills paid monthly such as water, phone, and electricity. Nor does it include mortgages, home or business equity loans, home or business equity lines of credit, or stock margin accounts

Credit rating
For individuals, credit risk is based on your financial resources and credit history. Your total debt level, timeliness in paying bills, number of credit cards, and many other factors are taken into consideration. Credit bureaus use credit scoring to quantify to potential creditors how likely you are to pay back a loan.

For bonds, a credit rating is an indicator of the risk of default. Bond rating companies have grading systems so investors can quickly determine whether a bond is worth the risk. If a company or municipality has financial problems, their bond credit rating falls and so does the price. You will be OK, however, as long as you hold your bonds to maturity and there is no default.

Credit score
A number that indicates an individual's creditworthiness. Credit bureaus determine the score with a statistical program. You are given points for such things as your credit card debt, number of cards, total debt level, and whether you rent or own your own home. Even the number of inquiries from potential creditors can affect your score because a high number of inquiries may signal credit problems. Creditors use the score to decide whether to give you a mortgage, issue a credit card, or offer a small business loan. A good score can result in a lower interest rate; a poor score can mean you will be charged a higher interest rate or denied a loan or credit card.

Current balance
The balance of all transactions entered as of today. See ending balance.

Debit card
A type of card that gives you electronic access to your money. Although it looks like a credit card, it is more like using cash or a check to pay for your purchases. Funds are immediately withdrawn from your bank account--there is no float on your money. You may not get the same protection from problem products or stolen cards that you get with a credit card. Debit cards are usually easier to obtain than credit cards and more commonly accepted than checks.

Deflation
The opposite of inflation, deflation occurs when consumer prices fall. Most people think of the Great Depression when deflation is mentioned. But mild deflation, just like mild inflation, can be good for the economy, and stocks historically have done well during such times. A severe deflation, however, can be devastating. Assets, such as real estate and stocks, decline in value along with consumer prices. People feel less wealthy and spend less money.

Depreciation
An accounting procedure that spreads the asset's purchase cost over its depreciable life. (For example, a fixed asset that cost $10,000 and lasted 10 years could be depreciated by $1,000 a year for 10 years. For accounting purposes, this reduces its value by $1,000 each year, until, at the end of its "useful life", it is worth nothing.) Depreciation reduces taxable income but does not reduce cash.Eventually, the economy can spiral into a depression.

Discount rate
The term "discount rate" has two distinct meanings:

1) In calculations of a company's intrinsic value, the term "discount rate" refers to the gain you'd need to realize to make your investment in a given stock worth the associated risk ("opportunity costs"). The discount rate factors in:

- The bond rate: Your investment could grow risk-free at the bond rate. You'll need to beat this rate to make your investment worthwhile. Matching the bond rate also means automatically that your money will grow at or above the rate of inflation; if you fail to keep up with inflation, the purchasing power of your investment will dwindle over time.

- A "risk premium": You're probably looking to realize a certain percentage gain over and above the inflation and bond rates to make assuming the investment risk worth your while. The size of this risk premium is up to you. Add the bond rate and risk premium together to arrive at a discount rate suitable to your investment expectations.

2) The interest rate the Federal Reserve Board charges large institutional banks for overnight borrowing. The discount rate is always lower than the federal funds rate, which is used when banks make short-term loans to each other. The Fed can influence short-term interest rates nationwide by raising or lowering the discount rate. Raising interest rates helps keep inflation in check. Lowering them generally fuels the economy and heats up the stock market.

Disinflation
A decline in the rate of inflation. With disinflation, prices still rise but at a slower rate than before. It should not be mistaken for deflation, which is when prices fall. In general, disinflation is good for business and the economy. It often causes interest rates to fall, which can boost P/E ratios.

Dividend
An amount of money or stock that a corporation pays to its shareholders quarterly. Typically, only larger companies pay dividends; smaller companies need to invest their own profits to grow. Some investors interested in producing income invest in dividend-producing securities; growth-oriented investors often Dow Jones industrial average (DJIA).

Often known as "the Dow", one of the most frequently quoted market indexes in the news. It refers to a weighted average of 30 widely-traded blue chip stocks (such as IBM and Coca-Cola). The closing prices of these 30 stocks are added and then divided by a factor that accounts for stock splits and other market changes. (The number refers to points, not dollars.) Because these stocks are in a variety of sectors and are actively traded, they are considered a good reflection of the market.

