12b-1 fee

A method of charging service- or distribution-related expenses directly against fund assets. "12b-1" refers to the 1980 U.S. Securities & Exchange Commission rule that permits the use of these plans. A fund is required to include any 12b-1 fees in its stated expense ratio.

401(k) plan

A type of defined contribution plan (defined by section 401(k) of the Internal Revenue Code) that allows an employee to elect to defer income by making pre- or post-tax contributions to an investment plan. Contributions may be matched at some level by employers. Contributions and earnings grow tax deferred until withdrawn.

403(b) plan

A retirement plan for employees of nonprofit organizations such as universities, churches, or public schools. The employee can contribute a portion of salary to the plan each year, and the contributions and earnings grow tax-deferred until withdrawn.


account registration

Includes the name(s) that appear on your accounts.

active portfolio management

Management of a fund's investment portfolio that seeks to exceed the returns of an unmanaged ("passive") benchmark or index. Active managers may rely on research, market forecasts or quantitative models as well as their own judgment and experience in making investment decisions.

accrued dividend income

An accrued dividend is remuneration (monetary payment) accumulated but not yet paid by a company to its shareholders.

accrued interest

Interest which accumulates on an investment, but has not yet been paid to the investor is called accrued interest.

advisory fee

The amount a fund pays to its investment advisor for the investment management associated with overseeing the fund's portfolio. Also referred to as a Management Fee.

after-tax return

The return from an investment after all income taxes have been deducted. By comparing after-tax returns investors can determine which investment makes the most sense based on their tax brackets.


A measure of the incremental return generated from active portfolio management.

alternative minimum tax (AMT)

The federal income tax created by adding normally deductible tax preference items back into adjusted gross income. If the income tax calculated by this method is higher than the regular tax liability, the regular tax and the amount by which the AMT exceeds the regular tax are paid.

alternative minimum tax (AMT) - (non-AMT)

Income exempt from the Alternative Minimum Tax.

AMT Bonds

Certain types of municipal bonds whose income is subject to the alternative minimum tax (AMT). AMT bonds include those issued to finance such private purpose activities as industrial redevelopment and sports stadium construction.

American depository receipt (ADR)

A method of investing in foreign stocks by trading negotiable receipts issued by a U.S. bank representing shares of a foreign corporation.

American Stock Exchange (AMEX)

The second largest stock exchange in the U.S. Companies that trade on the AMEX are generally smaller than those traded on the New York Stock Exchange.

annual report

A legally required document that every fund sends to its shareholders within 60 days after the end of the fund's fiscal year. The annual report describes the fund's financial condition and performance and includes a list of portfolio securities and an audited financial statement.

annualized rate of return

The average return over a stated number of years, taking into account the effect of compounding. For example, a 100% return over five years is equivalent to an annualized rate of return of 14.9% per year.

annualized total return

Determined by subtracting the initial investments from the redeemable value of the investment at the end of the investment period, dividing the remainder by the initial investment and expressing the result as a percentage. For multiple years, 1 would be added to the results, this number could then be raised to the power of 1/years annualized - 1 to find the result of a multiple year annualized return. The calculation assumes that all income and capital gains distributions by the Fund have been reinvested at net asset value (share price) on the ex dates during the period.

asset allocation

The process of apportioning your investment across various classes of financial assets, such as stocks, bonds, and short-term reserves. According to financial experts, the investment mix that you choose has a greater impact on your long-term investment results than the performance of individual investments that you select.

asset allocation fund

A mutual fund that invests its assets in a wide variety of investments that may include domestic and foreign stocks and bonds, government securities, commodities, and real estate. Some asset allocation funds keep the proportions allocated between different investments relatively constant, while others alter the mix as market conditions change.

auction rate preferred

Preferred stock issued by leveraged closed-end funds. The shares are bought or sold at weekly auctions. The rates paid on the shares are set by the auction.

automatic investment plan

See Systematic Investment Plan.

automatic withdrawal plan

See Systematic Withdrawal Plan.

average annual total return

This is a commonly used method to express an investment's performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment's actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered.

average cost of leverage

The sum of preferred share dividends, interest paid on debt, and leverage costs associated with a fund’s leveraged derivative investments, divided by the fund’s average leverage amount, over 6 months.

average effective maturity

For a bond fund or defined portfolio, the weighted average of the effective maturity dates of the fixed-income securities in the fund's holdings. A bond's effective maturity takes into account the possibility that it may be called by the issuer before its stated maturity date. In this case, the bond trades as though it had a shorter maturity than its stated maturity.

average weighted / median market capitalization

The market capitalization of a company is equal to the number of the company's common shares outstanding multiplied by the current price of the company's stock. The average market capitalization and the median market capitalization of a mutual fund's portfolio give a measure of the size of the companies in which the fund invests.

average maturity

For a bond fund or defined portfolio, the average of the stated maturity dates of the fixed-income securities held. In general, the longer the average maturity, the greater the fund's or defined portfolio's sensitivity to interest-rate changes, which means greater price fluctuation. A shorter average maturity usually means a less sensitive, and consequently, less volatile, portfolio.

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balanced fund

A fund that seeks to provide both current income and long-term growth of principal by investing in a combination of stocks, bonds, and other securities.

basis point

One one-hundredth of one percentage point, or 0.01%. For example, 25 basis points equals 0.25%.

bear market

A prolonged period of declining stock prices, typically defined as a decline of 20% or more from the stock market high.


A standard-often an unmanaged index-used for comparative purposes in assessing an investment's performance.


A recipient of proceeds from a qualified retirement plan, from a will or trust, or from an insurance policy upon the death of the registered owner.


Property left to an heir under the terms of a will.


