This action might not be possible to undo. Are you sure you want to continue?
Adv iso r The organization employed by a mutual fund to give professional advice on the fund's investments and to supervise the management of its assets. Ask ed or Off er in g Pric e The price at which a mutual fund's shares can be purchased. The asked or offering price means the current net asset value (NAV) per share plus sales charge, if any. For a no-load fund, the asked price is the same as the NAV. Ass et Al locat ion Fund a fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. This gives small investors far more diversification than they could get allocating money on their own. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change. Auto mat ic Re inve st me nt A service offered by most mutual funds whereby income dividends and capital gain distributions are automatically invested into the fund by buying additional shares and thus building up holdings through the effects of compounding. Ba lanc ed Fund A mutual fund that maintains a balanced portfolio, generally 60% bonds or preferred stocks and 40% common stocks. Bid or Se ll Pric e The price at which a mutual fund's shares are redeemed (bought back) by the fund. The bid or redemption price means the current net asset value per share, less any redemption fee or back-end load. Bo nd Fund A mutual fund whose portfolio consists primarily of corporate, municipal or U.S. Government bonds. These funds generally emphasize income rather than growth. Bo nd Rati ng System of evaluating the probability of whether a bond issuer will default. Standard and Poor's Corp. and Moody's Investors Services, among other firms, analyze the financial stability of both corporate and government bond issuers. Ratings range from AAA or Aaa (extremely unlikely to default) to D (currently in default). Bonds rated BBB or below by S&P or Baa or below by Moody's are not considered to be of investment grade. Mutual funds generally restrict their bond purchases to issues of certain quality ratings, which are specified in their prospectuses.
Ca pi tal App rec iat ion Fund A mutual fund that seeks maximum capital appreciation through the use of investment techniques involving greater than ordinary risk, such as borrowing money in order to provide leverage, short-selling and high portfolio turnover. Ca pi tal Gai ns Dis tribut ion s Payments (usually annually) to mutual fund shareholders of gains realized on the sale of portfolio securities. Ca pi tal Grow th A rise in market value of a mutual fund's securities, reflected in its net asset value per share. This is a specific long-term objective of many mutual funds. Cer tif icat e of Dep os it Interest-bearing, short-term debt instrument issued by banks and thrifts. Clos ed- End Inv es tm en t Co mpa ny An investment company that offers a limited number of shares. They are traded in the securities markets, usually through brokers. Price is determined by supply and demand. Unlike open-end investment companies (mutual funds), closed-end funds do not redeem their shares. Co mme rc ial Pap er Short-term, unsecured promissory notes with maturities no longer than 270 days. They are issued by corporations, in denominations starting at $10,000, to fund short-term credit needs. Co mmon Stock Fund An open-end investment company whose holdings consist mainly of common stocks and usually emphasize growth. Co nfir m Date The date the fund processed your transaction, typically the same day or the day after your trade date. Co nt ing en t Def er red Sale s Char ge (CDSC) A fee (or back-end load) imposed by certain funds on shares redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, such as four percent to one percent of the amounts redeemed, with the fee reduced each year the units are held. Cus tod ian The bank or trust company that maintains a mutual fund's assets, including its portfolio of securities or some record of them. Provides safekeeping of securities but has no role in portfolio management.
Dai ly Divi de nd Fund This term applies to funds that declare their income dividends on a daily basis and reinvest or distribute monthly. Def er re d Comp en sa tio n Plan A tax-sheltered investment plan to which employees of state and local governments can defer a percentage of their salary. Di st ributor An individual or a corporation serving as principal underwriter of a mutual fund's shares, buying shares directly from the fund, and reselling them to other investors. Div er sif icat ion The policy of spreading investments among a range of different securities to reduce the risks inherent in investing. Rup ee- Cos t Ave ragi ng The technique of investing a fixed sum at regular intervals regardless of stock market movements. This reduces average share costs to the investor, who acquires more shares in periods of lower securities prices and fewer shares in periods of high prices. In this way, investing risk is spread over time. Exchan ge Priv il eg e (O r swi tchi ng priv il eg e) The right to transfer investments from one fund into another, generally within the same fund group, at nominal cost. Ex-Div ide nd Dat e The date on which a fund's Net Asset Value (NAV) will fall by an amount equal to the dividend and/or capital gains distribution (although market movements may alter the fund's closing NAV somewhat). Most publications which list closing NAVs place an "X" after a fund’ name on its ex-dividend date. Ex pe ns e Rat io The ratio of total expenses to net assets of the fund. Expenses include management fees, 12(b)1 charges, if any, the cost of shareholder mailings and other administrative expenses. The ratio is listed in a fund's prospectus. Expense ratios may be a function of a fund's size rather than of its success in controlling expenses. Fan ni e Mae (Fed era l Mor tga ge Asso cia tion ) An agency established by the federal government, but owned by private stockholders, which issues mortgage-backed certificates in $25,000 denominations. Timely payment of both interest and principal are insured. A growing number of mutual funds emphasize investments in these and other mortgage-backed securities.
