| 12b-1 Fee |
| A fee assessed on certain mutual funds or share classes permitted by the SEC to cover the costs associated with marketing the fund and shareholder servicing expenses. The maximum fee of a fund's net assets is 0.75%. |
| 401(k) Plan |
| A contribution plan offered by a corporation to its employees, allowing employees to set aside tax-deferred income for retirement purposes. The employer may match the employee's contribution up to a limit. Withdrawing a distribution of the funds before at the age of 59½ will generally trigger a penalty tax. |
| 403(b) Plan |
| A retirement plan similar to a 401(k) plan, but one which is offered by non-profit organizations, such as universities and some charitable organizations, rather than corporations. There are several advantages to 403(b) plans: contributions lower taxable income, larger contributions can be made to the account, earnings can grow tax-deferred, and some plans allow loans. Contributions can grow tax-deferred until withdrawal at which time the money is taxed as ordinary income (which is sometimes a disadvantage). |
| 457 plan |
| A tax-exempt deferred compensation program made available to employees of state and federal governments and agencies. A 457 plan is similar to a 401(k) plan, except there are never employer matching contributions and the IRS does not consider it a qualified retirement plan. Participants can defer some of their annual income (up to an annual limit), and contributions and earnings are tax-deferred until withdrawal. Distributions start at retirement age but participants can also take distributions if they change jobs or in certain emergencies. Participants can choose to take distributions as a lump sum, annual installments or as an annuity. Distributions are subject to ordinary income taxes and the amounts cannot be transferred into an IRA. |
| Active Management |
| The trading of securities to take advantage of market opportunities as they occur, in contrast to passive management. Active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell. |
| Aggressive (Investing Style) |
| An investment approach that accepts above-average risk of loss in return for potentially above-average investment returns. |
| Aggressive Growth Fund |
| An investment fund that takes higher risk of loss in return for potentially higher returns or gains. |
| Alpha |
| The excess return of an investment relative to the return of a benchmark index. |
| Annual Rate of Return |
| The annual rate of gain or loss on an investment expressed as a percentage. |
| Annual Report |
| A yearly record of an investment’s (e.g., a mutual fund’s or company’s) financial position and operations. Public companies are required by the SEC to produce annual reports. |
| Annualized Return |
| The average amount of money earned by an investment each year over a given time period. An annualized return provides only a snapshot of an investment’s performance and does not give investors any indication of its volatility. Annualized return merely provides a geometric average, rather than an arithmetic average. |
| Annuity |
| A form of insurance contract that provides a stream of periodic payments, typically for life. Annuities are available in a variety of forms. See also Life Annuity, Joint and Last Survivor Annuity. |
| Annuity Commencement Date |
| The date set forth in the annuity contract on which annuity payments will start. Also known as the "annuity start date." |
| Asset |
| Anything with commercial or exchange value owned by a business, institution or individual. Examples include cash, real estate and investments. |
| Asset Allocation |
| A method of investing by which investors include a range of different investment classes, such as stocks, bonds, and cash alternatives or equivalents, in their portfolios, with the purpose of balancing risk and return. |
| Asset Class |
| A group of securities or investments that have similar characteristics and behave similarly in the marketplace. Three common asset classes are equities (e.g., stocks), fixed income (e.g., bonds), and cash alternatives or equivalents (e.g., money market funds). |
| Average Annual Total Return |
| The yearly average percentage increase or decrease in an investment’s value that includes dividends, gains, and changes in share price. The average annual total return is used to show the amount an investor would earn over a certain time frame if the annual return was compounded. |
| Back-end Load |
| A fee imposed by some funds when shares are redeemed (sold back to the fund) during the first few years of ownership. Also called a contingent deferred sales charge. |
| Back-tested performance |
| Back-tests are used to assess the viability of an investment strategy by building a simulation with historical data to analyze risk and profitability before risking any actual capital. |
| Balanced Fund |
| A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. |
| Barclay’s Capital U.S. Aggregate Bond Index |
| An index widely used to measure performance of U.S. bond funds. The index tracks approximately 17,000 bonds including Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in the U.S. |
| Basis Point |
| One-hundredth of one percent, or 0.01%. For example, 20 basis points equal 0.20%. Investment expenses, interest rates, and yield differences among bonds are often expressed in basis points. |
| Benchmark |
| An unmanaged group of securities whose performance is used as a standard to measure investment performance. Some well-known benchmarks are the Dow Jones Industrial Average and the S&P 500 Index. |
| Beta |
| The beta coefficient measures an investment’s relative volatility or impact of a per-unit change in the independent variable (market) on the dependent variable (portfolio), holding all else constant. The beta of a portfolio is its covariance in relation to the market. The market portfolio has a beta coefficient of 1. A higher (lower) beta would imply more (less) volatility. |
| Blue Chip |
| A blue chip company has a long record of stable and reliable growth; it is nationally recognized and known to operate profitably in the face of adverse economic conditions. |
| Bond |
| A debt security which represents the borrowing of money by a corporation, government, or other entity. The borrowing institution repays the amount of the loan plus a percentage as interest. Income funds generally invest in bonds. |
| Bond Fund |
| A fund that invests primarily in bonds and other debt instruments, such as notes, mortgages or leases. |
| Bond Rating |
| A bond rating signifies the credit quality of a bond, considering the financial strength of its issuer and the likelihood that it will repay the debt. Agencies such as Standard & Poor’s, Moody’s Investors Service, and Fitch issue ratings for different bonds, ranging from AAA (highest quality, minimal credit risk) to D (in default). |
| Book to Market |
