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Glossary content provided by Financial
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safety of principal
Safety of principal is an objective that emphasizes the security
of the invested principal.
salary reduction simplified
employee pension (sarsep)
A SARSEP is a simplified alternative to a 401(k) plan. It
is a SEP that includes a salary reduction arrangement. Under
this special arrangement, eligible employees can elect to
have the employer contribute part of their before-tax pay
to their IRA. This amount is called an "elective deferral".
SEC
The main regulatory body regulating the securities industry
is called the Securities and Exchange Commission.
second mortgage
A mortgage on real property in a junior position to a primary
or first mortgage. The increased risk associated with a second
mortgage is often reflected in a higher interest rate and
a shorter term of repayment.
securities
Stocks and bonds are traditionally referred to as securities.
More specifically, stocks are often referred to as "equities"
and bonds as "debt instruments."
Securities and Exchange Commission
The main regulatory body regulating the securities industry
is called the Securities and Exchange Commission.
short position
A short position in an investment indicates a position in
an investment that would increase in value as the underlying
asset(s) decrease in value. Opposite of a long position.
short sale
The sale of stock that you do not yet own in order to take
advantage of an expected share price decline. If the stock
declines in price, the stock is purchased at the now lower
price and the short position is closed.
simplified employee pension
(sep)
A SEP provides employers with a "simplified" alternative
to a qualified profit-sharing plan. Basically, a SEP is a
written arrangement that allows an employer to make contributions
towards his or her own and employees' retirement, without
becoming involved in a more complex retirement plan. Under
a SEP, IRAs are set up for each eligible employee. SEP contributions
are made to IRAs of the participants in the plan. The employer
has no control over the employee's IRA once the money is contributed.
small cap
A small cap stock is one issued by a company with less than
$1.7 billion in market capitalization.
smart card
A card with an embedded computer chip which stores more information,
performs more functions and is more secure than a credit card
or debit card.
spousal ira
An individual can set up and contribute to an IRA for his/her
spouse. This is called a "Spousal IRA" and can be
established if certain requirements are met. In the case of
a spousal IRA, the individual and spouse must have separate
IRAs. A jointly owned IRA is not permitted.
stock
Stock certificates represent an ownership position in a corporation.
Stockholders are often entitled to dividends, voting rights,
and financial participation in company growth.
stock dividends
The investor's share of the income earned by the company issuing
the stock.
stock exchange
A market for trading of equities, a public market for the
buying and selling of public stocks.
stop-loss order
This is when you tell your broker to sell the stock if it
drops to a certain price.
succession planning
Planning for a business to pass to the next generation of
owner/managers.
surrender value
When a policy owner surrenders his/her permanent life insurance
policy to the insurance company, he or she will receive the
surrender value of that policy in return. The surrender value
is the cash value of the policy plus any dividend accumulations,
plus the cash value of any paid-up additions minus any policy
loans, interest, and applicable surrender charges.
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tax credit
An income tax credit directly reduces the amount of income
tax paid by offsetting other income tax liabilities.
tax deduction
A reduction of total income before the amount of income tax
payable is calculated.
tax-deferred
The term tax deferred refers to the deferral of income taxes
on interest earnings until the interest is withdrawn form
the investment. Some vehicles or products that enjoy this
special tax treatment include permanent life insurance, annuities,
and any investment held in IRA's.
technical analysis
Technical analysis is a technique of estimating a stock's
future value strictly by examining its prices and volume of
trading over time. Technical analysis is the opposite of fundamental
analysis.
tenants in common
Two or more people who own the same piece of property, with
the inherent condition that if one of the tenants die, his
interest automatically passes on to his heirs.
term insurance
Term insurance is life insurance coverage that pays a death
benefit only if the insured dies within a specified period
of time. Term policies do not have a cash value component
and must be renewed periodically as dictated by the insurance
contract.
testamentary trust
A trust created under the terms of a will and that takes effect
upon the death of the testator.
ticker symbol
A ticker symbol is a combination of letters that identifies
a stock-exchange security.
title
A legal document establishing property ownership.
title search
A detailed examination of legal records to determine the history
and legal ownership of a property.
top heavy plans
Each year, a qualified plan must be tested to determine whether
it is "top-heavy". Generally, a "top-heavy"
plan is one in which more than 60 percent of the benefits
under the plan are for key employees (usually owners and officers).
Additional requirements apply to a top-heavy plan such as
faster vesting and mandatory employer contributions.
total disability
In order to make a disability claim a person must meet the
definition of disability set forth in the insurance contract.
There are two general definitions of disability used in today's
contracts. The first definition is that the insured is unable
to perform all of the substantial and material duties of his/her
own occupation. The second, and more restrictive, definition
is that the insured is unable to perform any occupation for
which he/she is reasonably suited by education, training,
or experience.
treasury bill
Treasury bills, often referred to as T-bills, are short-term
securities (maturities of less than one year) offered and
guaranteed by the federal government. They are issued at a
discount and pay their full face value at maturity.
treasury bond
Treasury bonds are issued with maturities of more than 10
years and are offered and guaranteed by the U.S. Government.
They are issued at a discount and pay their full face value
at maturity.
treasury note
Treasury notes are issued with maturities between one and
10 years. These notes are offered and guaranteed by the U.S.
Government. They are issued at a discount and pay their full
face value at maturity.
TSA (tax-sheltered annuity)
Tax deferred annuity retirement plan available to employees
of public schools and colleges, and certain non-profit hospitals,
charitable, religious, scientific and educational organizations.
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underwriter (banking)
A person, banker or group that guarantees to furnish a definite
sum of money by a definite date in return for an issue of
bonds or stock.
underwriter (insurance)
The one assuming a risk in return for the payment of a premium,
or the person who assesses the risk and establishes premium
rates.
underwriter (investments)
In the bond/stock market means a brokerage firm or group of
firms that has promised to buy a new issue of bonds/shares
from a government or company at a fixed discounted price,
then arranges to resell them to investors at full price.
unemployment rate
The number of people unemployed measured as a percentage of
the labor force.
universal life insurance
An adjustable Universal Life insurance policy provides both
a death benefit and an investment component called a cash
value. The cash value earns interest at rates dictated by
the insurer. The policyholder may accumulate significant cash
value over the years and, in some circumstances, "borrow"
the appreciated funds without paying taxes on the borrowed
gains (taxes may be required if policy is surrendered). As
long as the policy stays in force the borrowed funds do not
need to be repaid, but interest may be charged to your cash
value account. Premiums are adjustable by the policy owner.
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