A measure of the variability of the change in the share price for a fund in relation to a change in the value of the fund's market benchmark. Securities with betas higher than 1.0 have been, and are expected to be, more volatile than the benchmark; securities with betas lower than 1.0 have been, and are expected to be, less volatile than the benchmark.

bid price

The price at which you can sell (redeem) a defined portfolio's units or a mutual fund's shares, determined by deducting any applicable contingent deferred sales charge from the net asset value (NAV) per unit/share. Also known as the redemption price.

bid to bid

A rate of return for a defined portfolio's performance. This return assumes the portfolio's value at the purchase date and does not include sales charges.

bid to liquidation

A rate of return for a defined portfolio's performance. This return assumes the value of a unit redeemed today and includes all deferred sales charges and past expenses, but does not include an upfront sales charge.

blue-sky laws

State securities laws that require mutual funds, closed-end funds, and defined portfolios to register their shares and to provide details on each share class so that investors can base their investment judgments on relevant data. The purpose of the laws is to prevent securities fraud -- in other words, to protect investors from inadvertently buying a piece of "blue sky."


A type of IOU issued by corporations, governments, or government agencies. The issuer typically makes regular interest payments on the bond and promises to pay back, or redeem, the face value of the bond at a specified point in the future, called the maturity date. Bonds may be issued for terms of up to 30 years or more.

bond fund

A closed-end fund or open-end mutual fund that invests in bonds. Taxable bond funds typically invest in corporate bonds and/or U.S. government debt. Some focus on domestic bonds, others invest in international debt, including bonds from emerging markets. Other bond funds invest in municipal bonds; their interest is usually free from federal income tax and may be free from state and local taxes as well.

bond insurance

Insurance as to timely payment of interest and principal of a bond issue.

book value

The net worth of a business based on accounting values. Calculated by subtracting all liabilities, including debt and preferred stocks from total assets, and dividing by the number of shares of common stock outstanding.

bottom-up approach

An investment strategy that emphasizes evaluating individual companies' businesses before considering broad economic trends.


A financial firm registered with the Securities & Exchange Commission that trades investment securities such as stocks, bonds, ETFs, and closed-end funds to the public.

bull market

A prolonged period of strongly rising security prices.

business cycle

The regular ebb and flow of economic conditions over time, characterized by fluctuating employment levels, industrial productivity, and interest rates.

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callable bond

A bond whose issuer reserves the right to redeem (or "call") it before it is due. This feature represents a risk to the investor in that bonds are generally called when interest rates fall, and thus usually can't be replaced with a similarly yielding issue of the same quality.

call features

Call features include the percentage of issues maturing or presently being scheduled to be called from the portfolio in each specified year. Calculations are based upon scheduled calls or maturities.

call option

The right but not the obligation to buy a given security within a particular time, or on a specified date, at a specified price.

call protection

A provision in a bond's indenture (the legal agreement between the borrower and the lender) setting a certain period of time during which the bond cannot be redeemed by the issuer.

call risk

The possibility that callable bonds held by a defined portfolio or mutual fund will be redeemed prior to maturity.

capital appreciation

An increase in the value of a fund's securities, reflected by the appreciation of its net asset value per share. Capital growth is a specific long-term objective of many stock mutual funds.

capital appreciation fund

A mutual fund that seeks maximum capital appreciation by investing primarily in stocks with above-average growth potential and often greater than average risk.

capital gain/(loss) - funds

The difference between the sales price of a capital asset, such as a closed-end fund, mutual fund, stock, bond, or other security, and the cost basis of the asset. If the sales price is higher than the cost basis, there is a capital gain. If the sales price is lower than the cost basis, there is a capital loss. Short-term capital gain refers to a gain on assets owned for one year or less. Long-term capital gain refers to a gain on assets owned for more than one year. Net capital gains generated by a mutual fund from the sale of securities in its portfolio are distributed to shareholders, usually once a year in December.

capital gain/(loss) - defined portfolios

The difference between the price paid (offering price) for a unit of a defined portfolio and the selling price (if sold before maturity or termination of the portfolio) or maturity/termination value. If the selling price or maturity/termination value exceeds the price paid, a capital gain is realized. If the maturity/termination value exceeds the selling price, a capital loss is realized.

capital gain distribution

A payment to fund shareholders of net capital gains realized on the sale of the fund's securities. The net asset value of the fund is reduced by the amount of the distribution.

capital growth

See capital appreciation.

capital structure

The specific mix of a company's debt and equity. Debt generally comes in the form of bond issues or notes payable, while equity is classified as common stock, preferred stock or retained earnings.


A company's long-term debt plus its equity plus its retained earnings.

carry trade

A strategy that involves borrowing at a comparatively low rate and investing in a security that pays a higher rate.

cash equivalent

A short-term money-market instrument, such as a Treasury bill or repurchase agreement, of such high liquidity and safety that it is virtually as good as cash.

cash reserves

Cash deposits as well as short-term bank deposits, money market instruments, and U.S. Treasury bills.

Certificate of Deposit (CD)

An FDIC-insured, interest-bearing debt instrument issued by a bank, which requires the depositor to keep the money invested for a stated period of time.

closed-end fund

A closed end fund is a type of investment company that, like a mutual fund, uses a professional manager to invest the fund's assets in a diversified selection of securities. The fund is closed end, which means a limited number of shares are issued during an IPO. Fund shares are then bought and sold on an exchange and may be purchased in regular brokerage accounts, retirement plan accounts, and trust or custodial accounts.


Assets or property pledged by a borrower to secure a loan. The assets or property may be seized by the lender if the borrower defaults.

commercial paper

Corporate promissory notes issued to provide short-term financing, sold at a discount and redeemed at face value.


The fee an agent or broker receives for arranging the purchase or sale of a fund, closed-end fund share, stock, bond or other security.


