50, 200-day Average Price    The price of a company's stock, averaged over the latest 50-day or 200-day period. These are moving averages, which means they change every day as they are updated. Technical analysts often use 50-day and 200-day averages to help decide when they will buy or sell a stock. When these lines cross, it indicates a change away from trend. The 50-day moving average is considered an appropriate gauge for intermediate-term trading, while investors tend to prefer the 200-day average for long-term trend analysis. If the price rises above the averages, it is an indicator that the stock is on the move. If the price drops below the averages, it may spell trouble for the stock.

52-week range            A stock’s high and low prices for the year. By comparing the current price with the 52-week range, investors see where a stock's current price falls relative to its 52-week extremes.

AIMR             Association for Investment Management and Research

Aggressive investment          A volatile, hard-to-predict investment subject to rapid gain or loss. This type of investment is generally appropriate for long-term holdings (1 or more years) and for investors willing to accept fluctuations in the value of their investments.

Alpha coefficient        Measures the extent to which a security's performance exceeds or falls short of the return you would expect given its level of risk (beta). An investment with a positive alpha has delivered more return than would have been predicted by its beta. A negative alpha denotes performance that is below what you would expect given its risk level.

American Stock Exchange (ASE or AMEX)            One of the major stock exchanges in the United States. The AMEX is a central auction market, which means it conducts business on a trading floor where traders buy and sell securities from specialists, or market makers in a specific stock. The AMEX is well known as a major market for options as well as stocks.

Annual report A document sent to shareholders communicating a public company’s version of operations and performance. Information includes earnings, revenues, balance sheet data, an auditor’s statement, and management’s discussion of the company’s track record and future direction.

Annualized gain          In a portfolio, this calculation converts the price gain or loss of a security held for more than one year into a compound annualized gain. Annualized gains offer investors a way to compare holdings that have been owned for different lengths of time. The calculation factors in the commission paid to purchase securities, but does not include the reinvestment of dividends.

Annualized return       The yearly increase (or decrease) in the value of an investment, including the effects of compounding. Annualized returns are a bit more complicated than average returns, which you can get by adding up the annual returns of a stock or fund and dividing by the number of years. Securities that have the same average return may have very different annualized returns, especially if one security is volatile. For example, it's possible for a stock or fund to have a respectable average return but a negative annualized returned if gains in the first two years are offset by a big drop in the third.

Annuity           A type of investment that guarantees payment of specific amounts at specific times, or a single lump sum payment. Annuities are sponsored by insurance companies and other financial instituitions and sold by agents, banks, savings and loans, stockbrokers, and financial planners. Fixed annuities work like certificates of deposit (CDs). Variable annuities let you direct your investment into fund-like portfolios of stocks, bonds, and cash equivalents. Your return, as with a fund, depends on the performance of the portfolios you choose. Variable annuities come with annual charges.

Ask     The lowest price a seller will accept for a security.

Asset allocation          The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds, real estate, and cash.

Asset class     Typically refers to securities that have similar features. For example, stocks and bonds are the two main classes. They may be subdivided into other classes like mortgages, common stock, and preferred stock. Typical asset classes are cash (money market), domestic bonds, international stocks, large cap stocks, and small cap stocks. Asset classes are used in the process of asset allocation to control the risk and return characteristics of a portfolio. In the long run, with a diversified portfolio, over 90 percent of the returns are determined by asset allocation. The remaining percentage of your return depends on which specific stock, bond or mutual fund you buy within asset classes, and when you buy it.

Average annual return           A calculation that converts a cumulative total return into an annualized figure. For example, an investment that has a cumulative return of 30% over three years--meaning it has gained 30% for the entire three-year period--has an annualized gain (average annual return) of 9.1%.

Back-end load            A fee to sell shares in a mutual fund.

Balanced fund            A mutual fund that typically buys a mixture of bonds, preferred stock, and common stock to achieve the highest return with the lowest risk. It blends long-term growth from stocks with income from bonds.

Basis   The price paid for an investment when it was originally purchased, including any commission or fees you paid for the trade.

Bear market   A bear market is a period during which stock prices are generally declining.

Beta coefficient          A measure of a stock's volatility relative to the overall stock market. The beta coefficient of the S&P 500 is 1. Any stock that is more volatile than the market as a whole has a beta value higher than 1. If the beta coefficient is less than 1, the security is considered to be less risky than the market.

Bid      The price that a potential buyer is willing to pay for a security.

Block trade     At least 10,000 shares of stock bought or sold by institutional investors. Individual investors sometimes watch block trades to determine a stock’s attractiveness. Rising institutional interest in a stock is a positive sign.