Fi sca l Yea r An accounting period consisting of 12 consecutive months. Global Fund A fund that invests in both Indian. and foreign securities. Grow th F un d A mutual fund whose primary investment objective is long-term growth of capital. It invests principally in common stocks with significant growth potential. Inco me Divid en d Payment of interest and dividends earned on the fund's portfolio securities after operating expenses are deducted. Inco me F und A mutual fund that primarily seeks current income rather than growth of capital. It will tend to invest in stocks and bonds that normally pay high dividends and interest. Ind ex Fund A mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a broad-based index, most often the Standard & Poor's 500-stock index. In te rnat iona l Fund A fund that invests in securities traded in markets outside India. Inv es tm en t Com pan y A corporation, partnership or trust that invests the pooled monies of many investors. It provides greater professional management and diversification of investments than most investors can obtain independently. Mutual funds, or "open-end" investment companies, are the most popular form of investment company. Inv es tm en t Obj ec tiv e The financial goal (long-term growth, current income, etc.) that an investor or a mutual fund pursues. Junk Bo nd A speculative bond rated BB or below by Standard & Poor's Corp. and Ba or below by Moody's Investor Service. "Junk bonds" are generally issued by corporations of questionable financial strength or without proven track records. They tend to be more volatile and higher yielding than bonds with superior quality ratings. "Junk bond funds" emphasize diversified investments in these low-rated, high-yielding debt issues.
Load A sales charge or commission assessed by certain mutual funds ("load funds,") to cover their selling costs. The commission is generally stated as a portion of the fund's offering price, usually on a sliding scale from one to 8.5%. Load Fund A mutual fund that levies a sales charge up to 8.5%, which is included in the offering price of its shares, and is sold by a broker or salesman. A front-end load is the fee charged when buying into a fund; a back-end load is the fee charged when getting out of a fund. Low-Load F und A mutual fund that charges a small sales commission, usually 3.5% or less, for the purchase of its shares. Ma nag em en t Fe e The amount a mutual fund pays to its investment adviser for services rendered, including management of the fund's portfolio. In general, this fee ranges from .5% to 1% of the fund's asset value. Mo ne y Mark et F und A mutual fund that aims to pay money market interest rates. This is accomplished by investing in safe, highly liquid securities, including bank certificates of deposit, commercial paper, government securities and repurchase agreements. Money Market funds make these high interest securities available to the average investor seeking immediate income and high investment safety. Mo rt gage- Back ed Securi ti es Certificates backed by pooled mortgages (e.g., Freddie Mac or Ginnie Mae). Issuing agencies buy mortgages from lending institutions and repackage them as securities that they sell to investors. They are generally issued in denominations of $25,000 or above. Yields, which stem from interest and principal on underlying mortgages, are generally higher than those of Treasury bonds that provide comparable liquidity and safety. A growing number of income mutual funds concentrate their holdings in these securities. Mun ic ipa l Bond F und A mutual fund that invests in a broad range of short, intermediate or long-term tax-exempt bonds issued by states, cities and other local governments. The interest obtained from these bonds is passed through to shareholders free of tax. The objective of these funds is current tax-free income. Mutua l Fund An open-end investment company that buys back or redeems its shares at current net asset value. Most mutual funds continuously offer new shares to investors.