A physical good, such as an agricultural product or metal, that is interchangeable with other goods of the same type. Commodity futures (contracts for the future delivery of a standardized amount of the commodity) are traded on exchanges such as the Chicago Board of Trade.

common stock

A security that represents ownership in a public corporation.


The growth that comes from investment income and gains on both the original principal and the reinvested income and capital gains of an investment.


A printed record of recent transactions sent to you when distributions are paid or other business is transacted. Short for confirmation.

Consumer Price Index (CPI)

The change in consumer prices determined monthly by the U.S. Bureau of Labor Statistics, often cited as a general measure of inflation.

contingent deferred sales charge (CDSC)

The sales charge paid if you redeem B or C shares within a certain period after purchase. This fee decreases the longer you hold the fund's shares, and often declines to zero after a certain number of years.

convertible bond

A corporate bond that can be exchanged for a specified amount of the company's common or preferred stock, usually at the option of the bondholder, at certain times during the life of the bond.


A measure of the curvature in the relationship between bond prices and bond yields.


A relatively short-term drop in stock prices, usually defined as a decline of 10% or more from the stock market's high.

cost basis

The cost of an investment, used as the basis for calculating and reporting capital gains or losses. It is adjusted for stock splits, distributions, and return of capital.


The interest rate stated on a bond when it is issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate".

coupon rate

The interest rate that an issuer promises to pay over the life of a debt security, such as a bond, expressed as a percentage of face value. Common practice is to pay half the annual rate semiannually.


A promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out.

credit rating

An evaluation of the creditworthiness of a debt security by an independent rating service such as Moody's, Fitch, or Standard & Poor's.

credit risk

The potential for default by an issuer on its obligation to pay interest or principal on debt securities. U.S. government securities are usually considered to have very little credit risk.

credit spread

The difference between the interest notes of securities that are identical in all material respects except for quality rating.

cumulative discount privilege

A way for a mutual fund shareholder to qualify for a reduced sales charge by combining investments in different funds made at the same time into a single transaction.

current distribution rate

See Current market distribution rate.

current market distribution rate

For a closed-end fund, the ratio of the most recent distribution paid by the fund divided by the market price of the fund as of the date of the calculation, multiplied by the number of distribution payments made in a year.

current yield

The rate of return on a bond based on the ratio of the bond's coupon income to its market price assuming the investor holds the bond to maturity. The calculation assumes that coupon payments can be reinvested at the same rate as the current yield.

CUSIP number

A nine-digit identifier used to uniquely identify every security publicly traded in the United States. The numbering system was developed by the Committee on Uniform Securities Identification Procedures.


The bank or trust that holds a defined portfolio's, closed-end fund's, or mutual fund's assets (stocks, bonds, cash, and other securities) and handles payments and receipts for the fund's securities transactions.

cyclical stocks

Stocks of companies whose main business experiences regular ups and downs in activity due to cyclical changes in the economy. The auto, chemical, paper, and steel industries, for example, are considered cyclical because their earnings tend to fall when the economy slows and increase when the economy is growing. Food and drug stocks are generally considered to be non-cyclical, since food and medical care needs continue no matter what economic conditions are.

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debt securities

See fixed income security.

declaration date

The date the Board of Directors of the closed-end fund announces the amount of the dividend and/or capital gains distribution to be paid to shareholders.

deferred sales charge

See Contingent deferred sales charge.

defined benefit plan

A retirement plan that guarantees a certain benefit, usually based on average salary in the period before retirement and on the number of years of service. Employers bear the investment risk with defined benefit plans. Benefits in most cases are guaranteed up to a certain monthly limit by the Pension Benefit Guaranty Corporation, a federal agency.

defined contribution plan

A retirement plan offering a benefit that is dependent on total contributions made by the employer and the employee and on the investment returns earned by those contributions. Employees bear the investment risk with defined contribution plans.

defined portfolio

Also called a Unit Investment Trust; a portfolio of securities that remains fixed, except under certain circumstances, for the life of the trust. Shares of this portfolio are offered to individual investors and called "units."


A decline in the prices of goods and services. The opposite of inflation.


A financial instrument whose value is based on, or "derived" from, that of another security, asset, or market index, including stocks, bonds, commodities and currencies. Common derivatives include swaps, warrants, options, and futures. Derivatives can be used to gain indirect exposure to certain securities and to manage risk.

direct rollover

A distribution from a qualified plan or IRA account that is sent directly to the custodian of an IRA account and that is reported to the IRS as a rollover.


Amount (stated in dollars or a percent) by which the selling or purchase price of a security is less than its face amount. Also the amount by which the market price of a closed-end fund is less than the fund's Net Asset Value.

discount bond

A bond that currently is selling below par or face value; e.g., a $1,000 bond selling for $950.

discount rate

The interest rate charged by the Federal Reserve on short-term loans to member banks. Effectively, the floor rate for short-term interest rates in the economy.


A slowing of the rate at which prices are increasing. Not the same as deflation, when prices actually drop.


The periodic payment made by a fund to common shareholders, which may include net investment income, capital gains and/or a return of capital.

distribution rate

For a closed-end fund, the ratio of the most recent distribution paid by the fund divided by the market price of the fund as of the date of the calculation, multiplied by the number of distribution payments made in a year. Also known as Current market distribution rate.

distribution schedule

The schedule describing when a fund makes income, principal, dividend, capital gains, and/or other distributions.


A strategy of spreading investments among many different securities or sectors to reduce the risk of owning any single investment.


