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Glosssary of Investment Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A
Account (Deferred Compensation Plan Account): Each Plan participant has an account which is maintained by the Plan's recordkeeper. A participant can access his/her account through the voice response telephone system.

Agency Securities: Securities issued by U.S. government-sponsored entities and federally related institutions.

Asset-Backed Bonds: Bonds that are backed by loan paper or accounts receivable.

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B
Basis Point: One one-hundredth (1/100) of one percent. In others words, it takes 100 basis points to make up one percent. (ex: 10 basis pts = .10%)

Beneficiary: A person or persons designated by the participant to receive proceeds or benefits upon the participant’s death.

BIC: The abbreviation for Bank Investment Contract. A BIC is a time deposit for a specified period and rate of interest, normally issued to a retirement or deferred compensation plan. The issuing bank guarantees the interest and the return of the funds at maturity.

Blue Chip: A stock of a large and well-established company

Bond: An IOU or promissory note, usually issued in multiples of $1000. The issuer promises to pay the bondholder a fixed or variable rate of interest for a specific length of time and to repay the principal amount of the loan at maturity. The U.S. government, states, municipalities and corporations issue bonds. In every case, a bond represents debt; the bondholder is a creditor, not a part owner like a person who owns a stock. Also referred to as a fixed income or debt security.

Bond Funds: A mutual fund which invests in bonds issued by corporations or by the U.S. government. Investment returns are earned from interest payments and from fluctuations in the market value (both up and down) of the bonds held by the fund.
Bond Rating: A measure of the quality, safety and potential performance of a bond issue Standard & Poor’s is a major company that rates bonds.

Book Value: For the Stable Income Fund, book value is the principal plus accumulated interest. For an equity fund, the book value per share is a company’s assets less liabilities divided by the number of shares outstanding. Book value of an asset or a security may have little or no significant relationship to market value.

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C
Capital Appreciation: A rise in the market value of the original investment.

Cash Equivalents: Short-term investments held in lieu of cash and readily converted into cash within a short time span (i.e., CDs, commercial paper, Treasury bills, etc.).

Common Stock: Equity, or ownership, in a corporation. Stockholders participate in a company’s profits or losses through dividends and changes in the stock’s market value.

Compound Interest: Paying interest on interest earned in addition to paying interest on principal.

Convertibles: Corporate securities that are exchangeable for a set number of another form of security at a pre-stated price.

Corporate Bond: (See Bond)

Credit Rating: (See Standard & Poor’s Rating)

Current Income: Money that is received on an ongoing basis from investments in the form of dividends, interest, or other income sources.

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D
Debt Security: (See Bond)

Diversification: The spreading of risk by placing assets in several categories of investments, such as stocks, bonds, and money market instruments, or in several industries or sectors.

Dividend: The payment or earnings resulting from the distribution of profits to shareholders. Dividends may also be realized from income derived from a mutual fund’s investments.

Domini 400 Social Indexsm: Created in 1990, an Index made up 400 stocks that have passed multiple social and environmental screens. The Index is a market cap weighted index consisting primarily of large-capitalization U.S. equities. Approximately 250 of these companies are included in the Standard & Poor’s 500 Index, approximately 100 are large companies not included in the S&P 500, but providing industry representation, and approximately 50 additional companies with particularly strong social characteristics.

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E
Equity Fund: (See Stock Funds)

Equity Security: (See Stock)

Expense Ratio: The amount paid by investors for an investment fund’s operating expenses and management fees. This amount, expressed as a percentage of total invested assets, is taken out of current income before the net asset value (NAV) of the fund is established.

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F
Fixed-Income Security: (See Bond)

Fixed Income Options: (See Bond)

Fund Manager: (See Portfolio Manager)

Futures: Options on a Futures Contract. A Futures Contract is an agreement to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date.

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G
GIC: The abbreviation for Guaranteed Investment Contract. The "guarantee" relates to specific contract provisions insuring payment of principal and accrued interest. The contracts are backed by the investments, legal reserve and cash flow from operations of the contract issuers. Thus, the guarantee is valid only as long as these institutions are sound.