Blue-chip stocks         Stocks of seasoned companies that have paid regular dividends in both good and bad years. Investments in blue-chip stocks are relatively conservative. Some examples of blue-chip stocks are the 30 securities used to calculate the Dow Jones Industrial Average. The term “blue chip stocks” is derived from poker since the poker chip with the highest value is blue.

Bond   A type of security that pays a fixed amount of interest at a regular interval over a certain period of time. Bonds are essentially loans given to companies and government entities promising to pay back the loan at a specified interest rate. Bonds are considered less risky investments than stocks. When interest rates are rising, bond prices go down; when rates are falling, bond prices rise.

Suppose you own a ,000 bond that pays 6% interest over 10 years. In this case, assuming you bought the bond at its par value of ,000 and held it for 10 years, you would receive a year (6% of ,000) for 10 years. At the end of the 10 years, you would have received 0 in interest ( x 10 years), and you would also get the ,000 back.

Bond rating     Indicates the risk of default on municipal or corporate bonds. Rating agencies, such as Moody’s and Standard & Poor’s, assign a rating when a bond is issued. They continue to monitor the bond and will change the rating if the issuer’s financial condition changes. The highest rating is AAA (Aaa for Moody’s). Bonds rated BBB (or Baa) and above are considered investment grade. Anything below is considered junk, which typically carries a higher interest rate to compensate for risk. Bonds with a D rating (C for Moody’s) are in default.

Broker            A broker is someone who handles the transfer of a security from a seller to a buyer. Brokers must be licensed by the Securities and Exchange Commission (SEC).

Bull market    A market in which prices are moving upward.

Business plan             A written proposal for a new business or new direction in a previously established business. Business plans typically include a description of the company and its products or services, a budget, an overview of current and projected financing, a market analysis and marketing strategy, and projected profits and losses. Business plans serve as an operating model for the business and outline financial expectations for potential investors.

Buying on margin       When an investor borrows money from a broker to buy a security. You can borrow up to 50% of the purchase price. If the value of the stock goes up, you earn all the gains on the investment, even though you borrowed half of the initial investment. Of course, you need to pay back the borrowed amount to the brokerage, which charges interest for the amount you have borrowed. If the value of the stock falls, you will owe the brokerage for the losses.

Call     In options trading, the right to buy a specified number of shares at a set price by a specific date. Investors buy call options when they think the price of a stock is going up and want to lock in the current strike or exercise price.

Capital gain    The positive difference between an asset's purchase price and selling price.

Cash    In an investment portfolio, the relatively stable investments that can be easily changed into currency, such as a checking account, Treasury bills, a money market account, or a money market mutual fund.

Certificate of deposit (CD)    An FDIC-insured investment offered by banks that guarantees a specified rate of return for a specified term. It is generally considered a conservative investment.

Closed-end mutual fund         A mutual fund that has a set number of shares available to investors. You buy and sell closed-end mutual funds on the open market. The supply and demand for a closed-end mutual fund determines its price, not its net asset value.

Commissions  A fee brokerages charge when securities are bought or sold

Contrarian investing  A method of investing: one ignores market trends and buys neglected and depressed stocks of well-managed companies. Contrarians select the opposite of what most people are investing in at a given time by looking for healthy companies in unpopular industries or overlooked firms. A contrarian adviser tends to buy stocks with low P/Es.

Covariance     A measure that reflects both the variance (volatility) of a stock's returns and the tendency of those returns to move up or down at the same time relative to other stocks (their correlation). Covariance allows one to see if two stocks tend to move up or down together and how large those movements tend to be.

Debt-equity ratio        The ratio of a company's liabilities to its equity. Long-term debt-equity is the ratio of a company's long-term liabilities to its equity. Total debt-equity is the ratio of a company's long-term and current liabilities (debt that will be paid off within one year) to its equity. The higher the level of debt, the more important it is for a company to have positive earnings and steady cash flow. Debt requires the timely payout of interest to debt holders, so it is important to analyze a company within the context of the likeliness that it will have adequate resources to meet its payments in the future. Debt-equity ratio is most useful for comparing companies within the same industry.

Deflation         Deflation occurs when consumer prices fall. Most people think of the Great Depression when deflation is mentioned. But mild deflation, just like mild inflation, can be good for the economy, and stocks historically have done well during such times. A severe deflation, however, can be devastating, as assets, such as real estate and stocks, decline in value along with consumer prices. People feel less wealthy and spend less money, and the economy eventually turns into a depression.