Distribution of a portion of a company's earnings, decided by the Board of Directors / Trustees to the shareholder. The amount of a dividend is quoted in the amount each share receives.

dividend yield

For a company's stock, the ratio of the dividends paid out by the company each year per share to the share's current market price.

dollar-cost averaging

An investment strategy of making investments of equal amounts at regular intervals in the same fund. Because the shareholder buys more shares at lower prices and fewer shares at higher prices, the average cost of the shares purchased will generally be lower than the average price over the investment period. However, dollar-cost averaging does not ensure a profit or protect against a loss in a declining market.

Dow Jones Industrial Average ("the Dow")

One of the most commonly used indicators of stock market performance, based on the prices of 30 major industrial companies.

Dividend Reinvestment Plan (DRIP)

A plan offered by a corporation or fund allowing investors to reinvest their cash dividends and capital gains distributions by purchasing additional shares or fractional shares on the dividend payment date.


A measure of the price sensitivity of a fixed income security or portfolio to changes in interest rates. Duration is stated in years. For example, if a bond has a duration of four years, the price of the bond is expected to change by approximately 4% for every one percentage point change in interest rates. The shorter the duration, the less price variability expected in the security's price due to changes in interest rates.

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earnings growth rate

The average annual rate of growth in earnings per share over the past five years for the stocks in a fund's portfolio.

earnings per share

A measure of a company's financial performance, calculated by dividing its earnings by the number of common shares outstanding.

effective duration

Effective duration (sometimes called option-adjusted duration) is a more refined calculation than the basic "modified duration" which is often used, and recognizes that the probability that a bond will be called or stay outstanding until maturity will vary if market interest rates change. Effective duration requires the use of a model for pricing bonds that adjusts the price of the bond to reflect changes in the value of the bond's "embedded options" (e.g., the right of the issuer to call the bond prior to maturity, or a sinking fund schedule) based on the probability that the option will be exercised. The model makes several assumptions so effective durations may not be comparable.

effective leverage

The total economic leverage exposure of the fund. This includes structural leverage as well as leverage exposure created by the fund’s investment in certain derivative investments, such as Tender Option Bonds. See Understanding Leverage for more detail.

emerging markets

Countries with developing economies, such as Brazil or Thailand, as distinguished from economically developed countries such as Japan or the U.S. Emerging market economies often tend to be more volatile than developed economies due to political or financial instability.

equity security

A type of security representing an ownership share in a corporation. Common stock, preferred stock, and convertible securities are all equity securities. Debt securities do not represent ownership.


The Employee Retirement Income Security Act of 1974 which created rules covering qualified retirement savings plans.

ETF (Exchange-Traded Fund)

A fund that trades on an exchange like a stock. Most ETFs track an index or are focused on a particular sector. For additional information on specific ETFs, go to

ETN (Exchange-Traded Note)

A type of unsecured, unsubordinated debt security. This type of debt security differs from other types of bonds and notes because units or shares of ETNs are traded on an exchange with their price based on the performance of a market index minus applicable fees. No period coupon payments are distributed and no principal protections exist.


The status of shares during the time between the announcement and the payment of a fund dividend or capital gains distribution. When a mutual fund is trading ex-dividend a purchaser is not entitled to the distribution.

ex-dividend date

The date on which a buyer of the security is no longer entitled to receive the most recently declared dividend. A fund's net asset value (NAV) drops by an amount equal to the dividend and/or capital gains distribution on the ex-dividend date. Most publications that list closing NAVs place an "X" or "XD" after a fund's name on its ex-dividend date.

expense ratio

The percentage of a fund's average net assets used to pay fund expenses. The expense ratio takes into account various fees, including management fees, administrative fees, and any 12b-1 fees.

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face value

A bond's stated redemption value at maturity. Most bonds have a face value, or par value, of $1,000.

fed funds rate

The interest rate which is charged by banks to lend to other banks needing overnight loans. The Federal Reserve Board sets the target for this rate which is the most sensitive indicator of the direction of short-term interest rates.

Federal Reserve System

The central bank of the United States, which has regulated credit in the economy since its inception in 1913. It includes the Federal Reserve Bank, 14 district banks, and the member banks of the Federal Reserve.

Financial Industry Regulatory Authority (FINRA)

A regulatory body created after the merger of the National Association of Securities Dealers (NASD) and the New York Stock Exchange's regulation committee. The Financial Industry Regulatory Authority is responsible for governing business between brokers, dealers and the investing public. By consolidating these two regulators, FINRA aims to eliminate regulatory overlap and cost inefficiencies.

fiscal year

An accounting period of 365 days (366 in leap years) for which a fund prepares financial statements and performance data. It is not necessarily the same as the calendar year (January 1 through December 31).

fixed-income security

A security that pays a specific rate of interest or dividends. Fixed-income securities include bonds, CDs, and most preferred stock.

fixed-income fund

A fund whose objective is to provide current income by investing in fixed-income securities.

floating rate securities

Bonds whose coupon rates adjust periodically based on a specified reset mechanism. Floating rate securities include most bank loans and some preferred stock.

forward commitment

A purchase or sale of a security at a specified price with delivery and cash settlement at a specified future date.

forward contract

A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date. Most forward contracts do not have standards and are not traded on exchanges.

forward interest rate swap

A contractual agreement between two counterparties under which one party agrees to make periodic payments to the other for an agreed period of time based on a fixed rate, while the other party agrees to make periodic payments based on a floating rate of interest based on an underlying index. Alternatively, both series of cash flows to be exchanged could be calculated using floating rates of interest but floating rates that are based upon different underlying indices.

front-end load

See up-front sales charge.

full faith and credit

An unconditional commitment to pay interest and principal on debt securities, usually securities issued or guaranteed by the U. S. Treasury and tax-exempt municipal general obligation bonds.

fund abbreviation

An abbreviation of a fund's name, commonly used in newspaper listings.

fund net assets

The total value of a fund's securities, cash, and other holdings, minus any outstanding debts.

fundamental analysis

The study of a company's business and financial condition to help forecast future movements in its stock price. Analysts consider the company's past record of earnings and sales as well as company assets, management, and markets to predict trends that could affect a company's stock. Also known as bottom-up analysis.


