ANNUITY A series of payments over a period of time.

Usually a contract issued by an insurance company,

that guarantees an income for a specified period,

such as a number years or for life.

ARBITRAGE A technique employed to take advantage of

differences in price. If, for example, XYZ stock

can be bought in New York for $10 a share and sold

in London at $10.50, an arbitrageur may

simultaneously purchase XYZ stock here and sell

the same amount in London, making a profit of 50

cents a share, less expenses.

ASSET A possession having present or future economic

value to its owner.

BALANCE A financial statement showing a person’s or a

SHEET company’s assets, liabilities and the difference,

called Net Worth.

BEAR Someone who believes the market will decline.

BEAR MARKET A period during which securities prices generally

decline, usually over several months or more.

BENEFICIARY The person, company or organization that will

receive benefits. Usually the proceeds from a

retirement plan, life insurance policy or annuity,

or the benefits of a trust.

BETA COEFFICIENT A statistical measure showing to what extent an

individual stock or a portfolio has historically

moved in price up or down relative to the

general investment market.

BID AND ASKED Often referred to as a quotation or quote. The

bid is the highest price anyone has offered to

pay for a security at a given time; the asked is

the lowest price anyone will take at that time.

BLUE CHIP Refers to either a nationally-known company, or

the stock of that company that sells at a

relatively high price because of the company’s

sound reputation and long record of earnings and

dividend payments.

BOND A contract of indebtedness (or a loan) extending

for more than one year. A bond is an obligation

that must be repaid at a certain time. The

borrower pays interest to the lender for the use of

the funds. Bonds are also called debt or fixed

income securities.

BOOK VALUE Determined from a company’s records by adding all

assets (generally excluding such intangibles as

good will) from which all debts, liabilities and

the liquidation price of any preferred issues

are subtracted. The remainder is divided by the

number of common shares outstanding and the result

is book value per common share. Book value may

have little or no relationship to market value.

BROKER A person in the business of making transactions in

securities for accounts of others. The broker

receives a commission for the sale and purchase of

securities on your behalf.

BULL One who believes the market will rise and is

therefore purchasing shares or mutual funds.

BULL MARKET A period during which securities prices generally

increase, usually over several months or more.

CALL A contract giving the holder the option to buy from

the seller (or writer) a specified quantity of a

specified security (such as a stock) at a specified

price within a specified time period.

CAPITAL GAIN The amount of money by which the sales or exchange

price of an asset exceeds the cost of the asset,

generally determined upon sale or surrender.

CAPITAL STRUCTURE A corporation’s financial framework. It generally

includes long-term debt, preferred stock and common

stock used to provide funds for a corporation.

CASH FLOW Reported net income of a corporation plus amounts

charged off for depreciation, depletion,

amortization and extraordinary charges to reserves

bookkeeping deductions not paid out in cash.

COMMERCIAL PAPER Short-term, unsecured promissory notes of major

corporations, maturing within 270 days or less and

sold via dealers to banks and other investors.

COMMON STOCK A security representing ownership in a corporation.

Common stockholders generally have the right to

vote on certain corporate policies. Liability is

limited to the amount of stock they own.

CONGLOMERATE A corporation that operates or controls several

business activities in unrelated industries.

CONSOLIDATED A financial statement that combines the affairs

STATEMENT of holding companies and subsidiaries as though

they were one business.

CONVERTIBLE BOND A junior debt security in which the company will,

at the holders option, convert for another

security, usually a predetermined number of

shares of common stock of the company.

COUPON The interest rate, stated as a percentage of par

value (face amount) a bond promises to pay the

investor. A coupon may also be the slip attached

to a bond which must be detached and submitted for

payment on the due date.

COVERING Buying a security previously sold short.

CUSTODIAN The bank or trust company that holds securities

and does the bookkeeping for a mutual fund, a trust

or an individual.

DAY ORDER An order to buy or sell which, if not executed,

expires at the end of the trading day entered.

DEALER An individual or firm in the securities business

acting as a principal rather than as an agent.