Equity
Ownership. When you own part of something, you have equity in it. So, for example, when you own 3,000 shares of Company XYZ's stock, that is your equity in the corporation. In other words, you and other shareholders own a piece of the corporation. In the case of real estate, your home equity equals your down payment plus any principal you've paid on your mortgage.

Estate
All the assets you possess at the time of your death. These include securities, real estate, physical possessions, and cash. Your estate is distributed to your heirs according to the provisions of your will.

Estate planning
Planning to insure that your assets pass in an orderly and efficient manner to designated individuals. Estate planning includes writing wills, setting up trusts, and planning ahead to avoid unnecessary taxes.

Federal Insurance Contributions Act (FICA)
A federal law that requires employers to withhold Social Security and Medicare tax from an employee's wages or salary. Employers are also required to pay a portion of these taxes.

Federal Reserve Board
The central bank of the United States. Founded by Congress in 1913, the Fed is responsible for maintaining the stability of the U.S. economy. Its duties include balancing the supply of money and credit, regulating the banking system, and providing financial services to banks and the U.S. government. Investors closely watch the Fed's moves, especially when it changes the discount rate, which is the interest rate banks pay for borrowing overnight from the Fed. Raising or lowering the discount rate influences short-term interest rates.

Fiduciary
A person, company or association that holds assets in trust for a beneficiary. The fiduciary is expected to make sound investment choices on behalf of the beneficiary. Most states have laws that limit how a fiduciary may handle the beneficiary's assets. Fiduciaries can be: executors of wills and estates, receivers in bankruptcy, trustees or administrators of assets for underage or incompetent beneficiaries.

Finance charges
Interest charged on loans made to you. For example, the interest rate on a credit card or the interest rate on a car loan is a finance charge.

Fixed-rate loan
A loan with an interest rate that doesn't change with fluctuating market conditions. Fixed-rate loans usually have higher initial interest rates than variable-interest loans. Conventional mortgages have fixed rates, as do most business loans and consumer loans.

Flexible benefits plan
A benefits plan that allows employees to choose from a selection of taxable and non-taxable benefits, often including 401(k) contributions, health insurance, and flexible spending account contributions. Employees can elect to divert a portion of their taxable cash compensation and apply it towards qualified nontaxable benefits.

Flexible spending account (FSA)
An employee benefit that allows money to be deducted from your paycheck on a pre-tax basis, to pay for qualifying health care and dependent care expenses. A health care FSA can save you substantial sums on a wide range of medical, dental, and vision expenses that are not covered by your firm's insurance plan. A dependent care FSA can be used to pay for childcare and eldercare costs. Contributions to your FSA accounts are exempt from federal and in some cases state income taxes. The tax exemption in effect produces "savings" of as much as 40% or more. You typically can contribute a maximum of $3,000 annually to a health care FSA and $5,000 annually to a dependent care FSA. The catch is that you forfeit any money left in your account at the end of the year, so you must carefully budget your expenses for the year.

Government bond
This interest-bearing or discounted security is issued by the government and obligates the government to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. Government bonds are backed by the full faith and credit of the U.S. Government, which if necessary can print money to make payments.

Guardianship provisions
Clauses typically found in a will, used to designate who will physically care for a minor child should the parents die. It is critical to think this through carefully, to include successor guardians should the one you designate be unable to or refuse to become the guardian.

Home equity loan
Also called an "equity loan" or a "second mortgage," a home equity loan is a line of credit secured by your home. When you use this credit line to buy something, the financial institution giving you the line of credit places a second mortgage loan on your home until the debt is paid off, after which the credit line may again be used to buy something else. The interest rate on such loans is usually lower than on standard second mortgages or credit cards. Most interest on home equity loans is tax deductible. Like any mortgage, if a home equity loan is not paid off, your home may be sold to pay the debt.

Household income
The combination of income from all workers in your household.

Individual Retirement Account (IRA)
An individual tax-deferred savings and investment account meant to accumulate funds for retirement.   Individuals may contribute the lesser of $4,000 or 100% of earned income in 2006-2007.  Ages 50+ can put an additional $1,000 in.  Refer to an Investment Services Advisor for the Catch Up Clause.  