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H

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I
Index Fund: A fund designed to replicate a designated securities index. In the case of Deferred Compensation, it is the Standard & Poor’s 500 Index.

Individual Retirement Account (IRA): A personal retirement account in which the principal is sometimes, and the earnings are always, tax-deferred.

Inflation: An increase in the general level of prices.

Institutional Investors: Organizations that trade large volumes of securities.

Institutional Class Shares: Shares sold to institutional investors.

Interest: An amount paid for the use of borrowed money, usually calculated as a percentage.

Investment Grade: Bonds that are appropriate for purchase by conservative investors because they represent moderate to low risk.

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J

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K

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L

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M
Market Value: the price the buyer is willing to pay for a security and the price a seller is willing to accept.

Market-Weighted Portfolio: Market Capitalization (Market Cap) is the current market price per share of a company multiplied by the number of shares outstanding. Market cap is the value, in dollars, that the stock market has assigned to a publicly traded company at any particular moment. A market weighted (or market capitalization weighted) portfolio is a portfolio in which each stock held, is held in proportion to its market capitalization. For instance, if company "A"'s Market Cap is twice that of Company "B", the portfolio's holdings of Company "A" will be worth twice as much as the holdings of Company "B".

Maturity: Reaching the date at which a debt instrument is due and payable.

Money Market Fund: A fund made up of only short-term, low-risk securities.

Mortgage-Backed Bond or Certificate: Security backed by mortgages. Such certificates are issued by the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association. Others are guaranteed by the Government National Mortgage Association (GNMA). Investors receive payments out of the interest and principal on the underlying mortgages.

Mutual Fund: A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, futures, currencies or money market securities. Such a fund offers investors the advantages of diversification and professional management. All shareholders share equally in the gains and losses generated by the fund.

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N
Net Asset Value (NAV): The market value of a fund share. It is calculated by taking the market value of all securities owned by the fund and all other assets, such as cash: subtracting all liabilities, then dividing the result by the total number of shares outstanding.

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O
Option: An investment that gives the investor the right to buy or sell a security for an agreed upon sum up to a specified date. If the right is not exercised before the date, the option expires and the buyer forfeits whatever he or she paid for it.

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P
Passive Investment Strategy: An investment strategy that seeks to match, rather than outperform, the return and risk characteristics of an index, by holding all securities that make up the index or a statistically representative sample of the index.

Portfolio: Combined holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities.

Portfolio Manager: The professional in charge of the securities portfolio of a mutual fund. The portfolio manager has the responsibility to manage the assets and to choose which stocks, bonds or other investments present the best opportunities for profit at any particular time, consistent with the fund’s stated investment objective.

Principal: The amount of money invested, exclusive of earnings, i.e. dividends or interest.

Private Label Mutual Fund: A mutual fund designed exclusively for a specific group of investors.

Prospectus: A document offered by a mutual fund describing the fund’s history and its investment objective, policies, and practices.

Q

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R
Rate of Return: For stocks, the annual dividend divided by the purchase price. For bonds, the rate of return is the current yield.

Repurchase Agreements (REPO): An agreement between a seller and buyer, usually of U.S. Government Securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time.

Retail Class Shares: Shares sold to retail investors. A retail investor buys securities and commodities futures on his/her own behalf, not for an organization, and is usually charged commissions higher than those paid by institutions.

Return: The amount of money received annually from an investment, usually expressed as a percentage.

Risk: The potential for gain or loss. The possibility of exposure to loss or no increase in value. The types of risk that can affect investments include:

Credit risk: The creditworthiness or ability of the issuer of the security to pay its obligations. The most creditworthy of bond issuers is the Federal Government, so from a credit risk stand-point, the safest investments are U.S. Treasury securities. At the opposite end of the spectrum are so-called junk bonds issued by companies with lower credit ratings. These companies have to pay a higher rate of interest than more creditworthy issuers to encourage investors to buy their bonds.