| Book-to-market evaluates a company's current book value relative to its market capitalization. The ratio is influenced by growth prospect, shareholder risk, and cash flow generation. |
| Book Value |
| The book value is the sum remaining if a company were to sell all assets and repay all liabilities. Book value is calculated by subtracting depreciation from the asset's original cost. |
| Book-to-Market Ratio |
| The “BtM” is the ratio of a firm’s book value of equity to its market value of equity. Book value of equity is determined by the firm’s accountants using historic cost information. Market value of equity is determined by buyers and sellers of the stock using current information. A high (low) BtM ratio indicates that the book value per share is high (low) relative to the stock price. |
| Broker |
| A person who acts as an intermediary between the buyer and seller of a security, insurance product, or mutual fund, often paid by commission. The terms broker, broker/dealer, and dealer are sometimes used interchangeably. |
| Brokerage window |
| Offered in 401k plans, brokerage windows expand investor's options to choose from a few listed investments to a range of ETF's, mutual funds and publicly traded securities. Brokerage windows may incur greater fees, or trading costs. |
| Capital Appreciation |
| An increase in the value of an investment. |
| Capital Appreciation Fund |
| An investment fund that invests primarily in high growth and value stocks in an attempt to increase asset value. Capital appreciation funds are also referred to as "growth funds" or "capital opportunity funds" and tend to be heavily weighted towards equities. |
| Capital Gain |
| An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price. |
| Capital Loss |
| The loss in the value of an investment, calculated by the difference between the net purchase price and the net sale price. |
| Capital Preservation |
| An investment goal or objective to keep the original investment amount (the principal) from decreasing in value. |
| Capitalization (Cap) |
| The total market value of a company's outstanding equity. |
| CAPM |
| Capital Asset Pricing Model. An economic model for valuing stocks by relating risk and expected return. Based on the idea that investors demand additional expected return (called the risk premium) if asked to accept additional risk. |
| Cash Alternative or Cash Equivalent |
| An investment that is short term, highly liquid, and has high credit quality. |
| Cash Refund Annuity |
| An annuity that makes periodic payments for the life of an individual and a benefit payable to a beneficiary upon death equal to the premium(s) paid less payments made to the individual. |
| Center for Research in Security Prices (CRSP) |
| A securities research center, founded in 1960, located at the University of Chicago. The Center provides historical pricing data for exchange-traded securities used for analysis, educational and other purposes. |
| Collective Investment Fund |
| Investments created by a bank or trust company for employee benefit plans, such as 401(k) plans, that pool the assets of retirement plans for investment purposes. They are governed by rules and regulations that apply to banks and trust companies instead of being registered with the SEC. These funds are also referred to as collective or commingled trusts. |
| Commission |
| Compensation paid to a broker or other salesperson for his or her role when investments are bought or sold. |
| Common Stock |
| An investment that represents a share of ownership in a corporation. |
| Company Stock Fund |
| A fund that invests primarily in employer securities that may also maintain a cash position for liquidity purposes. |
| Competing Funds |
| An investment fund that is identified by the investment manager of another fund and which is subject to special rules relating to an investor’s ability to buy and sell investments between the two funds. See Equity Wash Restriction. |
| Compounding (Investment) |
| The cumulative effect that reinvesting an investment’s earnings can have by generating additional earnings of their own. |
| Conservative (Investing Style) |
| An investment approach that accepts lower rewards in return for potentially lower risks. |
| Contingent Deferred Sales Charge (CDSC) |
| A fee imposed when shares of a mutual fund or a variable annuity contract are redeemed (sold) during the first few years of ownership. Also called a back-end load. |
| Corporate Bond |
| A bond issued by a corporation, rather than by a government. The credit risk for a corporate bond is based on the re-payment ability of the company that issued the bond. |
| Cost of Capital |
| A company issues stock (or debt) in exchange for capital to fund its operations. The investor provides this capital by purchasing shares (or bonds) in exchange for an expected return. Because the company foregoes the return on the stock or debt it issues, its cost of capital is identical to the investor’s expected return. |
| Credit Risk |
| The risk that a bond issuer will default, meaning not repay principal or interest to the investor as promised. Credit risk is also known as "default risk." |
| Current Yield |
| The current rate of return of an investment calculated by dividing its expected income payments (as measured by interest or dividends) by its current market price (of the security). |
| Custodian |
| A person or entity (e.g., bank, trust company, or other organization) responsible for holding financial assets. |
| Decile |
| A decile is a portion within a whole that has been divided into ten equal parts. For example, the population of issues on the NYSE can be broken into ten deciles according to market capitalization, each containing the same number of stocks. |
| Deferred Annuity |
| An annuity contract under which periodic income payments begin at a future date. See Annuity Commencement Date. A deferred annuity can be variable or fixed. |
| Deflation |
| Deflation indicates a decline in the prices of goods and services. |
| Dependent Variable |
| The dependent variable is a response variable (i.e., expected return) whose behavior is to be measured as a result of the manipulation of independent variables in an experiment. Ideally, the dependent variable should be reliable, sensitive, and easy to measure. |
| Depreciation |
| A decrease in the value of an investment. |
| Designated Investment Alternative |
| The investment options picked by your plan into which participants can direct the investment of their plan accounts. |
| Diversification |
| The practice of investing in multiple asset classes and securities with different risk characteristics to reduce the risk of owning any single investment. |
| Dividend |
| Money an investment fund or company pays to its stockholders, typically from profits. The amount is usually expressed on a per-share basis. |
| Dollar Weighted Returns |