See futures contracts.

futures contracts

Exchange-traded, standardized agreements to buy or sell specific amounts of financial instruments or physical commodities for an agreed upon price at a specified time in the future.

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Generally Accepted Accounting Principles (GAAP)

The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

general obligation (GO) bond

A municipal bond backed by the general credit of the issuing organization. General obligation bonds are usually considered to be more secure than revenue bonds and thus often trade with a slightly lower yield.


An investment focus on companies with above-average expected growth in earnings or revenues.

growth and income

An investment focus on companies with above-average growth prospects in addition to paying dividends.

growth fund

A mutual fund whose objective is to provide long-term growth in assets primarily from capital appreciation.

growth investing

A style of equity investing that emphasizes stocks with above-average price-to-book ratios and sales and earnings growth. These companies typically pay below-average dividend yields.

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A strategy used to manage investment risk. In investing, hedging often involves the purchase of an offsetting position, such as a put option or futures contract, to guard against the risk of a market decline.

Heritage Foundation Index

The 2008 Index of Economic Freedom covers 162 countries across 10 specific freedoms such as trade freedom, business freedom, investment freedom, tax rates and property rights.

high-yield bond

A bond with a below investment-grade credit rating, BB or below. Because these bonds have a higher risk of default, they typically pay a higher rate of interest. Also known as junk bonds.

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income dividend

Payments to fund shareholders of dividends and interest earned by securities held by a fund. Income dividends are paid after deducting operating expenses.

income fund

A mutual fund that seeks current income rather than growth of capital. Income funds typically invest in bonds and/or high-yielding stocks.

income risk

The possibility that the income provided by a fund will fluctuate due to changing interest rates. Money market funds and short-term bond funds are most subject to income risk.


The formal contract governing a corporate bond that explains the bond's maturity, coupon rate, call privileges, and other rights and obligations.


A benchmark against which to measure performance, such as the Standard & Poor's 500 Index or the Lehman Brothers Aggregate Bond Index.

individual retirement account (IRA)

A retirement plan that allows individuals to contribute money on a tax-deferred basis to a retirement account each year.


A rise in the prices of goods and services, often equated with loss of purchasing power.

initial public offering (IPO)

A company's first public offering of common stock or a closed-end fund.

initial sales charge

The sales charge paid by the investor at the time of purchase of a fund. Also known as a front-end load.


A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.

interest-rate risk

The risk that a security will decline in price because of changes in market interest rates.

inverse floater

Inverse floating rate securities are created by depositing a bond, typically with a fixed interest rate, into a special purpose trust created by a broker-dealer. This trust, in turn, (a) issues floating rate certificates typically paying short-term interest rates in amounts equal to some fraction of the deposited bond's par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an "inverse floater") to an investor (such as a Fund) interested in gaining investment exposure to a long-term bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates' holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond's downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond's value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis.

investment adviser

An individual or organization that manages a portfolio and makes day-to-day investment decisions regarding the purchase or sales of securities. Also called a portfolio manager.

investment company

A company that is primarily engaged in the business of investing, reinvesting, or trading in securities such as mutual funds, closed-end funds, and unit investment trusts. Investment companies are governed by rules established in the Investment Company Act of 1940.


Securities whose issuers are judged by an independent rating service such as Standard & Poor's or Moody's Investors Service to have adequate to exceptional ability to pay interest and repay principal. Standard & Poor's and Moody's Investors Service designate bonds in their top four categories (AAA/Aaa, AA/Aa, A/A, and BBB/Baa) as investment grade. Bonds rated in the lower categories are considered to be non-investment-grade.

investment horizon

The length of time you expect to keep a sum of money invested.

investment objective

The financial goal that an investor or a fund pursues. A growth fund, for example, typically seeks to provide long-term growth (as opposed to current income).

investment style

A broad indicator of a fund's investment emphasis. For stock funds, the investment style often indicates whether a fund emphasizes stocks of large-, medium, or small-capitalization companies or whether it emphasizes stocks with growth or value characteristics or a blend of these characteristics. For fixed income funds, style may indicate whether it emphasizes investment-grade or junk bonds, domestic or international securities, or how much interest rate risk it takes.


The Internal Revenue Service, created in 1913 to administer the collection of federal income taxes.

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joint account

An account registered to two or more adult shareholders, who are joint tenants with the right of survivorship. Joint tenants with the right of survivorship share an undivided interest in an account; in the event of one tenant's death, the surviving tenants automatically inherit the property without the necessity of court proceedings.

joint tenants with rights of survivorship (JTWROS)

A form of account registration in which two or more individuals share an undivided interest in an account. In the event of one tenant's death, the surviving tenant(s) automatically inherits the property without the necessity of court proceedings. A minor may not be a joint tenant.

jumbo CD

A certificate of deposit issued by banks in amounts of usually $1 million or more paying higher rates of interest than smaller-denomination certificates. The ability to participate in jumbo purchases is one of the advantages of investing in a money market fund.

junk bonds

Bonds with a rating below investment grade, BB or lower. These bonds typically pay a higher yield than investment-grade bonds. Also known as high-yield bonds.

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Keogh plan

A retirement plan for self-employed individuals and their employees.

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large capitalization stocks

Definitions vary, but usually the stocks of companies whose market value is more than $5 billion. Large-cap companies are usually well-established corporations.

letter of intent (LOI)

A way for a shareholder to qualify for a reduced sales charge by promising to invest a certain amount within a specified time.