Derivative      An investment contract based on an underlying investment called an "instrument." The most common type of derivative is an option contract, which involves the right to buy or sell the underlying instrument at an agreed price. Futures contracts are also derivatives.

Dividend         An amount of money or stock that a corporation pays to its shareholders quarterly. Typically, only larger companies pay dividends; smaller companies need to invest their own profits to grow.

Dollar-cost averaging            An investment method in which you put the same amount of money into an investment at regular intervals, such as every month. As the market price of the investment rises and falls, you end up buying more shares when prices are low and fewer shares when prices are high. This way, you don't have to track the market and time your purchases (that is, buy low, sell high).

Dow Jones industrial average (DJIA)          A weighted average of 30 widely-traded blue chip stocks (such as IBM and Coca-Cola). The closing prices of these 30 stocks are added and then divided by a factor that accounts for stock splits and other market changes. Because these stocks are in a variety of sectors and are actively traded, they are considered a good reflection of the market.

Earnings         A corporation's profits. An earnings report is a statement a company issues to shareholders and to the public declaring its current profits on either a quarterly or annual basis.

Earnings growth rate The percentage change in earnings per share (EPS), usually reported for a year, or on an annualized basis. The future earnings growth rate is an important component in the PEG ratio, an indicator of a stock's potential. To calculate future EPS growth rates you need earnings estimates.

Earnings per share (EPS)      The net income (earnings) of a company for the past 12 months divided by the current number of shares. For example, if a company has million in net income and 4 million outstanding shares, then its earnings per share is .00.

Earnings yield            Also known as Earnings-price ratio (EPR). A corporation's earnings per share divided by its current stock price. It is used to compare the attractiveness of stocks, bonds, and money market instruments.

Ex-dividend (Ex-Div) Time period between a company's announcement of a dividend and the payout date. When a stock is trading ex-dividend, it means that investors who buy the company's stock will not be able to collect the most recently declared dividend. In stock listings, ex-dividend is indicated by a lower-case "x".

Exercise price            Also known as Strike price. In options trading, the exercise price is the specified price at which one can buy or sell the underlying security of the call or put.

Expense ratio The percentage of total investment that shareholders pay annually for mutual fund management fees and operating expenses.

First Boston High Yield Index           An index of junk bonds rated BB or lower by S&P or Moody's.

Fixed-income investment       An investment that pays the same rate of income every year (for example, bonds).

Forward P/E    A stock’s price-earnings ratio for the current fiscal year. The forward P/E, uses earnings estimates for the current year (versus over the last 12 months), and gives investors an even better idea of whether a stock is a good buy. If earnings estimates go up, the forward P/E will be lower than the trailing P/E. That could be a signal that it’s a good time to invest in the stock.

Front-end load            A fee to purchase shares in a mutual fund.

Global fund     An international mutual fund that invests in securities from around the world, including the United States.

Growth fund    A mutual fund that invests in growth stocks. Investors who want high capital appreciation tend to invest in growth stocks, which are less conservative than income funds. Income from dividends usually is not a goal of these funds. Growth funds often have high P/E ratios because managers are willing to pay a premium for stocks of fast-growing companies.

Growth stock  Stocks of younger or smaller companies, have relatively high risk and represent relatively aggressive investments. Usually, they have grown significantly in the past 3 to 5 years and are expected to continue growing for the next few years. Growth stocks are usually purchased as a long-term holding, with the expectation that they will pay dividends (as well as appreciate in price per share) in the future, thus providing income at a later time.

Hedge fund     A type of investment fund that pools money from investors and invests in a variety of markets. Managers often use derivatives and other investment tools in the hopes of earning large returns. Hedge funds generally require a very high initial investment, charge a management fee of 1-2%, and take the first 20% of profits for themselves.

Hybrid Fund   A mutual fund that invests in a mix of stocks and bonds. Many of these funds buy blue-chip stocks and high-quality bonds. Risks and returns typically are moderate, and expenses can be high.

IPO lockup period      The period after an initial public offering when company insiders are prohibited from selling their shares. Lockup periods typically last 180 days, but they can be as short as 120 days and as long as 365 days. Underwriters insist that insiders such as managers, employees, and venture capitalists sign lockup agreements to shore up the stock price right after the IPO.

Illiquid investment     Any investment that may be difficult to sell quickly at a price close to its market value.

Income fund    A fund that invests in securities which provide investors with current income (such as bonds and stocks paying dividends).

Income stocks            Stocks of stable companies, having relatively low to moderate risk and representing relatively conservative investments. Income stocks tend to be in stable service industries, such as telecommunications and utilities, and can offer both higher-than-average dividend payments and the possibility of capital appreciation.