| Measure of returns that remove the impact of contributions and withdrawals to enable accurate comparisons to benchmarks. Dollar-Weighted returns measure IFA's performance that may be affected by factors outside our control, such as your contributions and withdrawals while the Time-Weighted return measures IFA's performance as your investment advisor. |
| Dow Jones Industrial Average (DJIA) |
| The most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company), a practice that dates back to the beginning of the century. The Dow was officially started by Charles Dow in 1896, at which time it consisted of only 11 stocks. The Dow is computed using a price-weighted indexing system, rather than the more common market cap-weighted indexing system. A widely followed price-weighted index of 30 of the largest, most widely held U.S. stocks. |
| Duration |
| Duration measures bond price volatility by calculating the weighted average term-to-maturity of a bond’s cash flows, where the weights are the present value of each cash flow as a percentage of the bond’s full price. Duration rises with maturity, falls with the frequency of coupon payments, and falls as current yields rise (higher yields reduce the present value of the cash flows). |
| Efficient Market Hypothesis |
| “EMH” is the hypothesis postulating that market prices reflect the knowledge and expectations of all investors. It asserts that any new development is instantaneously priced into a security, thus making it impossible to beat the market consistently. |
| Emerging Market |
| Generally, economies that are in the process of growth and industrialization, such as in Africa, Asia, Eastern Europe, the Far East, Latin America, and the Middle East which, while relatively undeveloped, may hold significant growth potential in the future. Investing in these economies may provide significant rewards, and significant risks. May also be called developing markets. |
| Emerging Market Fund |
| A fund that invests primarily in emerging market countries. |
| Employer Securities |
| Employer securities, or company securities, can be issued by a company to a retirement plan that may be used as a plan investment option. Securities of the parent or subsidiary corporation can also qualify as employer securities. |
| Equity |
| A security or investment representing ownership in a corporation, unlike a bond, which represents a loan to a borrower. Often used interchangeably with “stock.” |
| Equity Fund |
| A fund that invests primarily in equities. |
| Equity Wash Restriction |
| A provision in certain stable value or fixed income products under which transfers made from the stable value or fixed income product are required to be directed to an equity fund or other non-competing investment option of the plan for a stated period of time (usually 90 days) before those funds may be invested in any other plan-provided competing fixed income fund (such as a money market fund). |
| ERISA |
| Employee Retirement Income Security Act of 1974. The federal law which established legal guidelines for private pension plan administration and investment practices. |
| Exchange Traded Fund (ETF) |
| An investment company, such as a mutual fund, whose shares are traded throughout the day on stock exchanges at market-determined prices. |
| Expected Return |
| “E(R)” is the mean value of the probability distribution of possible returns. |
| Expense Ratio (ER) |
| A measure of the relationship of operating expenses to a fund's assets. An expense ratio is determined by dividing a fund's operating expenses by the average dollar value of its assets under management (AUM). |
| Factor Gap |
| The difference between the returns of two indexes. |
| Factor Loading |
| Factor Loading is an asset's (i.e. mutual fund) sensitivity to an economically important return (i.e. inflation or interest rate). Factor loading measures the degree to which a factor has an impact on a variable; ranging from -1 to 1. Loadings closer to 0 imply a weak correlation with the variable, whereas a factor loading of 1 or -1 is associated with greater reliability. |
| Fair Value |
| Fair value is an estimate of the potential market price of a good, service, or asset. The price is agreed upon by willing buyers and sellers, assuming both parties are knowledgeable and enter the transaction freely. |
| Fama-French Three-Factor Model |
| A factor model expanding upon the capital asset pricing model (CAPM). This model adds both value and size factors as well as market risk. This model helps to accommodate for the tendency of stocks to outperform, making it more accurate in determining the performance of managers. |
| Federal Deposit Insurance Corporation (FDIC) |
| A federal agency that insures money on deposit in member banks and thrift institutions. |
| Fiduciary |
| An individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of the other party. |
| Financial Industry Regulatory Authority (FINRA) |
| A self-regulatory organization for brokerage firms doing business in the United States. FINRA operates under the supervision of the SEC. The organization’s objectives are to protect investors and ensure market integrity. |
| Financial Model |
| A financial model is the representation of an asset, business, portfolio or other investment's performance, based on expenses and earnings variables, that helps forecast future financial performance. |
| Financial Statements |
| The written record of the financial status of a fund or company, usually published in the annual report. The financial statements generally include a balance sheet, income statement, and other financial statements and disclosures. |
| Fixed Annuity |
| An annuity contract in which the insurance company makes fixed or guaranteed payments to an individual for the term of the contract. |
| Fixed Income Fund |
| A fund that invests primarily in bonds and other fixed-income securities, often to provide shareholders with current income. |
| Fixed Return Investment |
| An investment that provides a specific rate of return to the investor. |
| Front-end Load |
| A sales charge on mutual funds or annuities assessed at the time of purchase to cover selling costs. |
| Fund Family |
| A group or “complex” of mutual funds, each typically with its own investment objective, and managed and distributed by the same company. A Fund Family also could refer to a group of collective investment funds or a group of separate accounts managed and distributed by the same company. |
| Fund of Funds |
| A mutual fund, collective investment fund or other pooled investment that invests primarily in other mutual funds, collective investment funds or pooled investments rather than investing directly in individual securities (such as stocks, bonds or money market securities). |
| Glide Path |
| The change over time in a target date fund’s asset allocation mix to become more conservative shifting from a focus on growth (equities) to a focus on fixed-income assets. Glide path is based on the notion that younger investor portfolios should contain riskier assets as they have a greater number of years to the target date (retirement) than an older investor. |