Typically, a dealer buys for its own account

and sells to a customer from its own inventory.

The dealer’s profit or loss is the difference

between the price paid and the price received

for the same security.

DEBENTURE A bond secured by the general credit, integrity,

and any unpledged assets of the issuer. Debentures

have no claim to specific assets.

DELIVERY The certificate representing shares bought

"regular way" on the New York Stock Exchange

normally is delivered to the purchaser’s broker

on the fifth business day after the transaction.

A stock offered "seller’s option" may command a

lesser price than if offered "regular way."

DEPLETION Natural resources such as the metals, oils, gas and

timber, that conceivably can be reduced to

zero over the years. Depletion is an accounting

practice consisting of charges against earnings

based upon the amount of the asset taken out of

the total reserves in the period for which

accounting is made. A bookkeeping entry not

representing any cash outlay, but resulting in a

potential increase in cash as a result of a

reduction in incomes taxes.

DEPRECIATION A deduction of a portion of the cost 

of property used in a trade or business to allow for the wear and 

tear, or loss of use over a period of time. Depreciation is therefore a 

bookkeeping entry not representing any cash outlay, but resulting in a 

potential increase in cash as a result of a reduction in income taxes. 

Depreciation causes older assets to reflect low current net value.

DISCRETIONARY An account in which the customer gives the

ACCOUNT broker or someone else discretion, which may be

complete or within specific limits, as to the

purchase and sale of securities or commodities

including selection, timing and price to be paid

or received.

DISCRETIONARY The customer empowers the broker to act on his or her

ORDER behalf with respect to the choice of security to

be bought or sold, a total amount of any securities

to be bought or sold, and/or whether any such

transaction shall be one of purchase or sale.

DIVERSIFICATION Making investments in several categories of assets

or several different issues with a category, such

as stocks, order to spread risks.

DIVIDEND A payment to stockholders, usually in the form of a

quarterly check. The dividend may vary in relation

to the company’s profit for that quarter.

DOLLAR COST A system of buying securities at regular intervals

AVERAGING with a fixed dollar amount. Under this system

the investor buys by the dollars’ worth rather

than by the number of shares. If each investment

is of the same number of dollars, payments buy

more when the price is low and fewer when it rises.

Thus, temporary downswings in price benefit the

investor if he or she continues periodic purchases in

both good times and bad, and the price at which the

shares are eventually sold is more than their

average cost.

EARNINGS Corporate earnings for a stated period, after

PER preferred dividends have been paid, divided by the

SHARE (EPS) adjusted average number of common shares

outstanding during the period.

EMERGENCY These are usually liquid assets equivalent

FUNDS to one to six times one’s total monthly budget.

EQUITY The value of your net ownership in stocks or real

estate. Also, refers to the ownership interest of

shareholders in stock of a corporation.

EURODOLLAR A dollar invested in a bank outside the United

States.

EX-DIVIDEND The buyer of a stock, selling ex-dividend, does

not receive the recently declared dividend.

Ordinarily the stock price is reduced by the

value of the dividend.

EX-RIGHTS Corporations raising additional capital may do

this by offering their stockholders the right to

subscribe to new or additional stock, usually at

a discount from the prevailing market price.

The buyer of a stock that has been sold without

that privilege (ex-rights) is not entitled to

the new purchase rights.

FILL OR KILL A market or limited price order is to be executed

in its entirety as soon as it is represented in the Trading Crowd. If not so 

executed, the order is treated as canceled. For purposes of this definition, 

a stop is considered an execution.

FINANCIAL Debt used by a corporation to enhance its growth

LEVERAGE and total return on capital. Shareholders benefit

from leverage to the extent that the return on the

borrowed money exceeds the interest costs.

FLOWER BOND A United States government bond that can be bought

at a discount and redeemed at its face value for

payment of federal estate taxes. These pay low

rates; frequently purchased just prior to death.

