Glossary Of Investment Terms

Asset Allocation: The process of dividing investments among different kinds of asset classes, such as stocks, bonds and cash, to try to meet specific financial goals. Asset allocation is used as an effort to reduce investment risk.
Asset Class: A type of investment, such as stocks, bonds or cash.
Automatic Investment Service (AIS) or Plan (AIP): A service offered to mutual fund shareholders that allows a shareholder to automatically invest sums of money into a fund. This type of plan does not assure a profit and does not protect against loss in declining markets.
Bond: A bond is a security which is a long-term contract under which a borrower agrees to make payments of interest and principal, on specific dates, to the holder of the bond. Bonds have priority over equities to earnings and assets in the event of bankruptcy or liquidation.
Capital Appreciation: An increase in the value of a stock, bond or other asset.
Compounding: An investment strategy that combines the power of time with accumulating earnings to potentially increase an investor's portfolio value. Each time the investments generate earnings, those earnings are added to the original principal. This new principal balance, in turn, generates additional earnings that are again reinvested.
Capital Gains Distributions: Payments to mutual fund shareholders of net profits realized on the sale of securities within the fund’s portfolio.
Diversification: The strategy of investing across a wide range of different securities in an attempt to offset potential risks. Mutual funds offer investors the benefits of diversification because they are pools of different types of securities.
Dollar-Cost Averaging (DCA): An investment strategy in which securities (typically mutual funds) are purchased in fixed dollar amounts at regular intervals -- regardless of how the market is performing. This technique reduces the average share costs to investors because they purchase more shares in periods of lower securities prices, and fewer shares in periods of higher prices. While dollar-cost averaging tends to spread investment risk over time, it does not assure profits or protect against losses in declining markets. In addition, since dollar-cost averaging involves continuous investment in securities regardless of fluctuating price levels of such securities, investors should consider their financial ability to continue purchases through periods of low price levels.
Exchange: A transaction involving the sale of shares and the utilization of the proceeds to purchase shares of the same class in another fund within the same fund group. An exchange may result in a taxable gain or loss.
Expected Family Contribution (EFC): The amount a family will contribute to the cost of a college education. This amount is used to determinethe need for financial aid. The amount is determined through a calculation that includes both the parent’s and student’s available income and available assets minus allowances.
Financial Advisor: An investment professional who provides financial planning and advice to help individuals achieve and address a multitude of financial goals and insurance needs.
Financial Plan: A comprehensive strategy designed to help individuals achieve specific financial goals and prepare for unexpected life challenges or events. Financial plans may include investing, tax planning, asset allocation, risk management, retirement planning, education funding, accumulation funding, estate planning and insurance.
Global Funds: Mutual funds that invest in securities issued by companies located in both the United States and foreign nations. Global funds may be susceptible to risks such as currency fluctuation and political or economic changes.
Growth Funds: A mutual fund that tends to be made up of stocks of companies that present the potential for superior growth. These funds tend to offer greater return potential than growth and income funds, but are typically more risky.
Growth & Income Funds: Mutual funds that strive for both dividend income and capital appreciation by investing in companies with solid records of dividend payments and capital gains. Income Funds
A mutual fund that seeks to achieve current income more than capital appreciation. International Funds: Mutual funds that invest almost exclusively in securities issued by companies located outside the United States. International funds may be susceptible to risks such as currency fluctuation and political or economic changes.
Investment Objective: The financial goals pursued by an investor or a mutual fund. Examples of investment objectives include long-term growth, capital preservation or current income.
Letter of Intent: Under a Letter of Intent, an investor may make a series of investments that will be considered as one investment for the purpose of determining whether he or she is entitled to a reduced sales charge on purchases of Class A shares. The Letter of Intent refers to the written intent to make a series of investments within a 13-month period. Ask your financial advisor or call client services for details.
Market Risk: The possibility that the value of an investment will fall because of a general decline in the financial markets.
Money Market Funds: Mutual funds that invest in short-term money market instruments, such as U.S. Treasury bills, commercial paper, certificates of deposit and repurchase agreements. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds.
Mutual Fund: A professionally managed, diversified investment that enables investors to pool money with otherinvestors. A diversified investment such as a mutual fund may reduce vulnerability to a major decline in any one market or sector. Mutual funds also offer the small investor the benefits of diversification, liquidity and professional management.
Net Asset Value or Bid Price (NAV): The value of one share of a mutual fund determined by taking the fund’s total net assets and dividing them by the total shares outstanding for the fund on a given day. The NAV represents the amount per share you would receive if you sold your shares, before the deduction of deferred sales charges, if any.
Public Offering Price or Ask Price (POP): The price you would pay if you purchased shares. It’s the net asset value plus the appropriate sales charge, if any.
Portfolio Management Team: The individuals responsible for investing a mutual fund's assets, implementing its investment strategy and managing the day-to-day portfolio trading.
Prospectus: The official document that offers and describes a mutual fund to prospective investors. A prospectus contains information required by the SEC, such as investment objectives and policies, risks, services and fees.
Redemption (Liquidation): On any business day, a shareholder may sell back to the fund all or part of his or her shares at their current net asset value, which may be more or less than the original cost. A redemption may result in a taxable gain or loss.
Registration: The manner in which the named owners of an account register their shares (e.g., individual, joint tenancy, trustee, etc.).
Rights of Accumulation: The right to add the amount of a purchase to the market value of an account(s) for the purpose of determining if you’re entitled to a reduced sales charge on purchases of Class A shares.
Section 529 Plans: College savings plans that enable anyone to open an account and invest significant amounts for college expenses (contribution limits vary from state to state). Investments in 529 plans grow federal income tax-deferred, and, when assets are withdrawn for qualified higher education expenses, the earnings are federal income tax-free. State and local taxes may apply. (The federal tax-free treatment is scheduled to expire after December 31, 2010, unless extended by Congress.)
Stock: A security that represents part ownership or equity in a company.
Total Return: The performance of an investment over a designated period of time, including any income from the investment (dividends, interest and capital gains) as well as any changes in share price. Mutual funds are required to provide total return information quarterly and for the one-year, five-year and 10-year periods (or life of the fund, if shorter) as of the end of the most recent calendar quarter.
Transfer: Moving shares from one account registration to another, while keeping the shares in the same fund. Certain transfers may constitute a taxable event, but most transfers aren’t taxable. Consult your tax advisor about your specific situation.
Value Funds: Mutual funds that invest in stocks those generally have fallen out of favor in the marketplace and areoften priced much lower than stocks of similar companies in the same industry.

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