| Global Fund |
| A fund that invests primarily in securities anywhere in the world, including the United States. Global funds can be focused on a single asset class or allocated to multiple asset classes. |
| Government Securities |
| Any debt obligation issued by a government or its agencies (e.g., Treasury Bills issued by the United States). |
| Group Annuity Contract |
| An annuity contract between an insurance company and owner on behalf of the company's employees. The contract guarantees a pension benefit to qualified participants, such as retirement plan participants, and adheres to IRS rules. |
| Growth and Income Fund |
| A fund that has a dual strategy of growth or capital appreciation and current income generation through dividends or interest payments. A growth and income fund can only invest in equities or a combination of stocks, bonds, REIT and other securities. |
| Growth Fund |
| A fund that invests primarily in the stocks of companies with above-average risk in return for potentially above-average gains. These companies often pay small or no dividends and their stock prices tend to have the most ups and downs from day to day. The companies reinvest their earnings into expansion, acquisition and/or research and development. |
| Guaranteed Interest Account |
| An account within a fixed annuity or a variable annuity that is guaranteed by the insurance company to earn at least a minimum rate of interest while invested in the contract. |
| Guaranteed Investment Contract |
| A contract issued by an insurance company that guarantees a specific rate of return on an investment over a certain time period. |
| Guaranteed Lifetime/Minimun Withdrawal Benefit |
| A feature that may be offered under an annuity contract in which the insurance company promises an individual may withdraw a specified amount from an account, even if the account balance is reduced to zero: (1) for the life of the individual, or the joint lives of two individuals (e.g., the individual and spouse); or (2) for a specified period of time. |
| Hardship Withdrawal |
| Removing money from a retirement account such as a 401(k) or 403(b) earlier than expected due to a hardship. Individuals that remove funds early are subject to taxation and penalties enforced by the Internal Revenue Service. |
| Hedge Fund |
| A fund, usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other mutual funds, which allows them to accomplish aggressive investing goals. They are restricted by law to no more than 100 investors per fund, and as a result most hedge funds set extremely high minimum investment amounts, ranging anywhere from $250,000 to over $1 million. As with traditional mutual funds, investors in hedge funds pay a management fee; however, hedge funds also collect a percentage of the profits (usually 20%). |
| Hypothesis testing |
| Hypothesis tests, also known as significance tests, are mathematical models used to tests a claim about a parameter in a given population set, using data measured in a sample set. |
| Hypothetical performance Data |
| Simulated performance data that attempts to illustrate expected performance that utilizes past data. The data does not represent performance of actual client portfolios. There are different types of hypothetical performance data, including back-tested performance data and model performance data. |
| Immediate Annuity |
| An annuity contract under which periodic income payments begin within 12 months of purchase. |
| Inception Date |
| The date that a fund began operations. |
| Income Fund |
| A fund that primarily seeks current income rather than capital appreciation. |
| Independent Variable |
| An independent variable is a factor whose effects are to be studied and manipulated in an experiment (i.e., exposure to market, size, and/or value risk). |
| Index |
| A benchmark against which to evaluate a fund's performance. The most common indexes for stock funds are the Dow Jones Industrial Average and the Standard & Poor's 500 Index. |
| Index Fund |
| An investment fund that seeks to parallel the performance of a particular stock market or bond market index. Index funds are often referred to as passively managed investments. |
| Individual Annuity Contract |
| An annuity contract generally entered into between an insurance company and a person or persons. |
| Inflation |
| The overall general upward price movement of goods and services in an economy. Inflation is one of the major risks to investors over the long term because it erodes the purchasing power of their savings. |
| Interest Rate Risk |
| The possibility that a bond’s or bond fund’s market value will decrease due to rising interest rates. When interest rates (and bond yields) go up, bond prices usually go down and vice versa. |
| Interest/Interest Rate |
| The fee charged by a lender to a borrower, usually expressed as an annual percentage of the principal. For example, someone investing in bonds will receive interest payments from the bond’s issuer. |
| International Fund |
| A fund that invests primarily in the securities of companies located, or with revenues derived from, outside of the United States. |
| Investment Adviser |
| A person or organization hired by an investment fund or an individual to give professional advice on investments and asset management practices. |
| Investment Company |
| A corporation or trust that invests pooled shareholder dollars in securities appropriate to the organization’s objective. The most common type of investment company, commonly called a mutual fund, stands ready to buy back its shares at their current net asset value. |
| Investment Objective |
| Stated goal used to determine the optimal portfolio mix for a client or individual. The objective outlines the goal an investment fund or investor seeks to achieve, such as, growth or greater income. |
| Investment Return |
| Also known as Return on Investment (ROI), investment return represents the gain or loss on an investment over a certain period, expressed as a percentage. Income and capital gains or losses are included in calculating the investment return. The ROI is used to compare a company's profitability or to compare the efficiency of different investments. |
| Investment Risk |
| The possibility of losing some or all of the amounts invested or not gaining value in an investment. |
| IRA |
| Individual Retirement Account. A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). The exact amount depends on the year and your age. IRAs can be established at a bank, mutual fund, or brokerage. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn. A participant is able to roll over a distribution to another IRA or withdraw funds using a special schedule of early payments made over the participant's life expectancy. |