Index   A quantitative measure of the total returns that have been earned by some underlying group of securities (can be stocks or bonds) over a fixed period of time.

Index fund      A mutual fund that invests in the stocks upon which an index is based. Index fund performance closely mirrors the performance of the index itself.

Inflation          A rise in the price of commodities and services, which occurs when spending increases faster than supply. Moderate inflation is an expected result of economic growth.

Initial public offering (IPO)   The first time a company sells shares of its stock to the public. Also known as going public, an IPO can generate funds for working capital, debt repayment, acquisitions, and a host of other uses.

Intrinsic Stock Price  The true value of a company divided by the number of shares outstanding. If the intrinsic value of a stock is higher than its market price, then you have an undervalued stock that may have high potential.

Junk bonds     Low-rated, high-yield securities issued by companies with low credit ratings. Junk bonds are often issued for use in takeovers and buyouts.

Large-Cap Blend Fund          A mutual fund that invests in stocks with a median market capitalization of billion or more, offering a blend of growth and value characteristics. Blend funds typically are less risky than growth funds, and large-cap funds typically are less volatile than mid-cap and small-cap funds, and more likely to pay dividends.

Lehman Brothers Aggregate Bond Index                A popular benchmark index investors can use to gauge the performance of bonds or bond funds (like the S&P500 of bonds). The index is comprised of the Lehman's Government/Investment Grade Corporate index, the Mortgage Backed Securities index and Asset Backed Securities index.

Listed  A security that is traded on an organized stock exchange. Securities must meet certain requirements to be listed on a major exchange. A company that stumbles and no longer meets the requirements can be delisted, or taken off the exchange.

Margin account          A special type of brokerage account allowing investors to buy certain securities with money borrowed from the broker. A margin account is established when an investor wants to buy securities on margin or short stocks.

When buying on margin or shorting stocks, an investor must have a minimum amount of cash or securities deposited with the broker (this amount is known as the margin). Since 1945, the initial margin required has been between 50 and 100 percent of the security's purchase price. Minimum maintenance requirements are also imposed by the major stock exchanges and by brokerage firms.

Margin call     When an investor has bought stocks on margin and the value of that stock falls too low, the broker may issue a margin call to the investor to obtain money to cover the decline. Stock exchanges, the National Association of Securities Dealers (NASD), and individual brokerages have established rules governing the percentage of a purchase that can be made on margin.

Market capitalization            The total number of a company's shares multiplied by the current price per share. For example, if a company has 15 million shares, and the current price per share is , then the company's market capitalization is 0 million ( x 15 million).

Market index A statistical composite of representative stocks. The Dow Jones Industrial Average, the Standard & Poor's 500, and the Nasdaq Composite are the three most widely quoted market indexes.

Market outperform    An analyst’s rating that indicates a stock is expected to grow faster than the market as a whole. The benchmark index often used is the S&P 500.

Market share             A measure of how dominant a company is in its industry, determined by expressing a company’s revenues, sometimes for a specific product or service, as a percentage of the industry’s overall revenues for similar products or services. Growing market share is a bullish sign while declining market share can be a negative indicator.

Market value The market value of a security equals the market price per share times the number of shares.

Mid-Cap Blend Fund A mutual fund that invests in stocks with a median market capitalization between billion and billion that blend growth and value characteristics. Blend funds typically are less risky than growth funds.

Mid-cap stock            A company with a market capitalization of between billion and billion.

Money market           A market for short-term debt instruments (generally of less than one year) such as certificates of deposit, commercial paper, banker's acceptances, Treasury bills, and discount notes of the Federal Home Loan Bank and the Federal National Mortgage Association. Money markets offer safety and liquidity.

Morgan Stanley Capital International All Country Index   A market-weighted index of stocks from 45 countries.

Morgan Stanley Capital International EAFE ex-Japan Index        An aggregate of 21 individual country indexes (excluding Japan). This index is considered a general benchmark for international stocks.

Morgan Stanley Capital International Europe Index          An index of stocks in 15 developed European markets.

Morgan Stanley Capital International Pacific Ex-Japan Index      An index of stock markets in Australia, Hong Kong, New Zealand, Singapore and Malaysia.

Morgan Stanley Capital International Pacific Index           An index of stock markets in Australia, Hong Kong, Japan, New Zealand, Singapore and Malaysia.

Morgan Stanley Capital International World Ex-U.S. Index          An index of stocks from 21 developed-country markets, excluding the United States.

