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401(k)
A tax-deferred defined contribution employer sponsored investment plan that allows
an employee to put aside a percentage of their earned wages into an investment account
which is intended to be used as retirement income. In some cases employers will
match the contribution made by their employees dollar for dollar - or offer a percentage.
The name 401(k) comes from the IRS section which describes the program.
403(b)
Similar to a 401(k), a 403(b) is a tax-deferred retirement investment plan that
allows employees of non-profit organizations to put a percentage of their earned
wages into an investment account. Some key advantages to a 403(b) plan include lower
taxable income contributions, larger contributions can be made to the account and
the possibility of taking out loans. Also contributions can grow tax-deferred until
withdrawal, during which time the money is taxed as ordinary income.
529
An education savings plan operated by a state or educational institution where families
are able set aside funds for a child’s future college costs. However, the proceeds
can only be used for education withdrawals. If used for non-educational purposed
a 10% penalty will incur. In most case, the money is invested in a portfolio of
stocks, bonds or mutual funds. Key benefits include, withdrawals from the account
are taxed at the child's tax rate and anyone can contribute to a Section 529 plan
regardless of income level.
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A
Annuity
Annuities allow you to accumulate tax deferred funds for retirement. There are two basic types: Fixed rate and Variable rate annuities. Fixed rate annuities offer you a fixed interest rate enabling your money to grow federal tax-free and allows you the ability to shelter your assets from the volatility of the stock or bond market, and provide guaranteed income for your spouse or heirs, Variable rate annuities offer a wide range of investment options, tax-free growth for investors who seek long-term growth, but are generally geared for investors who have a higher risk tolerance or who may have already fully contributed to their other tax deferred accounts.
Asset Allocation
The strategy of diversifying a percentage of your money among various assets such
as stocks, bonds, and cash. The value of allocating among different asset classes
is that each class tends to react differently to the economy. Asset Allocation is
determined by your comfort with Market Risk (Risk Tolerance) and the amount of time
before you need access to your savings (Time Horizon).
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B
Bonds
A debt instrument sold by the government, states, cities, corporations or other
institutions issued for more than one year with the goal of raising capital by borrowing.
By issuing a bond (debt) , an institution promises to repay the principal donation
along with interest (coupons) on a specified date (maturity date).
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C
Capital gain
The amount by which an assets sales price exceeds the original cost, or purchase
price.
Custodial account
The most common type of trusts for minors, family members and guardians can transfer
a child’s assets to a custodial account, which is covered by the UGMA (Uniform Gift
to Minors Act) and the UTMA (Uniform Transfer to Minors Act).
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D
Disability Insurance
An insurance policy which is designed to protect your finances, family, lifestyle
and health should you become sick or injured and are unable to work.
Dividend
A share of profits given, usually every quarter, by a board of directors to its
shareholders out of the company’s retained earnings. General a dividend is a taxable
payment given as cash, but they can also take the form of stock or other property.
Diversification
The strategy of spreading your investments between different types of securities,
markets and industries ensuring that at least some of your investments will be in
the market's winning sectors–and never fully invested in the losing sectors.
Dollar Cost Averaging
A type of investing strategy that enables you to invest a fixed amount of money
on a regular basis in which securities. Typically, mutual funds are purchased regardless
of market conditions. When the price of a fund rises, then fewer shares are purchased
and when the price of a fund falls, more shares are purchased.
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F
Fiduciary
A person, corporation or association that is legally appointed and is authorized
to hold and manage the assets for another party.
Financial Consultant
A qualified investment professional that assists and advises individuals and corporations
to help meet their long-term financial and investment objectives.
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I
IRA (Traditional/Roth/Rollover)
A tax-deferred retirement account that permits an individual to set aside money
each year for the sole purpose of using after they retire.
L
Life Insurance
A type of insurance that helps replace some of the income you would have earned
to your beneficiaries upon your death, and can also be used to help pay off debts,
funeral expenses and taxes.
Long Term Care Insurance
A type of insurance designed to protect and support you and your family in the event
of an illness, injury or disability.
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M
Mutual Funds
Through a mutual fund investment, your money is pooled with money from other investors
who share common financial goals. In return for the money invested, you receive
an equity position, or partial ownership, in the fund and all its securities.
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N
NASDAQ
The National Association of Securities Dealers Automated Quotation System, is an
automated quotation system that reports on the trading of domestic securities not
listed on the regular stock exchanges.
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P
Portfolio
A collection of investments owned by the same individual or organization.
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R
Risk
The threat of incurring loss or misfortune on an investment.
ROTH IRA
An individual retirement account that allows for tax-free withdrawals after age
59½. While you cannot deduct contributions, qualified distributions are tax free
if you satisfy certain requirements.
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S
SEC
Founded in 1933, after the passing of the Securities Act of 1933, the U.S. Securities
and Exchange Commission was designed to oversee the key participants in the securities
world, including securities exchanges, securities brokers and dealers, investment
advisors, and mutual funds; and to protect investors, maintain fair, orderly, and
efficient markets, and facilitate capital formation.
Stocks
An instrument used to signify an ownership position, or equity, in a corporation
including a share of its assets and profits.
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T
Treasury/Government bonds
Also known as T-Bonds, a government debt security that pays a fixed rate of interest
every six months until they mature – in more than 10 years. Perfect for diversifying
your investment portfolio, financing an education or supplementing retirement income.
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U
UGMA
The Uniformed Gift to Minors Act allows you to give unlimited gifts to a minor child
including cash, mutual funds, life insurance, annuities or other forms of property
given to the account with no limitations.
UIT
A Unit Investment Trust is a fixed portfolio of professionally selected and diversified
stocks, bonds and other securities. UITs have fixed terms that expire between 1
and 30 years. Plus, they’re also specific to a particular industry or sector, which
is a big contrast to the diversification demands of a mutual fund.
UTMA
An extension of the UGMA, the Uniform Transfers to Minors Act allows minors to own
other types of property, such as real estate, fine art, patent and royalties, and
for the transfers to be made through an inheritance.
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Y
Yield
The annual rate of return on an investment, often expressed as a percentage.
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