There are two types of IRA: traditional IRAs and Roth IRAs. In a traditional IRA, the money grows tax-deferred until it is taken out at retirement after age 59 ½.  Annual contributions may be tax-deductible, depending on specific IRS rules. To qualify, you and your spouse can't be covered by an employer's retirement plan unless your income falls below certain limits. The contribution is fully deductible for a single taxpayer earning up to $49,999 in 2006.  Married couples filing jointly may earn up to $74,999 for the full deduction in 2006. 

IRA withdrawals before age 59 ½ are hit with a 10% penalty. There are several exceptions to that rule, however. You are allowed to use IRA funds to pay for education expenses or to withdraw up to $10,000 penalty-free for a first-time home purchase. You also escape the penalty if you are disabled or need the money for substantial medical expenses or for health insurance while you are unemployed. It's generally a good idea, however, to leave your money in the IRA as long as possible to get the most out of tax-deferred compounding. You must start withdrawing your money from an IRA at age 70 ½ or the IRS will hit you with another penalty.

Inflation
A rise in the price of commodities and services. Inflation occurs when spending increases faster than supply. Moderate inflation is an expected result of economic growth.

Insurance
Insurance is a way to make an individual's financial losses more affordable by transferring them to a large group of people through an intermediary called an insurance company and a legal contract called a policy. The insurance company pools the risks of hundreds of thousands of people. The premium each policyholder pays is small compared to the potential loss he or she is insuring.

The cost of a homeowner's policy, for example, is a fraction of what it would cost to replace your house if it burns down. The insurance company can afford to pay for all the losses that occur in the covered pool - - and still make enough to stay in business and keep its shareholders happy - - assuming

1) that it charges appropriate premiums and

2) that every policyholder doesn't have a loss at the same time. The larger and more diverse the pool, the less likely that is to happen.

Interest
The cost for borrowing a sum of money, usually calculated at a percentage rate over a period of time. For example, if you borrow $1,000 for a year at an annual interest rate of 10%, you would pay $100 in interest for a year's use of the money:

$1,000 x .10 = $100.

You earn interest on bonds. In that case, the borrower is paying you interest to use the money you invested.

Internal rate of return (IRR)
The growth rate of your money over a time period relative to the amount invested. IRR, which compares the profit to the amount invested, is expressed as a percent gain or loss for easy comparison with other percent changes for the same time period. The IRR calculation is based on continuous compounding.

Investment Portfolio
The collection of assets that you have that are not used for everyday living expenses or short-term expenditures (those to be made in less than one year). Retirement accounts such as 401(k)s, IRAs, SEPs, etc. should be included. An investment portfolio may contain Certificates of Deposits, money market accounts, savings accounts, mutual funds, individual stocks and bonds, annuities, real estate (other than your personal residences), collectibles, precious metals, futures and commodities, etc.

Keogh
A tax-deferred retirement plan for the self-employed, partnerships, and small businesses. A Keogh is usually a better bet than a SEP for a self-employed individual with high, stable earnings. There are two kinds of defined-contribution Keoghs: profit-sharing plans and money-purchase plans. Profit-sharing plans give you the most flexibility. You are allowed to contribute up to 15% of self-employment income, and you can vary the percentage of income you want to sock away from year to year. Since the earnings ceiling is $160,000, the maximum contribution is $24,000 annually. You can put away more money with a money-purchase Keogh; as much as 25% of your income up to $30,000 annually. But you must contribute the same percentage of income every year. You can combine both plans to boost your contributions and to retain some flexibility.

Another type of Keogh is very complicated to administer because an actuary must determine the deduction for contributions every year. The benefit is determined by averaging the participant's highest earnings in three consecutive years. The maximum payout is $130,000 a year. In all cases, Keogh contributions are fully deductible. The plans generally follow IRA rules for penalties and withdrawals.

Lease
A contract that grants you the use of automobiles, equipment, real estate or other fixed assets for a period of time in exchange for payment, usually as rent.

Liability
Liability is any legally enforceable obligation. Liability insurance covers you for money you're legally obligated to pay because a court has found that you were responsible for injuries to another person's property.

Liability, Collision and Comprehensive
These are the three main types of coverage available in an auto insurance policy. Liability pays other people if you've injured them or damaged their property. Collision pays to repair damage to your car caused by (what else?) collisions. Comprehensive pays you for your losses due to theft and other calamities that are unrelated to collisions -- like damage from hail, fire, vandalism, floods, etc. For full protection, you need all three types of coverage. But if your car is so old that its book value is less than the cost of repairing it, you should consider dropping collision and comprehensive coverage, because no policy pays you more than the car's book value for repairs or replacement.

