Savings Bonds

U.S. Government issued bonds that were first issued in 1941 that range in face value from $50 to $10,000. The two current main types of Savings bonds are Series EE and Series HH. Both EE & HH bonds were originally issued in 1980. Both bonds typically earn interest for 10 years, however the government can extend the date.

Share

A unit of ownership in a corporation

Shareholder

An owner of one or more shares of stock in a corporation

Sharpe Ratio

Sharpe Ratio is way to measure investment risk in relationship to investment return. It shows how much more investment value a fund or portfolio is giving an investor while taking into consideration the level of volatility or risk the portfolio contains. The equation is: (Portfolio realized return - risk free rate)/standard deviation of the portfolio. The risk free rate is typically measured by the 90 day T-Bill rate. In other words an investor can go and purchase 90 day Treasury Bills with basically zero risk while earning a certain return. So if an investor starts to acquire Large Cap Stocks to his portfolio which are much more risky and volatile is the asset class worth the amount of risk the investor will now incur. Sharpe Ratio is a great way to measure how efficient an investment portfolio is. The higher the number the better!

Simplified Employee Plan (SEP)

A type of retirement plan, given favorable tax treatment by the IRS, whereby both employer and employee can make contributions towards an employee's retirement fund.

Specialized Mutual Fund

A mutual fund that specifically invests its money into stocks of companies in particular sectors such as technology. Specifically investing in one sector carries much more risk than a mutual fund that diversifies its assets into companies of different sectors. An investor would incur this extra risk with the hopes that the fund will yield a greater return by capitalizing on a hot sector.

Speculation

Investing in a way that carries a high degree of risk i.e. loosing your capital investment. An investor would hope to "score big" by investing in a speculative investment. "Day Trading" is a type of speculative investing due to the fast-paced market timing nature of buying stock and selling immediately.

Standard & Poor's 500 Index (S&P 500)

A broad-based measurement of 500 very large companies, representing various sectors, that currently trade on the New York Stock Exchange. The companies that comprise the S&P 500 are weighted according to their respective shares outstanding. This index serves as a benchmark measuring stock market performance on a daily basis. Since the S&P 500 tracks many more companies than the Dow Jones Industrial Average (DJIA), which tracks only 30 companies, the S&P500 has become a much more accurate measurement of the market’s daily movements.

Stock

Ownership of a company represented in shares that consist of the company's earnings and assets. Common stockholders also have voting rights to vote on certain company issues such as the election of the board of director's.

Stock Market

A generic term representing the organized trading of securities on the various exchanges and the Over-The-Counter (OTC) market. The various types of securities that are traded include: stocks, preferred stocks, options, convertibles, rights, warrants, and bonds.

Stock Option

The right to purchase a stock at a certain price within a set period of time. The two main types of stock options are Non-Qualified and Qualified stock options (ISO).

Stock Symbol

The letters used to distinguish the names of the various companies being traded.

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Tax Basis

The original cost of an asset less any depreciation taken on that asset. The tax basis is needed to calculate the capital gain or loss on that asset for tax purposes. The calculation for tax basis on securities does not take depreciation into consideration.

Tax Credit

This is dollar for dollar credit that a taxpayer can deduct from their tax liability. For example, if at the end of the year you owed $3,400 in taxes, however you had a $500 child-care tax credit, you could apply that credit to the $3,400 tax liability and reduce the liability down to $2,900. The are various types of Government approve tax credits.

Tax Deferred

A tax-friendly environment whereby money grows free of taxes. The money that grows in a tax-deferred environment is not taxed until the money is withdrawn from the environment. Examples of tax-deferred environments include Employer-Sponsored Qualified Retirement Plans, Both Roth & Traditional IRA’s, Educational IRA's, Annuities, Life Insurance, stocks, and series EE & HH Government Savings bonds.

Tax Exempt

When interest earned is exempt from taxes. Municipal bonds are exempt from Federal Taxes and depending upon the state issuing the Municipal bond it could also be free of state & local taxes. A triple tax-exempt municipal bond is free from Federal, State, & local taxes.

Tax Shelter

Sheltering income to reduce or avoid taxes.

1099

This is an annual statement sent to taxpayers and the IRS by the payer of interest 1099 (INT) and dividends 1099 (Div). Mutual fund companies would send these 1099 statements out at the end of the year to shareholders of funds that received a dividend or interest. Even if the dividends or the interest was reinvested back into the mutual fund the statements would still go out and taxes would still be owed on the earnings.

Tick

The movement of a securities' price during a trading day. As the stock gets traded, the price moves up and down.

Total Return

The complete annual return of an investment encompassing interest, dividends, and capital gains.

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