| Joint and Last Survivor Annuity |
| An annuity that provides periodic payments for the joint lives of two individuals with benefits payable upon the death of one individual to the surviving individual at, for example, 50%, 75% or 100% of the original payment amount depending upon the terms of the contract. |
| Large Cap |
| A company with a market capitalization value generally of more than $10 billion. Large cap translates to "large market capitalization." |
| Large Cap Blend |
| A blend fund is an equity mutual fund that combines value and growth stocks. Large cap blend funds offer investors diversification among large value and large growth investments in a portfolio. |
| Large Cap Fund |
| A fund that invests primarily in large cap stocks, with market capitalizations generally above $10 billion. The funds cover a range of countries, industries, and sectors. |
| Large Cap Stocks |
| Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. |
| Large Growth |
| A large growth company invests its earnings back into corporate growth instead of paying a dividend. Growth stocks are generally very volatile in price, and profits are expected to grow at a faster rate than the market average. |
| Large Value |
| A large value stock is the stock of a large company, with a market capitalization generally of more than $10 billion. Large Value stocks "account for value stocks with high book-to-market ratios that generate higher expected returns in comparison to the market." (https://www.investopedia.com/terms/f/famaandfrenchthreefactormodel.asp) |
| Life Annuity |
| An annuity that makes periodoc payments only for the life of one individual. Also known as "single life annuity." |
| Lifecycle Fund |
| A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor’s age or target retirement date through a mix of asset classes. The mix changes over time to become less focused on growth and more focused on income. Also known as “target date retirement” or “age-based” funds. |
| Lifestyle Fund |
| A fund that maintains a predetermined risk level and generally uses words such as “conservative,” “moderate,” or “aggressive” in its name to indicate the fund’s risk level. Used interchangeably with “target risk fund.” |
| Lipper |
| A leading mutual fund research and tracking firm. Lipper categorizes funds by objective and size, and then ranks fund performance within those categories. |
| Liquidity |
| The ease with which an investment can be converted into cash. If a security is very liquid, it can be bought or sold easily. If a security is not liquid, it may take additional time and/or a lower price to sell it. |
| Load |
| A sales charge assessed on certain investments to cover selling costs. A front-end load is charged at the time of purchase. A back-end load is charged at the time of sale or redemption. |
| Longevity Risk |
| The risk that you will live longer than expected with the potential result that you run out of money before you die. |
| Management Fee |
| A fee or charge paid to an investment manager for its services. |
| Market Capitalization |
| The market value of a company. Market capitalization can be determined by multiplying the number of outstanding shares of a company’s stock by the stock’s current market price per share. |
| Market Risk |
| The possibility that the value of an investment will fall because of a general decline in the financial markets. |
| Market Value |
| The market value is the current stock price of all outstanding shares for a market traded security. |
| Maturity Date |
| The date on which the principal amount of a loan, bond, or any other debt becomes due and is to be paid in full. |
| Mean |
| This measure of central tendency indicates the point at which a population of observations is measured. Equals the sum of the observations’ values, divided by the number of observations. |
| Median |
| This measure of central tendency is used to indicate the point at which a population of observations is measured. It is the point in the distribution at which 50% of the observations will have values greater than or equal to the median, and 50% less than or equal to the median. |
| Mid Cap |
| Sitting between large cap and small cap stocks, mid cap stocks have a market capitalization generally between $2 and $10 billion. |
| Mid Cap Fund |
| A fund that invests primarily in mid-cap stocks. |
| Mid Cap Stocks |
| Stocks of companies with a medium market capitalization. Mid caps 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). |
| Mid Capitalization (Cap) |
| A reference to either a medium sized company stock or an investment fund that invests in the stocks of medium-sized companies. |
| Model Performance |
| An indicator of how closely predicted estimations have met results. Model performance is also used as a measure of a firm's overall financial health for a given period of time. |
| Modern Portfolio Theory |
| Overall investment strategy that seeks to construct an optimal portfolio by considering the relationship between risk and return, especially as measured by alpha, beta, and R-squared. This theory recommends that the risk of a particular stock should not be looked at on a standalone basis, but rather in relation to how that particular stock's price varies in relation to the variation in price of the market portfolio. The theory goes on to state that given an investor's preferred level of risk, a particular portfolio can be constructed that maximizes expected return for that level of risk. also called modern investment theory. |
| Money Market Fund |
| A mutual fund that invests in short-term, high-grade fixed-income securities (such as US Treasury bills and commercial paper), and seeks the highest level of income consistent with preservation of capital (such as maintaining a stable share price). |
| Monte Carlo Method |
| An analytical technique in which a large number of simulations are run using random quantities for uncertain variables and looking at the distribution of results to infer which values are most likely. The name comes from the city of Monte Carlo, which is known for its casinos. |
| Morningstar |
| A leading mutual fund research and tracking firm. Morningstar categorizes funds by objective and size, and then ranks fund performance within those categories. |
| MSCI EAFE Index |
| An index known by an acronym for the Europe, Australasia, and Far East markets produced by Morgan Stanley Capital International (MSCI). Markets are represented in the index according to their approximate share of world market capitalization. The index is a widely used benchmark for managers of international stock fund portfolios. |
| MSCI World Index |
| An index of major world stock markets, including the United States. The index is a widely used benchmark for managers of global stock fund portfolios. |
| Mutual Fund |