FRANCHISE A permit, or right granted for a period of years or

in perpetuity entitling a dealer to sell a

manufacturer’s product or a service organization’s

service. A franchiser is a company that sells

its products or services through such outlets, such

as McDonalds or General Motors. Revenue comes from

the sale of franchises and the basic product.

GOOD DELIVERY Certain basic qualifications must be met before

a security sold on the Exchange may be delivered.

GROWTH STOCK A stock of a company that has shown better than

average growth in earnings and is expected to continue to do so.

GUARANTEED BOND A bond whose interest and principal payment are

guaranteed by a firm other than the issuer, usually

a lessee of the issuer’s property, such as railroad

bonds.

HEDGE Strategy used to offset investment risk.

IMMEDIATE A market or limited price order that is to be

OR CANCEL executed in whole or in part as soon as it is

ORDER represented in the Trading Crowd, and the

portion not so executed is to be treated as

canceled. For purposes of this definition,

a stop is considered an execution.

INCOME BOND A bond on which the interest payment is contingent

on sufficient earnings from year to year.

INFLATION An economic condition characterized by a sustained

rise in most prices. Classically, it is referred to

as "too much money chasing too few goods."

INTEREST Payments a borrower pays a lender over and above

the principal for the use of his or her money. A

corporation pays interest on its bonds to its

bondholders.

INVESTMENT Also known as an underwriter. The middle person

BANKER between the corporation issuing new securities

and the public. The usual practice is for one

or more investment bankers to buy outright from

a corporation a new issue of stocks or bonds.

The group forms a syndicate to sell the securities

to individuals and institutions.

INVESTMENT One whose principal business consists of acting

COUNSEL as an investment advisor to individuals or

businesses. Many financial planners act as

investment counselors.

LEVERAGE The means on enhancing return or value by using

borrowed money to increase the level of investment.

Leverage increases the risk if a venture declines,

but increases the potential reward if it grows.

LIABILITY Anything an individual or company owes to another

party. An individual may owe a mortgage company;

a company may owe a creditor. The concept of

liability is now expanded to include product and

professional issues.

LIMIT ORDER A customer’s order to buy or sell security at a

stated price "or better."

LIMITED A form of business in which a General Partner

PARTNERSHIP supplies expertise and the ability to operate in a

INVESTMENT certain business and a group of individual

investors called Limited Partners supply the

working capital. The partners report their share

of the partnership’s profits, losses, and

deductions on their individual tax returns.

LIQUIDITY The ability of the market to absorb a reasonable

amount of buying or selling at reasonable price

changes. Liquidity is one of the most important

characteristics of a good market.

LOAD & NO LOAD The portion of the offering price of shares

of open-end investment companies that covers

sales commissions and all other costs of

distribution, is the load. It is usually incurred

only on purchases, and in most cases there are no

charges when the shares are sold (redeemed). If

the shares sell for their Net Asset Value, they

are called No Load.

MARGIN The amount paid by the customer when he or she

uses a broker’s credit to buy a security. Under

Federal Reserve regulations, the initial margin required in the

past 20 years has varied.  In recent years, it has been 50%

MARGIN ACCOUNT A brokerage account allowing the owner to buy

securities with cash borrowed from the broker.

MARGIN CALL A demand upon a customer to put up money or

securities with the broker. The call is made

when a purchase is made; also if a customer’s

equity in a margin account declines below a

minimum standard set by the Exchange or by the

firm.

MARKET ORDER An order to a broker or dealer to buy or sell

securities at the best price currently available.

MATURITY The date on which the principal amount of a bond or

other debt is due.

MIP Monthly Investment Plan. A pay-as-you-go method

of buying New York Stock Exchange listed shares

on a regular payment plan. Under MIP

the investor buys stock by the dollars’ worth

(if the price advances, he or she get fewer shares; if

it declines he or she get more shares.) Investments

may discontinue at any time without a penalty.

MONEY A mutual fund specializing in the purchase of

MARKET very short-term securities in the money market,

FUND such as Treasury Bills, Commercial Paper and

Bankers Acceptances, all previously unavailable

to investors because they only sell in very large

denominations of $100,000 or more.