Economic risk: Changes in the state of the economy. For example, a depression or major recession could negatively impact a company, affecting the price of its stock and its ability to pay regular dividends to its shareholders.

Market risk: Fluctuations in interest rates affect the prices of securities bought and sold on the stock and bond markets. For example, a long-term bond, bought for a par value of $1,000, that pays 10% interest, will pay that rate (i.e., $100/yr.) as long as it is held. If the bond is held to maturity, the $1,000 is returned to the investor. But if the bond is sold before then, the investor could receive either more or less than $1,000. If interest rates have risen above 10%, the bond will decline in value because it pays less than the current market rate. Conversely, if interest rates have fallen, the bond will be worth more because it pays more than the current market rate.

Risk Tolerance: The amount of fluctuation a person can absorb to his/her account value from one quarter to the next. The primary factor in determining a person’s level of risk tolerance is the Time Horizon. For example, someone with a long investment time horizon is better able to assume risk than a person with a short investment time horizon.

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S
Securities: A general term used when referring to all types of stocks, bonds, and money market instruments. Securities may also be called "instruments."

Share: A security representing ownership in a mutual fund or publicly-owned corporation.
Share Value: The dollar value associated with a share. The share value is calculated by dividing the market value of the mutual fund by the number of outstanding shares.

Social and Environmental Screens: Utilization of social and environmental criteria in evaluating a company for inclusion or exclusion from a portfolio. 

Socially Responsible Investing: Incorporation of social and environmental criteria in the investment decision making process.   
Standard & Poor’s Index (Standard & Poor’s 500 Index): Broad based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

Standard & Poor’s Rating: A classification of bonds according to risk. S&P’s four top grades, AAA, AA, A, and BBB are called Investment Grade because they are low-risk investments.

Stock: Shares of ownership in a corporation. Common stock, which is more widely issued than preferred stock, entitles the holder to voting rights in the corporation. Preferred stock usually does not vote, but generally does give the holder a right to be paid dividends or distributions before holders of common stock.

Stock Funds: Mutual Funds which invest in common stocks and preferred stocks. Investment returns are earned from dividends and from fluctuations in the market value (both up and down) of the stocks held by the fund. There is no guarantee of principal or fixed return.

Stock Market: General term referring to the organized trading of securities through the various exchanges and the over the counter market. The securities involved include common stock, preferred stock, bonds, convertibles, options, rights, and warrants.

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T
Time Horizon: The amount of time a person has until he/she begins to draw funds from his/her investment account. A person’s ability to accept risk is a function of his/her time horizon.

Total Return: The amount of one’s original investment (principal value), plus the interest or dividends one received on the investment, and any increase or decrease in the purchase price. Mutual fund total returns, except for money market mutual funds, reflect changes in net asset value (NAV) plus the effect of reinvesting all dividends. This term should not be confused with an investment’s "yield".

Treasury Bills: Short-term IOU issued by the U.S. Government.

Treasury Bonds: Long-term debt instruments with maturities of ten years or longer issued in minimum denominations of $1,000.

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U
U.S. Government Agency Securities: Securities issued by federal agencies, like the Government National Mortgage Association. These are not backed by the full faith and credit of the U.S. Government.

Unit: An accounting measure that represents ownership of a blended investment option.

Unit Value: The dollar value associated with a unit. The unit value is calculated by dividing the market value of the blended investment option by the number of outstanding units.

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V
Volatility: The characteristic of a security or market to rise or fall sharply in price within a short-term period.

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W
Warrants: A certificate giving the holder the right to purchase securities at a defined price within a specified time.

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X

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Y
Yield: Return received on investments, usually expressed as a percentage of the latest selling price of the stock or bond. For example, if the current price of a stock is $10 per share and investment income dividends totaled $0.50 during the past twelve months, the yield is expressed as 5%. In a mutual fund, yield is generally the current income that all of the securities in its portfolio pay per share, net of expenses.

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Z

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