| An investment company registered with the SEC that buys a portfolio of securities selected by a professional investment adviser to meet a specified financial goal (investment objective). Mutual funds can have actively managed portfolios, where a professional investment adviser creates a unique mix of investments to meet a particular investment objective, or passively managed portfolios, in which the adviser seeks to parallel the performance of a selected benchmark or index. |
| NASDAQ |
| The National Association of Securities Dealers Automated Quotation, also called the “electronic stock market.” The NASDAQ composite index measures the performance of more than 5,000 U.S. and non-U.S. companies traded “over the counter” through NASDAQ. |
| Net Asset Value (NAV) |
| The net dollar value of a single investment fund share or unit that is calculated by the fund on a daily basis. The NAV is derived from deducing the fund's liabilities from the market value of all its shares and dividing by the number of issued shares. |
| Net Worth |
| The value of a person's assets, including cash, minus all liabilities. The amount by which the individual's assets exceed their liabilities is considered the net worth of that person. |
| New York Stock Exchange (NYSE) |
| The oldest stock exchange in the United States, founded in 1792. With the world's largest stock exchange by market capitalization of its listed companies. |
| No-Load Fund |
| A mutual fund whose shares are sold without a sales commission and which does not charge a combined 12b-1 fee and service fee of more than 25 basis points or 0.25% per year. |
| Nominal Yield |
| Nominal yield is calculated as the annual dollar amount of income received from a fixed income security divided by the issue’s par value (usually $1,000). This yield is also called the coupon rate. |
| NYSE Arca Major Market Index (XMI) |
| Also known as the Amex Major Market Index. The XMI is price weighted and composed of the average of 20 Blue Chip Industrial Stocks. |
| Operating Expenses |
| The expenses associated with running or operating an investment fund. Operating expenses may include custody fees, management fees, and transfer agent fees. See Expense Ratio and Total Annual Operating Expenses. |
| Passive Management |
| The process or approach to operating or managing a fund in a passive or non-active manner, typically with the goal of mirroring an index. These funds are often referred to as index funds and differ from investment funds that are actively managed. |
| Pension Protection Act of 2006 (PPA) |
| One of the most comprehensive reforms of the national pension laws passed in August 2006 by the House of Representatives. The act fortified the previous loophole-infested pension insurance system by increasing the minimum funding requirements for various pension plans. |
| Period Certain |
| A payment feature that may be available in an annuity contract which guarantees periodic payments for no less than a set period of time. For example, in a life annuity, periodic payments would be made for the longer of either: (1) the guaranteed period, to the individual or a beneficiary, or (2) the life of the individual. |
| Population |
| A population is the entire collection of observations that is the focus of analysis. |
| Portfolio |
| A collection of investments such as stocks and bonds that are owned by an individual, organization, or investment fund. |
| Portfolio Manager |
| The individual, team or firm who makes the investment decisions for an investment fund, including the selection of the individual investments. |
| Portfolio Turnover Rate |
| A measure of how frequently investments are bought and sold within an investment fund during a year. The rate is determined by dividing the fund's acquisitions or dispositions (whichever is greater), by the average monthly assets of the fund for the year. The portfolio turnover rate is usually expressed as a percentage of the total value of an investment fund. |
| Price-to-Earnings Ratio |
| “PtE” is the ratio of the market price of a firm’s common stock to its current (or predicted) earnings per share. A high (low) PtE ratio is often an indicator of market sentiment in the continued growth (decline) of a firm’s earnings. |
| Principal |
| The original dollar amount of an investment. Principal may also be used to refer to the face value or original amount of a bond. |
| Prospectus |
| The official document that describes certain investments, such as mutual funds, to prospective investors. The prospectus contains information required by the SEC, such as investment objectives and policies, risks, services, and fees. |
| Prospectus Net Expense Ratio |
| The percentage of fund assets, net of reimbursements,used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are reflected in the fund’s NAV. Sales charges are not included in the expense ratio. |
| Prudence |
| An accounting concept where expenses and liabilities are recognized as soon as possible, but revenues are only when realized and assured. |
| Random Walk Theory |
| An investment theory which claims that market prices follow a random path up and down, without any influence by past price movements, making it impossible to predict with any accuracy which direction the market will move at any point. In other words, the theory claims that path a stock's price follows is a random walk that cannot be determined from historical price information, especially in the short term. Investors who believe in the random walk theory feel that it is impossible to outperform the market without taking on additional risk, and believe that neither fundamental analysis nor technical analysis have any validity. However, some proponents of this theory do acknowledge that markets move gradually upward in the long run. |
| Rate of Return |
| The gain or loss on an investment over a period of time. The rate of return is typically reported on an annual basis and expressed as a percentage. |
| Real Rate of Return |
| The rate of return on an investment adjusted for inflation. |
| Rebalance |
| The process of moving money from one type of investment to another to maintain a desired asset allocation. |
| Redemption |
| Redemption is the sale of fund shares back to the fund. Redemption can also be used to mean the repayment of a fixed-income security such as a preferred stock or bond on or before the agreed upon pay-off date. |
| Redemption Fee |
| A fee, generally charged by a mutual fund, to discourage certain trading practices by investors, such as short-term or excessive trading. If a redemption fee is charged it is done when the investment is redeemed or sold. |
| Regression |
| A statistical technique used to establish the relationship of a dependent variable (i.e, excess return) and one or more independent variables (i.e., exposure to market, size, and value risks). Slope coefficients measure the sensitivity of the dependent variable to changes in the independent variables. By measuring exactly how large and significant each independent variable has historically been in its relation to the dependent variable, the future value of the dependent variable can be estimated. Essentially, regression analysis attempts to measure the degree of correlation between the dependent and independent variables, thereby establishing the latter’s predictive values. |