Life expectancy
A calculation of the average length of life for a person based on gender and health. This figure is drawn from actuarial tables. To increase the chance that your money will last as long as you do, add ten years to your life expectancy.

Living will
A document that states your preferences in medical decisions if you are unable to speak for yourself as a result of medical incapacitation. This is used to express your desires regarding "do not resuscitate orders", being kept on life support devices, etc.

Loss
A loss is the basis for an insurance claim. For example, you've had a loss if the value of your car is reduced because another car smashed into it.

Lump-sum distribution
A single payment of all your retirement money from an account, usually given when you leave a company or when you retire. Prior to retirement, lump-sum distributions are usually rolled over into another retirement plan or into an IRA. There may be tax consequences when you take a lump-sum distribution. You should consult a financial professional to discuss the taxes that may apply to any action you take with a lump-sum distribution.

Buying on margin
When an investor borrows money from a broker to buy a security. Investors usually do this when they are confident that the price of a security will go up. For example, suppose you want to buy 200 shares of a stock that costs $20 per share. Normally, you would need $4,000 (plus commission) to purchase this security. But if you buy the security on margin, you can borrow up to $2,000 (50%) of the purchase price and pay the other $2,000 yourself. If the value of the stock goes up, you earn all the gains on the $4,000 investment, even though you borrowed half of the initial investment. At some point, of course, you need to pay back the borrowed amount to the brokerage, which charges interest for the amount you have borrowed. If the value of the stock falls, however, you will owe the brokerage for the losses. If the value of the stock falls too far, the brokerage may give you a margin call.

Market share
A measure of how dominant a company is in its industry. Market share is determined by expressing a company's revenues, sometimes for a specific product or service, as a percentage of the industry's overall revenues for similar products or services. Companies with high market share typically have lower operating costs and are more profitable than other companies in the industry. Changes in market share can indicate how well a company is likely to perform. Growing market share is a bullish sign while declining market share can be a sign of trouble.

Maturity
The date when a bond's principal becomes due and payable.

Medical Benefits
Insurance that reimburses you for covered medical expenses you incur as the result of an auto accident. Coverage varies by state. Read your insurance policy to learn the specifics about what medical benefits coverage includes and what it doesn't include.

Minimum wage
The minimum compensation that must be paid to most hourly workers. The federal minimum wage, which was raised to $5.15 an hour in 1997, applies to hourly employees at businesses that have more than $500,000 in revenues or that are engaged in interstate commerce. The law also applies to state and local government agencies, hospitals, schools, and domestic workers. It does not affect the youth minimum wage of $4.25 an hour, which may be paid to employees under age 20, who work for 90 days or less. States can set their own minimum wage. If it is higher than the federal standard, all companies in the state must comply.

Money market
A market for short-term debt instruments (generally of less than one year) such as certificates of deposit, commercial paper, banker's acceptances, Treasury bills, and discount notes of the Federal Home Loan Bank and the Federal National Mortgage Association. Money markets offer safety and liquidity. A money market fund is a mutual fund that invests only in money market investments. Most money funds allow limited check writing. An investment in a money market fund is not insured or guaranteed by the U.S. government. There is no assurance that the fund will maintain a $1 share price.

Mortgage debts
Includes first mortgages, home equity loans, and any other loans secured by your real estate. Include investment properties and second homes.

Mortgage loan
Short-term or long-term use of property or money with the consent of the owner of the property or money (the lender). Usually the loan of money has an agreed-to repayment schedule. Normally there is an interest charge for the use of the money.

Municipal bonds
Bonds issued by a state or local government entity. They are often tax-exempt if they are public purpose bonds. Private purpose municipal bonds, however, are taxable unless specifically exempted. Also known as "munis."

Mutual fund
A group of securities owned by a group of investors. It is managed by investment professionals who make buy and sell decisions for the group. Investors choose to purchase shares in mutual funds for a couple of reasons: they can diversify their holdings more easily with a smaller amount of money (because the mutual fund has the money to buy shares in many different types of securities); and they can rely on investment professionals to make trading decisions for them.