Ne t A ss et Value Per Shar e The current market worth of a mutual fund share. Calculated daily by taking the funds total assets securities, cash and any accrued earnings deducting liabilities, and dividing the remainder by the number of shares outstanding. No-Load F un d A commission-free mutual fund that sells its shares at net asset value, either directly to the public or through an affiliated distributor, without the addition of a sales charge. Opt ion Inco me F und A fund that invests primarily in dividend-paying common stocks on which call options are traded on national securities exchanges. These funds seek high current return consisting of dividends, premiums from selling options, net short-term gains (including those from the exercising of options) and any profits from closing purchase transactions. Payabl e Dat e The date on which distributions are paid to shareholders who do not want to reinvest them. This date can be anywhere from one week to one month after the Record Date. Payro ll Deduct ion Plan An arrangement between an employer and a mutual fund, authorized by the employee, through which a specified sum is deducted from an employee's salary to buy shares in the fund. Por tfol io Turnov er R at e The rate at which the fund's portfolio securities are changed each year. If a fund's assets total $100 million and the fund bought and sold $100 million worth of securities that year, its portfolio turnover rate would be 100%. Aggressively managed funds generally have higher portfolio turnover rates than do conservative funds that invest for the long term. High portfolio turnover rates generally add to the expenses of a fund. Pro sp ec tus An official document that each investment company must publish, describing the mutual fund and offering its shares for sale. It contains information required by the Securities and Exchange Commission. Re cord Dat e The date the fund determines who its shareholders are; "shareholders of record" who will receive the fund's income dividend and/or net capital gains distribution. Frequently the business day immediately prior to the Ex-Dividend Date. Re de mp tio n Fe e
A fee charged by a limited number of funds for redeeming, or buying back, fund shares. Re de mp tio n Pric e The price at which a mutual fund's shares are redeemed (bought back) by the less expensive fund. The redemption price is usually equal to the current net asset value per share. Re gio nal F und A mutual fund that concentrates its investments within a specific geographic area, usually the fund's local region. The objective is to take advantage of regional growth potential before the national investment community does. Re inv es tm en t Dat e (Payabl e Date ) The date on which a share's dividend and/or capital gains will be reinvested (if requested) in additional fund shares. Re inv es tm en t Pr ivi le ge A service that most mutual funds offer whereby a shareholder's income dividends and capital gains distributions are automatically reinvested in additional shares. Sector F und A fund that operates several specialized industry sector portfolios under one umbrella. Transfers between the various portfolios can usually be executed by telephone at little or no cost. Seri es F un d A mutual fund whose prospectus allows for more than one portfolio. Portfolios may be specialized (Sector Fund) or broad (growth stock, along with a money market portfolio). Management can create additional portfolios as it sees fit. Shor t Sel li ng The sale of a security which is not owned by the seller. The "short seller" borrows stock for delivery to the buyer, and must eventually purchase the security for return to the lender. Shor t-Te rm Mun ic ipa l Bon d F un d A fund that invests in municipal bonds with maturities not exceeding two years. See Municipal Bond Fund. Si mp li fi ed Emp loy ee Pen sio n An alternative to a Keogh plan that allows employers who have not established qualified retirement plans to contribute to their employee’s Individual Retirement Accounts. Sp ec ial ty Fund A mutual fund specializing in the securities of a particular industry or group of industries or special types of securities.
Sy st ema tic Withd rawal Plans Many mutual funds offer withdrawal programs whereby shareholders receive payments from their investments. These payments are usually drawn from the fund’s dividend income and capital gain distributions, if any, and from principal only when necessary. Un derw ri te r The organization that acts as the distributor of a mutual fund's shares to broker/dealers and the public. Var iabl e An nui ty A type of insurance contract that guarantees future payments to the holder, or annuitant, usually at retirement. The annuity's value varies with that of the underlying portfolio securities, which may include mutual fund shares. All monies held in the annuity accumulate tax-deferred. Vo lun tary Pla n A flexible plan for capital accumulation, involving no specified time frame or total sum to be invested. Yie ld Income or return received from an investment, usually expressed as a percentage of market price, over a designated period. For a mutual fund, yield is interest or dividend before any gain or loss in the price per share. Ze ro Coupon Bo nd Bond sold at a fraction of its face value. It appreciates gradually, but no periodic interest payments are made. Earnings accumulate until maturity, when the bond is redeemable at full face value. Nonetheless, interest is taxable as it accrues. As a result, zero coupon bonds are often used for IRAs, Keoghs and other tax-deferred retirement plans.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.