| Required Minimum Distribution (RMD) |
| Individuals are required to withdraw a certain sum from their retirement accounts each year, after a certain age. RMD applies to tax-deferred retirement accounts. |
| Return |
| The gain or loss on an investment. A positive return indicates a gain, and a negative return indicates a loss. |
| Risk |
| The potential for investors to lose some or all the amounts invested or to fail to achieve their investment objectives. |
| Risk Premium |
| The risk premium is the additional return an investor requires to compensate for the risk borne. |
| Risk Tolerance |
| An investor's ability and willingness to lose some or all of an investment in exchange for greater potential returns. |
| Risk-Free Rate |
| The risk-free rate is the current interest rate on a default-free bond in the absence of inflation. |
| Roth IRA |
| A new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all. Contributions to the Roth IRA are invested in mutual funds, stocks, or other securities, and the amount that someone is able to contribute is dependent upon their income, age, and tax filing status. Unique features of a Roth IRA are that it does not require you to start making withdrawals at a certain age, and also it allows an individual to make a qualified withdrawal up to $10,000 for a first time home purhcase. |
| Round Trip Restriction |
| A policy that limits the number of times an investor can exchange into and out of a fund within a given time frame. This is intended to discourage frequent trading that increases the costs to all the fund’s investors. |
| Russell Indexes |
| A group of indexes that are widely used to benchmark investment performance. The most common Russell index is the Russell 2000 Index, an index of U.S. small-cap stocks, which measures the performance of the 2,000 smallest U.S. companies in the Russell 3000 Index. |
| Sales Charge |
| A commission an investor pays to a financial intermediary, such as a broker, for purchasing an investment. |
| Sector Fund |
| A fund that invests in a particular or specialized segment of the marketplace, such as stocks of companies in the software, healthcare, or real estate industries. |
| Securities and Exchange Commission (SEC) |
| Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors. The SEC is responsible for ensuring that the securities markets operate fairly and honestly. |
| Security |
| A general term for stocks, bonds, mutual funds, and other investments. |
| Separate Account |
| An insurance company account that is segregated or separate from the insurance company’s general assets. Also refers to a fund managed by an investment adviser for a single plan. |
| Share |
| A representation of ownership in a company or investment fund. |
| Share Class |
| Some investment funds and companies offer more than one type or group of shares, each of which is considered a class (e.g., “Class A,” “Advisor” or “Institutional” shares). For most investment funds each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives. |
| Shareholder |
| An owner of shares in an investment fund or corporation. |
| Shareholder-Type Fees |
| Any fee charged against your investment for purchase and sale, other than the total annual operating expenses. |
| Sharpe Ratio |
| A commonly used risk-adjusted measure developed by Nobel laureate William Sharpe. Its calculation uses standard deviation and excess return to quantify reward for each unit of risk. A greater Sharpe Ratio indicates higher historical risk-adjusted performance. |
| Silent Partner |
| A business partner who provides capital but does not actively participate in the management of operations. |
| Small Cap |
| A company with a market capitalization generally between US$300 million and $2 billion. |
| Small Cap Fund |
| A fund that invests primarily in small-cap stocks. |
| Small Cap Stocks |
| Stocks of companies with a smaller market capitalization. Small caps are often considered to offer more growth potential than large caps and mid caps but with more risk. |
| Small Capitalization (Cap) |
| A reference to either a small company stock or an investment fund that invests in the stocks of small companies. |
| Small Growth |
| Growth stocks are expected to grow in earnings at rates above the market average. Companies typically reinvest their earnings to accelerate growth in the short term, rather than paying out dividends. |
| Small Value Index |
| A Small Value Index measures the performance of small cap stocks with relatively low prices and slow growth given anticipated per-share earnings, book value, cash flow, sales and dividends. |
| Small Value Stock |
| Value stocks are defined by size, relative value and growth. Size is often determined by metrics such as earnings and market cap. A small value stock implies a company that generally has less than $2 billion in market capitalization. Value is defined by relatively low price ratios and high dividend yields, and growth is defined by low growth rates for earnings, sales, book value and cash flow. |
| Stable Value Fund |
| An investment fund that seeks to preserve principal, provide consistent returns and liquidity. Stable value funds include collective investment funds sponsored by banks or trust companies or contracts issued by insurance companies. The owner of a stable value fund will continue to receive the agreed-upon interest payments regardless of the state of the economy. |
| Standard & Poor's 500 Stock Index (S&P 500) |
| An index comprised of 500 widely held common stocks considered to be representative of the U.S. stock market in general. The S&P 500 is often used as a benchmark for equity fund performance. |
| Standard Deviation |
| A measure of the variation or dispersion of a set of data points. Standard deviations are often used to quantify the historical return volatility of a security or portfolio. |
| Stock |
| A security that represents an ownership interest in a corporation. This entitles the stockholder to that proportion of the corporation's assets and earnings. |
| Stock Fund |
| A fund that invests primarily in stocks. |
| Stock Symbol |
| An abbreviation using letters and numbers assigned to securities to identify them. Also see Ticker Symbol. |
| Style Drift |
| An intentional or unintentional departure from the original way a mutual fund was being managed, and a change to a new way of managing of the fund. At their inception, all funds have an objective or specific style of investing, usually determined by the management of that fund. Style drift indicates a change in the investment style, which could occur for many reasons, such as a change in the management team, or a decision made by the team because of a change of circumstance in the market. |