Using borrowed money to invest in securities or other assets.

leverage-adjusted duration

Duration is a measure of the price sensitivity of a bond or bond Fund's to changes in market interest rates. Generally, the longer a bond's or Fund's duration, the more the price of the bond or Fund will change as interest rates change. Leverage-adjusted duration takes into account the leveraging process for a fund and therefore results in a fund that is longer than the duration of the fund's portfolio of bonds.

Lipper Average

The Lipper Average is the average performance of all funds within a Lipper fund classification for any time period specified.


The ability to easily turn assets into cash. An investor should be able to sell a liquid asset quickly with little effect on the price. Liquidity is a central objective of money market funds.


See sales charge.

load fund

A mutual fund that assesses a sales charge.

long-term capital gain

A profit on the sale of a security or mutual fund share that has been held for more than one year. Long-term capital gains are typically taxed at lower rates than short-term capital gains.

long-term investment strategy

A strategy that looks past the day-to day fluctuations of the stock and bond markets.

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managed distribution policy

A fund that adopts a "managed distribution policy" undertakes to pay periodic (typically monthly or quarterly) distributions to common shareholders of either a static amount per common share, or a static percentage of some recent common share NAV or a trailing average of the common shares' NAV. The goal of a fund's managed distribution program is to provide common shareholders with relatively consistent and predictable cash flow by systematically converting its expected long-term return potential into regular distributions. As a result, regular distributions throughout the year will likely include a portion of expected long-term and/or short-term gains (both realized and unrealized), along with net investment income, and may from time to time also include a return of capital. Often, a fund seeks to establish a relatively stable managed distribution rate that roughly corresponds to the projected net total return from its investment strategy over an extended period of time. However, you should not draw any conclusions about a fund's past or future investment performance from its current distribution rate. Funds that pay distributions that include elements such as capital gains or returns of capital are required by law to provide contemporaneous notice containing a description of the extent to which distributions are comprised of such elements.

Funds noted as having a “managed distribution” are those that have received an SEC exemption from Section 19(b) of the Investment Company Act of 1940.

management company

The firm that organizes, manages, and administers an open-end mutual fund, a closed-end fund, an ETF, or other investment vehicle.

management fee

The amount a fund pays to its investment advisor for the investment management associated with overseeing the fund's portfolio.

market risk

The possibility that stock or bond prices will fluctuate.

market timing

An investment strategy based on predicting market trends. The goal is to anticipate trends, buying before the market goes up and selling before the market goes down. Because mutual fund investors who follow this strategy often rapidly buy and sell fund shares, many fund companies, impose restrictions on these types of investors in order to prevent disruption of normal portfolio operations and to help keep trading costs low for all fund investors.

market yield (also known as dividend yield or current yield)

An investment's current annualized dividend divided by its current market price.

maturity date

The date on which the face value of a bond must be repaid.

median market cap

The middle stock in a stock fund's portfolio in terms of market capitalization.

micro-cap stocks

Usually stocks with a market value of $250 million or less.

mid capitalization stocks

Definitions vary widely, but often stocks with market capitalizations between $2 billion and $5 billion. The Standard & Poor's Mid-Cap 400 Index is one commonly used mid-cap benchmark.

minimum investment

The smallest investment permitted when opening a new fund account or making an additional purchase.

modified duration

Duration is a measure of the expected period over which a bond's principal and interest will be paid, and consequently is a measure of the sensitivity of a bond's or bond fund's value to changes when market interest rates change. Generally, the longer a bond's or fund's duration, the more the price of the bond or fund will change as interest rates change. Modified duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates.

money market fund

A fund designed to provide safety of principal and current income by investing in securities that mature in one year or less, such as bank certificates of deposit, commercial paper, and U.S. Treasury bills. The price per share is fixed at $1.00, although that value is not typically guaranteed. Money market funds have the lowest risk of any type of mutual fund.


Multi-Strategy is the term used when several different asset classes are blended within a fund's portfolio. Generally both equity and debt investments are used in different measures to try to achieve a targeted mix of income and growth.

municipal bond

An IOU issued by a state, city, or other municipality to finance public works such as the construction of roads or schools. The interest is usually free from federal income tax and may be free from state and local taxes as well.

municipal bond fund

A mutual fund that seeks to provide income exempt from federal income tax, consistent with preservation of capital and the fund's risk characteristics, by investing in a portfolio of municipal bonds.


The preferred stock of Nuveen municipal bond closed-end funds, they are AAA rated (the highest rating possible) and pay tax-exempt dividends at rates that are reset every 7 days.

MuniFund Term Preferred (MTP)

Preferred shares featuring fixed rate dividends and fixed term with mandatory redemption. Listed and trade on NYSE.

mutual fund

An open-end investment fund that pools the assets of individuals and organizations to invest in a professionally managed portfolio of securities. See open-end mutual fund.

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The National Association of Securities Dealers, a self-regulatory industry organization charged with standardizing investment practices and establishing high ethical standards in the securities industry (see FINRA).


A nationwide electronic stock trading system established by the NASD for up-to-the-minute price quotations and the trading of more than 3,000 listed and over-the-counter (OTC) stocks.

net asset value (NAV)

The net market value of all securities held in a portfolio.

net asset value (NAV) per share

The market value of one share of a mutual fund or closed-end fund. For a fund, the NAV is calculated daily by taking the fund's total assets (securities, cash, and accrued earnings), subtracting the fund's liabilities, and dividing by the number of shares outstanding.