Morningstar   One of the leading mutual fund rating services. A five star rating is Morningstar's top rating. Morningstar's rating has two distinct parts: a risk-assessment measure and a load-adjusted performance (return) measure. Morningstar calculates each rating for three time periods: three, five, and ten years, when available. (A fund must have at least a three-year track record before Morningstar will rate it.)

Morningstar categorizes funds in terms of investment philosophy. The various classes are developed by Morningstar and range from classes such as "Growth" and "Foreign Stock" to "Specialty-Communications." Morningstar determines a fund's extended asset class by reviewing information in the fund's prospectus or studying how a fund is marketed.

Mutual fund    A group of securities owned by a group of investors and managed by investment professionals who make buy and sell decisions for the group. Investors benefit from mutual funds in two ways: they can diversify their holdings more easily with a smaller amount of money (because the fund has the money to buy shares in many different types of securities); and they can rely on investment professionals to make trading decisions for them.

Nasdaq Stock Market           The second largest stock market in the United States. Launched in 1971, the National Association of Securities Dealers Automated Quotation (Nasdaq) market is the nation's first electronic stock market, linking buyers and sellers via a computer network. Brokers and dealers make a market in individual stocks by maintaining an inventory in their own accounts. They buy or sell when they receive orders from investors.

National Association of Securities Dealers (NASD)           The nonprofit organization that runs the Nasdaq Stock Market and the American Stock Exchange under its Nasdaq-Amex Market Group subsidiary. The Securities and Exchange Commission must approve any rule changes affecting trading or listing qualifications.

Net asset value (NAV)          The value of one share of a mutual fund. Except for money-market funds, the value of a mutual fund share usually changes daily. The net asset value comes from dividing the value of all the fund's holdings by the number of shares in the fund.

New York Stock Exchange (NYSE)  The largest and one of the oldest stock exchanges in the world. The NYSE traces its beginnings to 1792 when brokers and merchants on Wall Street signed the Buttonwood Agreement, detailing how they would trade securities. As a central auction market, the NYSE conducts business on a trading floor where traders buy and sell securities from specialists, or market makers in a specific stock. It has the most rigorous listing requirements of any U.S. market, looking at a company's financial strength, its position in its industry, and the direction of the industry. Qualifying companies must pay a fee to list their stocks and an annual fee to keep the listing current.

Nikkei Stock Average           The most widely quoted Japanese stock market index. Nihon Keizai Shimbun, parent of the major business newspaper of the same name, calculates the Nikkei. The Nikkei shows the average price for 225 issues, weighted in much the same way as the Dow Jones Industrial Average. The companies that make up the Nikkei are chosen to reflect the overall performance of the Japanese stock market.

No-load mutual fund  A fund that has no sales fees to purchase or sell shares of the fund.

OTC Bulletin Board   An electronic, regulated quotation service for National Association of Securities Dealers market makers. The service displays real-time quotes, last-sale prices, and volume information for more than 6,500 national, regional, and foreign securities that are not traded on an organized stock exchange. Sometimes called penny stocks as a result of their often low prices, these thinly traded securities are considered highly speculative because they are often issued by small, untested companies.

Open-end fund            The most typical type of mutual fund, with the number of shares available to investors limited only by the fund manager's discretion and the amount of money coming in to the fund from investors. You buy and sell open-end mutual funds directly through mutual fund companies or brokers. The net asset value (NAV) for an open-end mutual fund determines its price.

Option The right to buy or sell an investment instrument, usually a security, at a previously agreed price known as the strike price. The option buyer or seller pays a premium to lock in the price of the underlying investment without initially having to buy or sell the investment.

Order type      The kind of order you wish to place for a securities trade. Market orders are orders to buy or sell at the best available price at the time the order is placed. If you place a market order outside market hours, the order will be executed at the best available price when the market opens. When you place a limit order, you specify a price at which you want your order to be executed. When you place a stop order, you specify a price (called the "stop price") at which the stock must trade. Your order will be executed at the market price once the security has traded at the stop price. Unlike a limit order, a stop order offers no guarantee that the trade price will be as good as or better than the stop price. An all or none order ensures complete execution; the order is not executed unless it can be executed in full. Limit orders, stop orders, and all or none orders remain open through the end of the day or until cancelled (maximum 90 days), depending on the duration you specify. A fill or kill is an order to place a trade at a price you specify, immediately and in entirety. If the fill or kill cannot be executed immediately and completely, it is automatically cancelled.

Outstanding shares                Shares of stock that are owned by investors.

Over-the-counter (OTC)        A stock that is not listed on any national stock exchange. OTC stocks are often from young, untested companies that are unable to