A type of defined contribution plan that permits employees of businesses to defer paying current income taxes by contributing salary to the plan for retirement. The name of the plan reflects the section of the Internal Revenue Code where the basic rules for these plans are described.

The amount used in the calculation of an individual's income tax liability; one's income after certain adjustments are made, but before standardized and itemized deductions and personal exemptions are made.

Investment management style characterized by investment in small capitalization, and therefore higher risk, growth stocks.

The second largest organized exchange, handling roughly 25 percent of total annual national share volume.

A series of periodic payments that are fixed in amount or variable in amount based on one or more variable investment options, that typically begin at retirement and continue for the lifetime of the annuitant or some other specified period of time.

The process of dividing investments among different asset classes in accordance with an individual's tolerance for risk and personal investment objectives.

A broad group of individual securities or investments that have similar characteristics, such as risk or market capitalization.

Sales charge applied to an investment at the time of redemption (sale).

A type of fund that widely diversifies its portfolio holdings among common stocks, bonds, and money market instruments. Also called a flexible fund.

A market where prices decline sharply against a background of widespread pessimism, growing unemployment, and business recession.

An individual, institution, trustee, or estate which receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust, or other contract.

A measure of a stocks relative volatility in relation to the market as a whole.

The stock of a large, well-established company that is known for consistent profitability and stability.

A financial instrument that a business or governmental body sells to investors to borrow money by agreeing to pay back the money with interest over a defined period of time.

A mutual fund with a portfolio consisting of bonds that is operated by an investment management company to typically provide fairly stable income with a minimum of capital risk.

A judgment about the ability of the bond issuer to fulfill its obligation to pay interest and repay the principal when due. Ratings are usually given on a letter-grade system, with triple-A the highest rating and C or D the lowest.

A market with rising stock prices and optimistic investors.

The difference between the purchase price of an asset and its selling price.

A savings instrument issued by a bank that guarantees payment of a fixed amount of interest over a fixed period of time, usually from a few weeks to several years, and matures on a stated date.

Units of ownership in a public corporation represented by shares that constitute a claim on the corporation's earnings and assets. Shareholders of common stock can vote in the election of directors and other issues that arise at shareholder meetings, and may be entitled to receive dividends on their holdings. Common stock tends to have more potential for appreciation than some other classes of stock (i.e. preferred stock).

Interest that is calculated by applying the stated percentage rate both to the original capital amount and to the accumulated interest of the previous periods.

A measure of the change in prices consumers pay for certain goods, measured by the Bureau of Labor Statistics.

An instrument whereby a corporation acknowledges a stated sum is owed, which it will repay at a specified date with a stipulated amount of interest.

The interest payment due on a bond. A bond with a 6% coupon pays 6% interest.

Annual bond interest divided by market price.

An amount payable to a beneficiary of a qualified plan and/or a variable annuity. Payment is generally made upon the death of the plan participant, in the case of a qualified plan, or the death of the participant, owner or annuitant of a variable annuity, depending upon the terms of the applicable contract. Methods of payment can vary, depending upon the terms of the plan/contract, and the applicable tax laws, and often include a lump sum payment or a stream of income.

The sum of money taken out of one's pre-tax income and put into an account where the money will be taxed only when it is taken out of the account.

A type of retirement plan that pays a certain, or defined, amount of income at retirement based on a fixed formula.

A type of retirement plan that specifies the contributions made to the plan, either as a flat dollar amount or as a percent of compensation. The employee, the employer or both may make contributions to the plan. The final amount of income paid from this type of plan depends on results of investment experience.

A payment taken out of one's account.

The dividend divided by the market price of a stock.

With common stock, this is the discretionary distribution of earnings to shareholders, usually a portion of profits. Mutual fund dividends are paid out of income from the fund's investments, usually on a quarterly basis.

The process of purchasing securities or shares at regular intervals with a set dollar amount. When share prices are lower, the investor buys more units (shares) and fewer when prices are higher. Over time, this typically nets the investor a better average price for all shares purchased over the life of the investment. Dollar cost averaging does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.

A popular indicator of the stock market based on the average closing prices of 30 active industrial stocks representative of the overall economy. There are also Dow Jones averages for selected transportation and utility stocks.

Any contribution a participant of a retirement program chooses to make into their retirement fund, thus deferring tax payment on these funds.

This is the basic federal law covering pension plans and incorporates both the pertinent Internal Revenue code provisions and labor law provisions.

Investments whereby a person purchases a "portion of ownership" with the expectation it will increase in value (Stocks as opposed to bonds or mortgages).

Any person who exercises discretionary authority or control over the management of a plan or the disposition of plan assets or who gives investment advice to the plan for a fee or other compensation.

Sales charge applied to an investment at the time of initial purchase and taken directly from the purchase price.

Required by federal securities laws, a document issued by a registered investment company that describes such subjects as investment objectives and policies, services, investment restrictions, officers and directors, how shares are bought and redeemed, fund fees and other charges and the fund's financial statements.

Stocks believed to have a strong potential for better than average capital appreciation due to expected higher earnings and faster expansion of the underlying company. Growth stocks are riskier investments than average stocks.

A portfolio of stocks or bonds designed to replicate the composition and return of a particular market index (i.e. the S&P 500).

The persistent and appreciable rise in the general level of prices of goods and services (as measured by the CPI) and the resulting loss in the purchasing power of money.

The risk that the value of an investment will fall.

An individual retirement annuity or an individual retirement account. A tax-qualified retirement savings vehicle that is maintained by an individual and generally is not sponsored or contributed to by an employer. Depending on your adjusted gross income, you may be able to contribute money to an IRA in addition to the amount you save in your 401k plan.