MORTGAGE A lien on property created by pledging that

property as security for repayment on a loan.

MORTGAGE BOND Usually a corporate debt obligation that is

secured by the equipment or assets of the

issuing firm.

MUNICIPAL BOND The debt obligation of states, cities, school

districts, and other public authorities. Interest

paid on municipal bonds is not subject to federal

taxes.

MUTUAL FUND An investment company that pools the money from

several investors and invests in a group of

securities with a specific objective in mind. The

investors gain the benefits of diversification and

professional management of their money.

NOT HELD ORDER A market or limited price order marked "not

held," "disregard tape," "take time" or that

bears any such qualifying notation. An order

marked "or better" is not a "not held" order.

ODD LOT A small quantity of shares, less than 100. It must

be sold or bought by a special procedure, an

exchange. Stocks purchased in odd lots typically

cost the investor a higher price than those

purchased in even lots (100 lot shares).

ODD-LOT DEALER A member firm of the Exchange that buys and

sells odd lots of stocks: 1 to 9 shares in the

case of stocks traded in 10 share units and 1 to

99 shares for 100 share units.

OFF-BOARD This term may refer to transactions over-the-

counter in unlisted securities or, in a special

situation, to a transaction involving listed

shares that were not executed on a national

securities exchange.

OPEN ORDER An order to buy or sell placed through a securities

firm that is good until filled or canceled.

OVER-THE- COUNTER A market for securities made up of securities

dealers who may or may not be members of a

securities exchange and is mainly a market made

over the telephone. The over-the-counter market

is the principal market for U.S. Government

bonds and municipals.

PAPER PROFIT An unrealized profit or loss on an investment still

(LOSS) held. Paper profits and losses become realized

only when the investment is sold.

PARTICIPATING A class of stock that is entitled to its stated

PREFERRED dividend and, also, to additional dividends on a

STOCK specified basis upon payment of dividends on the

common stock.

PERCENTAGE A market or limited price order to buy (or sell)

ORDER a stated amount of a specified stock after a

fixed number of shares of such stock have traded.

PORTFOLIO A group of securities and/or properties owned by an

individual or an investment company. Frequently,

these are managed or considered as a unit.

PRICE- The current market price of a share of stock

EARNINGS divided by earnings per share for a 12-month

RATIO (PE) period. For example, a stock selling for $100

a share and earning $5 a share is said to be

selling at a price-earnings ratio of 20.

PROSPECTUS The official document that describes a security

issue or a mutual fund that must be supplied to

each investor prior to purchase.

PUT A right to buy (call) or sell (put) a fixed amount

of a given stock at a specified price within a

limited time.

REGULAR WAY Unless otherwise specified, securities (other

DELIVERY than Governments) sold on the New York Stock

Exchange are to be delivered to the buying

broker by the selling broker and payment made

to the selling broker by the buying broker

on the fifth business day after the transaction.

Regular way delivery for government bonds is

the following business day.

REVENUE BOND A state or local bond whose interest and principal

payments generally come from a business project

such as a toll road or a water system.

ROUND LOT The standard trading quantity in stock exchange

transactions, usually 100 shares or one $1000 bond.

SAVINGS BOND A small or medium-sized federal obligation sold to

individuals on a discount basis. The interest is

generally tax-deferred until bonds are liquidated,

although the taxpayer may elect annual taxation.

Referred to as Series EE U.S. Savings Bonds,

there are tax provisions if used for education.

SECURITIES An independent agency of the United States

EXCHANGE Government that administers the various securities

COMMISSION securities laws. Sometimes referred to as the SEC.

SELLING A method of protecting a paper profit. Let us

AGAINST say you own 100 shares of XYZ that has advanced

THE BOX in price, and you think the price may decline.

So you sell 100 shares short, borrowing 100 shares

to make delivery. You retain in your security

box the 100 shares that you own.