New York Stock Exchange (NYSE)

One of the oldest and largest stock exchanges in the U.S. operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist.

non-deliverable forward (NDF)

A cash-settled, short-term forward contract on a thinly traded or non-convertible foreign currency, where the profit or loss at the settlement date is the difference between the agreed upon exchange rate and the spot rate at the time of settlement, for an agreed upon notional amount of funds. This difference is calculated on the NDF's "fixing date"; the settlement date is the date by which the payment of the difference is due. NDF's are commonly quoted for time periods of one month up to one year and are normally quoted and settled in U.S. dollars. They have become a popular instrument for corporations seeking to hedge exposure to foreign currencies that are not internationally traded.

nominal interest rate

The interest rate unadjusted for inflation. Not taking into account inflation gives a less realistic number.

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open-end mutual fund

A fund that continues to sell shares in its portfolio and that will redeem those shares at the funds Net Asset Value at any time.


The right but not the obligation to buy or sell a given security within a particular time at a specified price. The right to buy is a call; the right to sell is a put.


Refers to an option that has no intrinsic value. For example, a put option in which the stock is selling above the exercise price or a call option in which the stock is selling below the exercise price.

over the counter (OTC)

A market, regulated by the NASD, for securities that are not listed on any organized exchange, as well as some listed securities traded off those exchanges. Most government, municipal, and corporate bonds are also traded over the counter. The trades take place by telephone or by computer.

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par value

The face value of a bond or stock as printed on the certificate. Bonds generally have a par value of $1,000.

payable date

The day on which a mutual fund pays its distributions to shareholders.

payment default risk (or default risk)

Although bond issuers promise to make regular interest payments on the bond and promise to pay back, or redeem, the face value of the bond at the maturity date, some issuers may fail to meet its obligations. Payment default risk refers to the risk that a specific issuer may not be able to meet these obligations.

peer group

A group of companies who share similar characteristics in which they operate. Characteristics can include (but aren’t limited to) industry sector, size, and investment strategy. Peer groups are determined by Morningstar.

portfolio allocation

The proportion of a fund's assets invested in different asset classes such as stocks, bonds and cash equivalents.

portfolio diversification

See diversification.

portfolio turnover

A measure of the trading activity in a fund's portfolio of investments -- that is, how often securities are bought and sold by the fund.

preferred stock

Traditionally, a class of non-voting stock with a dividend that is paid at a rate which is fixed for some period. Although preferred stock ranks below most debt, it has preference over a company's common stock in the payment of dividends and the liquidation of assets. Preferred securities are rated by credit rating agencies such as Fitch, Moody's, and Standard & Poor's. See taxable preferred securities.

preferred share assets

The total of all outstanding preferred shares issued by the fund, valued at liquidation preference.


The amount by which a bond's market price exceeds its par value. Also, the amount by which a closed-end fund's market price exceeds its Net Asset Value.

Premium or Discount

Refers to the amount which a closed-end fund market price exceeds (premium) or is less than (discount) the fund's net asset value (NAV).


A procedure used by state and local governments to refinance municipal bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to buy U.S. Treasury securities, the interest from which is used to make payments on the higher-yielding bonds. Because of this collateral, prerefunding generally raises a bond's credit rating and thus its value.

price/book ratio

The price per share of a stock divided by its book value (i.e., net worth) per share. For a fund, the ratio is the weighted average price/book ratio of the stocks in the fund's portfolio.

price/earnings ratio (P/E ratio)

The ratio of a stock's current price to its per-share earnings over the past year. For a fund, the ratio is the weighted average P/E of the stocks in the fund's portfolio. A forward P/E uses estimated earnings for the next four quarters in the denominator. P/E is often an indicator of market expectations about corporate prospects; usually, the higher the P/E, the greater the expectations for a company's future growth in earnings.

primary market

The primary market is the market for new issues of securities, such as closed-end funds. Primary is distinguished from the secondary market where previously issued securities are bought and sold.

private placement

The sale of equity or debt securities to a limited number of investors, often at the initial stages of a company's operations.


The official legal document that describes a fund and offers its units or shares for sale. By law, a prospectus must be given to all investors before they invest, or in connection with their purchase confirmation.


A written authorization that allows one person to act for another. For example, shareholders who are unable to attend a company's annual meeting may authorize the company's management to vote the shareholder's shares via a proxy.

public offering price (POP)

The purchase price of one mutual fund share, including any up-front sales charge.

put option

The right, but not the obligation, to sell a given security within a particular time or on a specified date at a specified price.

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qualified investor

Individual with at least $5 million in assets to invest.

qualified dividend income

Qualified dividend income ("QDI") is dividend income that is paid by a "qualifying" company and for which the recipient (shareholder) meets certain holding period requirements. A qualifying company for this purpose includes any domestic company (with special rules for REITs and regulated investment companies). In order for a foreign company to be treated as a qualifying company, either its shares must be traded on a qualifying exchange or the foreign company's country of origin must have a comprehensive income tax treaty with the United States that includes an exchange of information program.

qualified retirement plan

A retirement plan that meets certain IRS requirements and permits participants to defer taxes on contributions and investment earnings until withdrawal.

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R2 (R-squared)

A measurement of investment risk that shows how closely the portfolio's performance correlates with the performance of a benchmark index such as the Standard & Poor's 500 Index -- and thus indicates how closely that performance is linked to the broad market. A high R2 signifies that the portfolio's fluctuations generally reflect market moves, while a low R2 indicates that other factors tend to drive fund performance.

real estate company

A real estate company generally derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or residential real estate, or has at least 50% of its assets invested in such real estate.

Real Estate Investment Trust Act of 1960

Congress passed this federal law in 1960, which officially authorized Real Estate Investment Trusts (REITs). Its purpose was to allow small investors to pool their investments in real estate in order to get the same benefits as might be obtained by direct ownership, while also diversifying their risks and obtaining professional management.


A real estate investment trust (REIT) is a company that owns and, usually, operates income-producing commercial real estate, such as apartments, shopping centers, offices, hotels and warehouses.

