- Federal Deposit Insurance Corporation (FDIC).
A U.S. government agency that insures cash deposits, including certificates of deposit, that have been placed in member institutions, for up to $100,000.
- fee-based management.
A way in which a client is charged for professional financial help. With fee-based management, a client is charged a percentage of the assets in the manager’s control, usually around 1%–2%.
- fixed income investment.
An investment that produces a steady stream of income in the form of interest payments. The borrower, or issuer, can be a government—municipal, state or federal; a corporation; or a bank or savings and loan association.
- foreign fund.
A mutual fund that invests in developed markets outside the United States. See international stock funds.
- Form W-2.
A tax form prepared by an employer and given to an employee to be filed with his or her Form 1040. A W-2 lists wages earned during that year, federal and state taxes withheld, and Social Security tax information.
- Form W-4.
A tax form prepared by an employee for an employer indicating the employee’s exemptions and Social Security number, and allowing the employer to determine the amount of taxes to be withheld for the employee.
- Form 1099.
The IRS form for the annual reporting of dividend and interest payments made to investors. Companies, mutual funds, banks and other financial institutions report an investor’s dividend and interest directly to the IRS with this form.
- 401(k) plan.
A defined contribution plan in which an employer takes money directly from an employee’s salary and places it in a tax-deferred retirement account, which means that the employee doesn’t pay taxes on this money until he or she withdraws it. The decision about how and where the money is invested is usually the employee’s. Employers often match a percentage of employee contributions, sometimes as much as 50 cents on the dollar.
- 403(b) plan.
A 401(k) plan in the world of charitable and nonprofit organizations, including educational institutions. Contributions are deducted directly from employees’ salaries before taxes, and employers can contribute as well.
- front-end load.
A sales charge on a mutual fund that is applied when shares of the fund are purchased (as opposed to a back-end load, applied when shares are sold).
- gift tax.
A tax imposed on transfers of property as gifts during the donor's lifetime.
- gift-tax exclusion.
Federal law permits tax-free gifts of up to $12,000 (as of 2007) per individual each year. Married couples may jointly give tax-free gifts of up to double that amount.
- government bond.
A bond issued by the U.S. Treasury or other federal agencies.
- gross income.
All income from all sources (other than tax-exempt income) that must be included on one’s tax return. Also known as gross earnings.
- growth and income fund.
A mutual fund that seeks both capital appreciation (growth) and current income. Investments are selected based on both their appreciation potential and their ability to pay dividends.
- growth fund.
A stock fund that seeks long-term capital appreciation. Growth funds generally buy common stocks of companies that advisors believe have long-term growth potential.
- growth stock.
The stock of a company that has previously seen rapid growth in revenue or earnings and is expected to see similar growth beyond the short term. Generally speaking, growth stocks pay relatively low dividends and sell at a relatively high price, considering their earnings and book value.
The person who is legally responsible for the care and well-being of a minor (or in some states, of an incapacitated adult). If appointed by a court, the guardian remains under court supervision.
A composite of companies that measures changes in market behavior. Well-known market indices include the S&P 500® Index, the Dow Jones Industrial Average, the NASDAQ Composite Index, and the Wilshire 5000 Index.
- index fund.
A mutual fund that seeks to track the performance of a market index, such as the S&P 500 Index, by investing in the stocks or other securities that compose that index.
- Individual Retirement Account (IRA).
A self-funded retirement plan (a plan that an individual, not an employer, establishes and funds) that provides tax benefits. There are several different types of IRAs, including Traditional IRA, Rollover IRA, Education IRA, and Roth IRA.
An increase in the cost of living, measured as a percentage and classified according to its severity. Mild inflation occurs when the price level—an average of all prices—rises from 2% to 4%. Moderate inflation refers to an inflation rate of 5% to 9%. Severe inflation (or “double-digit inflation”) refers to an inflation that threatens a country’s economy, in which money loses its value and people turn to bartering rather than relying on currency.
- inheritance tax.
State death taxes imposed on property received by inheritance. See estate tax.
- international stock fund.
A mutual fund that invests outside of the United States. International stock funds can include global funds, which invest in securities issued throughout the world (including the U.S.) or in foreign funds, which invest in developed markets exclusively outside the U.S.