If the market price of the shares in XYZ should

decline, the profit on your short sale is

exactly offset by the loss in the market value

of the stock you own.

But, if the market price in XYZ advances, the

loss on your short sale is exactly offset by the

profit in the market value of the stock you

have retained. You can close out your short

sale by buying 100 shares to return to the

person from whom you borrowed, or you can send

them the 100 shares that you own.

SERIAL BOND A bond that matures in installments at periodic

stated intervals.

SHAREHOLDERS The individuals who own shares of stock in a

company or a mutual fund.

SHORT SALE A sale of a security that the seller does not own.

The share sold must be borrowed in order to make

delivery to the purchaser. For example: You

instruct your broker to sell short 100 shares of

ABC. Your broker borrows the stock so he or she can

deliver the 100 shares to the buyer. The money

value of the shares borrowed is deposited by your

broker with the lender. Sooner or later, you must

cover your short sale by buying the same amount

of stock you borrowed for return to the lender.

If you are able to buy ABC at a lower price,

than you sold it for, your profit is the net

between the two prices not counting commissions.

But, if you have to pay more for the shares of

ABC stock than the price you received, that

is the amount of your loss.

Stock Exchange and federal regulations govern and

limit the conditions under which a short sale

may be made on a national securities exchange.

STOCK A security that represents an ownership interest

(COMMON) in a corporation. Common stockholders have no

preferences on income or assets.

STOCK A distribution to stockholders of additional

(DIVIDEND) shares of stock in proportion to their holdings,

in lieu of cash. The stock may be of the issuing

company, or in shares of another company (usually

a subsidiary) held by the company.

STOCK Ownership shares in a corporation that are

(PREFERRED) entitled to stated priorities as to income or

assets ahead of other shares. Usually this

includes the right to receive a fixed dividend

before the common receives any dividends, and

a prior claim against the assets of the company

in the event of liquidation.

STOCK SPLIT A process that divides a share of stock without

any change in shareholder equity or market value.

STOP ORDER An order to buy at a price above or sell at a price

below the current market. Stop buy orders are

generally used to limit loss or protect unrealized

profits on a short sale. Stop sell orders are

generally used to protect unrealized profits or

limit loss on a holding. A stop order becomes a

market order when a stock sells at or beyond the

specified triggering price.

TREASURY BILL A United States government obligation that is sold

at a discount and matures at face value. All

Treasury bills mature within a year’s time, and are

traded in great quantities as a liquid short-term

investment.

TREASURY A United States government note having a maturity

NOTE or of ten years or less at original issuance while a

BOND bond matures from 10 or more years. Notes and

bonds pay interest semi-annually.

TREASURY Stock issued by a company but later reacquired.

STOCK It may be held in the company’s treasury

indefinitely, reissued to the public, or retired.

Treasury stock receives no dividends and has no

vote while held by the company.

VARIABLE An annuity contract under which the dollar payments

ANNUITY received over time fluctuate with the performance

of the underlying security. Generally, the

insurance company issuing the contract offers

several investment accounts having different

purposes and risk elements. The owner is usually

permitted to switch funds for a small fee, from one

account to another managed by the same company.

WARRANT A certificate giving the holder the right to buy

an indicated quantity of stock at a stated price

within a specified time period or perpetually.

YIELD Also known as return. The dividends or interest

paid by a company expressed as a percentage of

the current price. A stock with a current market

value of $40/share paying dividends at the rate of

$2.00 is said to yield 5% ($2.00 dividend by 40).

The yield on a bond is calculated the same way. A

9 percent $1,000 selling at $600 offers a current

yield of 15% ($90 interest divided by 600).

YIELD TO Concept used to determine the rate of return an

MATURITY investor will receive if an interest bearing

investment, such as a bond, is held to maturity.

It takes into account purchase price, redemption

price, time to maturity, coupon (interest rate)

and the time between interest payments.

ZERO COUPON First issued by companies in 1981, they pay no

BONDS interest and are priced at a discount from their

redemption price (face amount).