Bond with a credit rating of BBB or lower by rating agencies. Although commonly used, the term has a pejorative connotation, and issuer and holders prefer the securities to be called high-yield bonds. These bonds carry the potential for higher returns and higher risks.

The ability of a company or individual to convert assets into cash or cash equivalents without undue loss in the value of those assets. For instance, investments in money market funds and listed stocks offer greater liquidity than real estate.

The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Here also called market cap or capitalization.

A fund that invests in short-term securities such as negotiable certificates of deposit, commercial paper and US Treasury bills. Money market funds generally expose the investor to the least amount of market risk and tend to provide the smallest returns. Shares of the fund are not insured or guaranteed by the US Government.

Contract between a lender and a property owner typically with monthly payments of principal and interest and the property as collateral.

Issues of states, counties, cities, and other political subdivisions and distinguished by interest income that is exempt from federal taxation.

A mutual fund is a company that offers investors an interest in a professionally managed portfolio of investment assets.

National Association of Securities Dealers

A computerized system established by the NASD to facilitate trading by providing broker/dealers with current bid and ask price quotes on over-the-counter stocks and some listed stocks.

The dollar value of a single mutual fund share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.

The key exchange for stock and bond transactions, accounting for about 65 percent of the total annual volume of shares traded.

A mutual fund that does not have a sales charge or load assessed in connection with the purchase or redemption of shares of the fund.

The result desired by an investor or mutual fund, such as current income or capital appreciation; also called investment objective.

An agreement between you and your employer under which your employer contributes a certain amount of money to a retirement plan during the years you work. Pension plans fall under two main categories: A defined benefit plan, which guarantees you will receive a fixed, predetermined amount upon retirement, and a defined contribution plan, which does not guarantee a fixed pension amount.

A collection of different investments or assets.

Securities or shares representing an ownership interest in the business, but which have "preference" over the other shares (i.e. common stock), as regards dividends, or in distribution of assets up to a certain fixed amount in the event of liquidation, or both. Preferred dividends are normally fixed, whereas common stock dividends may fluctuate depending upon company earnings.

The current worth of an amount or series of amounts payable or receivable in the future after discounting each amount at a specified rate of interest (the discount rate).

A stock's market price divided by its current or estimated future earnings. It is a measure of the attractiveness of a particular security versus all other securities as determined by the investing public. The P/E ratio gives investors an idea of how much they are paying for earning power.

The amount invested. It does not include earnings.

An employee-sponsored retirement plan you may purchase on pre-tax basis which provides tax-deferred earnings.

The percentage change in the value of an investment in an asset (or portfolio of assets) over a specified time period.

Making adjustment to one's portfolio where funds already existing in the account are transferred into other accounts in percentages that match a new asset allocation for future contributions.

The expected level of profit from an investment; the reward for investing.

Uncertainty regarding loss.

The willingness and ability of an investor to accept the uncertainty regarding possible loss from an investment.

An individual, or nonqualified, retirement plan comprised of assets moved from one trustee to another because of changes in your employment or marital status.

A type of after-tax individual retirement annuity or account that first became available on January 1, 1998. Its different from a traditional IRA because generally, you can make withdrawals when you turn age 59½ and, if the account has between open for five years, you never pay taxes on the earnings. Certain availability restrictions apply.

Under securities law, an investment made in a common enterprise with the reasonable expectation of driving profits solely from the actions of others. Stocks, mutual funds, bonds and variable annuities are all securities.

One of the equal parts into which the capital stock of a corporation is divided. It represents the owner's proportion of interest in the corporation and is issued in the form of a stock certificate.

A market value-weighted index covering the stock of 500 utility, industrial, transportation, and financial companies. The index return includes the reinvestment of dividends and is considered to be representative of the performance of large capitalization companies of the US markets.

A share of stock represents ownership in a corporation. When you own stock, you usually have a right to vote on certain corporate matters, such as members of the Board of Directors. Stocks are also referred to as equities.

A dividend payable in shares of stock and generally disbursed in lieu of cash by corporations wishing to conserve capital for expansion or other purposes.

A fund that invests primarily in common stocks of publicly traded companies. Earnings come from a combination of dividend payments (investment income) and the increase in value of the underlying stocks that make up the portfolio (capital appreciation).

A process where the taxes on an investment are postponed, allowing the investment's value to grow due to compound interest.

An investment where earnings are not taxed as they accumulate. Taxes are deferred or delayed-generally until you receive a distribution. You contributions to a 401(k) plan or traditional IRA are examples of tax-deferred investments.

Treasury bills are short-term US government debt securities with maturities of one year or less.

A marketable security issued by the US Treasury with a term-to-maturity of over seven years. Interest is paid semiannually and Principal is returned at maturity.

Direct debt obligations of the US government. Government bonds include: Treasury bonds, notes, bills, and savings bonds. They carry the highest safety ratings (the least amount of risk) of all bonds.

Life insurance company annuity contract whose value fluctuates with that of an underlying securities portfolio or other index of performance. Distributions from a variable annuity may be taken periodically, beginning immediately or any time in the future. The annuity may be a single-premium or multiple-premium contract. The return to investors may be in the form of a periodic payment that varies with the market value of the portfolio or a fixed minimum payment with add-ons based on the rate of portfolio appreciation.

Your right to all or part of your employer contributions is known as vesting. You may be vested in your employer contributions immediately, or based on a schedule.

A measure of the potential for change in value of a security over time.

The return of an investment expressed as a percentage of cost or market value.