GLOSSARY OF FINANCIAL & 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
Immediate Annuity |
A single premium annuity that begins making periodic payments within the first year of the contract. |
| Index | An index, or market index, measures changes in a specific segment of the investment markets by tracking the value of a carefully selected group of stocks, bonds, or other investments. Some of the most commonly used indices include: Standard & Poor's 500 (S&P 500) which is the most commonly used benchmark for the stock market; the Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE), used as a benchmark for foreign stocks in Europe, Australasia, Far East; and the Lehman Brothers Aggregate Bond Index, generally used as a proxy for the total bond market. |
| Index Funds | Index funds are mutual funds designed to replicate the performance of a specified market benchmark, or index. What makes an index fund different from other funds is its investment strategy. While most fund managers try to outperform a certain segment of the market, the manager of an index stock fund assembles a portfolio that has the same stocks, in the same proportions, as a given index (e.g., the S&P 500). The objective is to replicate, or mimic, the performance of the index. Index funds generally appeal to investors who are willing to forego the opportunity for exceptional returns in exchange for consistently keeping pace with a certain segment of the market, as defined by the index chosen. |
Individual Retirement Account (IRA) |
A personal savings plan that provides income tax advantages to working people who want to save money for retirement. IRA earnings are not taxed until they are withdrawn and, under some IRAs, contributions may be tax-deductible. However, to help ensure that funds are held until retirement, there is generally a tax "penalty" of 10% charged against any funds withdrawn from an IRA before age 59 1/2. |
| Inflation | Inflation is the rise in the prices of goods and services that occurs when spending increases relative to the supply of goods on the market—in other words, too much money chasing too few goods. This is the sequence: When the demand for raw materials exceeds the supply, prices go up. As manufacturers pay more for these raw materials they raise the prices they charge merchants for the finished products and the merchants in turn raise the prices they charge consumers. While moderate inflation is a common result of economic growth, any rate of inflation means that your dollars are losing their value. |
Inflation Risk |
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Interest Rate Risk |
Changing interest rates will affect the market value of fixed income securities. A leading influence on the level of interest rates is inflation. As inflation rises, the future value of matured bond principal is less valuable, so interest rates will rise in response. |
Intermediate-Term Bonds |
Bonds issued with maturities of five to ten years |
Junk Bonds |
Fixed income investments that sell at relatively low prices because the issuing company has received a low credit rating. |