| Summary Prospectus |
| A short-form prospectus that mutual funds generally may use with investors if they make the long-form prospectus and additional information available online or in paper upon request. |
| Survivorship Bias |
| Refers to the skewing of fund performance data to consider only existing funds, excluding results of funds that have been liquidated or merged with other funds. |
| Tactical Asset Allocation |
| Portfolio strategy that allows portfolio managers to reallocate assets in various accounts to other accounts in order to capitalize on current market trends. This is typically a short-term strategy that is only used to achieve a quick profit. After the funds have been acquired, the portfolio manager will return back to a more strategic position. |
| Target Date Fund |
| A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor's age or target retirement date though a mix of asset classes. The mix changes over time to become less focused on growth and more focused on income. Also known as a "lifecycle fund." |
| Target Risk Fund |
| A fund that maintains a predetermined asset mix and generally uses words such as “conservative,” “moderate,” or “aggressive” in its name to indicate the fund’s risk level. Often used interchangeably with “lifestyle fund.” |
| Tax Loss Harvesting |
| The process of a trader selling stock at a loss in order to counteract gains in another investment. The trader tries to balance out the two, so that he/she does not have an elevated tax liability at the end of the year. The trader does run the risk of selling an investment at a loss that would have become very profitable in the near future. Due to tax loss harvesting, the stock market may become volatile as the end of the year approaches. |
| Ticker Symbol |
| An abbreviation using letters and numbers assigned to securities and indexes to identify them. Also see Stock Symbol. |
| Time Horizon |
| The amount of time that an investor expects to hold an investment before taking money out. |
| Time Weighted Returns |
| Measure of returns that incorporate both timing and amount of your contributions and withdrawals. Time-Weighted return measures IFA's performance as your investment advisor, while the Dollar-Weighted return measures IFA's performance that may be affected by factors outside our control, such as your contributions and withdrawals. |
| Total Annual Operating Expenses |
| A measure of what it costs to operate an investment, expressed as a percentage of its assets, as a dollar amount, or in basis points. These are costs the investor pays through a reduction in the investment's rate of return. See Expense Ratio and Operating Expenses. |
| Transparency |
| In finance and economics, a term used to describe conditions under which facts are fully and accurately disclosed in a timely manner. Securities & Exchange Commission filing regulations, the Sarbanes-Oxley Act of 2002, and government reporting on economic conditions are examples of measures intended to improve market transparency. |
| Treasury Inflation-Protected Securities (TIPS) |
| A US Treasury bond indexed to inflation. Investors are paid a fixed rate semiannually, as the bond's par value adjusts with the inflation rate. |
| Trustee |
| A person or entity (e.g., bank, trust company, or other organization) that is responsible for the holding and safekeeping of trust assets. A trustee may also have other duties such as investment management. A trustee that is a “directed trustee” is responsible for the safekeeping of trust assets but has no discretionary investment management duties or authority over the assets. |
| T-Statistic |
| The “t-stat” tests whether or not a given sample mean is statistically different from zero. Generally, a sample mean with a t-stat of ≥1.96 or ≤-1.96 (95% confidence level) indicates that the sample mean is significantly different from zero. Said differently, at ±1.96 (often rounded up to ±2), there is a 5% chance that the sample mean (and thus the population mean) is not different from zero. |
| U.S. Treasury Securities |
| Debt securities issued by the United States government and secured by its full faith and credit. Treasury securities are the debt financing instruments of the United States Federal government, and they are often referred to simply as Treasuries. |
| Unit |
| A representation of ownership in an investment that does not issue shares. Most collective investment funds are divided into units instead of shares. See Share. |
| Unit Class |
| Investment funds that are divided into units (e.g., collective investment funds) instead of shares may offer more than one type or group of units, each of which is considered a class (e.g., “Class A”). For most investment funds, each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives. |
| Unit Value |
| The dollar value of each unit on a given date. |
| Unitholder |
| An owner of units in an investment. See Shareholder. |
| Value Fund |
| A fund that invests primarily in stocks that are believed to be priced below what they are really worth. |
| Variable Annuity |
| An annuity contract under which the insurance company promises to make the payments beginning immediately or at some future date. The value of the annuity and amount of the benefits paid by the insurance company will vary depending on the performance of the investment options. |
| Variable Return Investment |
| Investments for which the return is not fixed. This term includes stock and bond funds as well as investments that seek to preserve principal but do not guarantee a particular return, e.g., money market funds and stable value funds. |
| Variance |
| Variance measures the dispersion of a return distribution. It is the sum of the squares of a return’s deviation from the mean, divided by n. The value will always be ≥ 0, with larger values corresponding to data that is more spread out. |
| Volatility |
| The amount and frequency of fluctuations in the price of a security, commodity, or a market within a specified time period. Generally, an investment with high volatility is said to have higher risk since there is an increased chance that the price of the security will have fallen when an investor wants to sell. |
| Weighted Net Expense Ratio |
| The expense ratios of the individual funds a portfolio are multiplied by the % weight of the portfolio. Then all those numbers are added up to show the total fee the portfolio holder would pay. |
| Wrap Fee |
| A fee or expense that is added to or “wrapped around” an investment to pay for one or more product features or services. |
| Yield |
| The value of interest or dividend payments from an investment, usually stated as a percentage of the investment price. |
| Yield to Maturity |
| The “YtM” is the rate of return if a long-term, interest-bearing security is held to its maturity date. |