REIT Modernization Act of 1999

The federal tax law change whose provisions allow a REIT to own up to 100% of stock of a taxable REIT subsidiary that can provide services to REIT tenants and others. The law also changed the minimum distribution requirement from 95 percent to 90 percent of a REIT's taxable income -- consistent with the rules for REITs from 1960 to 1980.

real interest rate

The amount by which the nominal interest rate is higher than the inflation rate. The real rate of interest is approximated by taking the nominal interest rate and subtracting inflation. The real interest rate is the growth rate of purchasing power derived from an investment.

real rate of return

The return on an investment after it is adjusted for the effects of inflation.

record date

The date that determines which shareholders will be paid the dividend or capital gain or other distribution. Only shareholders who are invested in the fund at the opening of business on the record date will receive the distribution on the payment date.

redemption price

The price at which a holder can redeem (sell) a fund's shares, determined by deducting any applicable sales charge from the net asset value (NAV) per share. Also known as the bid price.

reinvestment privilege

The right of shareholders to use income and/or capital gain distributions to purchase additional shares of their fund without paying a sales charge.

REOC (real estate operating company)

A real estate investment company. Unlike a REIT, a REOC is not required to pay out 99% of its dividends.

repurchase agreement (repo)

A contract under which one party "sells" securities to another party with an agreement to buy back or "repurchase" the securities at a fixed price on a future date. Repos are, in effect, a form of borrowing that is backed by collateral.

retained earnings

Net earnings not paid out as dividends, but retained by the fund. Retained earnings increase a fund's net asset value.

return of capital

A distribution you receive from a fund investment that is not from income or realized capital gains but rather represents either an unrealized gain or a return of a part of your original investment, or both. A return of capital is not taxable unless it exceeds your investment.

revenue bond

A municipal bond that is backed by the revenue from the project being financed. Revenue bonds are considered to be less securely backed than general obligation bonds, and thus may trade with higher yields.

rights offering (issue)

Issuing rights to a company's existing shareholders to buy a proportional number of additional securities at a given price (usually at a discount) within a fixed period.

rights of accumulation (ROA)

A way for a shareholder to qualify for a reduced sales charge by adding the value of shares already owned to the amount of a new purchase.


A tax-free transfer of cash or other assets from one retirement plan to another. An IRA holder may shift assets from his or her present IRA to another. Distributions from a qualified retirement plan may also be rolled over to an IRA or to another employer's plan.

rollover IRA

An individual retirement account that is established for the sole purpose of receiving a distribution from a qualified plan.

Roth IRA

An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible and qualified distributions are tax-free.

Russell 2000

A market-weighted index published by the Frank Russell Company measuring the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 is made up of 3,000 of the largest U.S. stocks and represents approximately 98% of the U.S. equity market. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

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sales charge

A fee you may pay when you purchase a fund. Depending on which option best meets your needs when buying a mutual fund, you may pay this fee either at the time of purchase (A shares), when you redeem shares (B shares) or on an on-going basis (C shares). The sales charge help cover selling costs as well as the cost of paying your financial advisor a commission for advising you on your purchase. The prospectus for each fund has specific details.

Sarbanes-Oxley Act of 2002

Also known as the U.S. Public Company Accounting Reform and Investor Protection Act. A law passed in the wake of major corporate and accounting scandals at prominent companies in the U.S. which is aimed at improving companies' accountability to shareholders. Named after sponsors, Senator Paul Sarbanes (D-MD) and Rep. Michael G. Oxley (R-OH), among other requirements, it sets standards for various aspects of corporate governance, financial disclosure, and auditing.

secondary market

After an initial public offering (IPO) of a security such as stock or a closed-end fund, the shares may be traded on an exchange or over the counter. The market for shares after an IPO is called the secondary market.

sector diversification

Indicates the percentage of a portfolio's total net assets invested in each of the major industry classifications that comprise the market in which the fund invests.

sector fund

A fund that invests primarily in a particular sector of the market, such as technology, precious metals, or health care. Sector funds are often more volatile than those which invest in a more diversified range of industries.

Securities and Exchange Commission (SEC)

The federal agency created by the Securities and Exchange Act of 1934 which administers the laws governing the securities markets. The SEC regulates the registration and distribution of shares of closed-end funds, mutual funds, and ETFs.

securitization (or securitized)

A security is a transferable ownership interest in some underlying asset. This includes investments such as stocks and bonds. Securitization is a process by which pooled assets or obligations (such as a mortgages or credit card debt) are converted into securities that can be traded by various retail and institutional investors. This process allows for the transfer of risks and cash flows from the obligation originator to a new set of investors. This generally increases the liquidity and ownership interests of these securities, while distributing risk among a larger set of investors.

SEC yield

A standardized measure of the current net market yields on a fund's investment portfolio. It is based on the net investment income for the 30-day period ending on the last day of the previous month divided by the highest offering price on that last day.

senior loan

A loan that takes priority over other debts of the issuer.

settlement date

The date when payment for a wire-order purchase or a wire-order redemption is received. Funds purchased through a dealer firm are normally settled five business days after the trade date. Mutual funds purchased directly by an investor settle on the day payment is due.

short-term capital gain

A profit on the sale of a security or a mutual fund share held for one year or less.

signature guarantee

A stamp or seal by a bank or brokerage firm or other financial intermediary that is a member of an Approved Medallion Guarantee Program (or other acceptable guarantor) on correspondence that authenticates your signature. A signature guarantee is required by the transfer agent for defined portfolios and mutual funds in order to process certain types of account activity (e.g. change of account registration) that you request. A notary public cannot provide a signature guarantee.

small capitalization stocks

The range of values varies, but stocks of companies whose market value is less than $2 billion generally fall into this group. Small-cap companies tend to grow faster than large-cap companies and typically use any profits for expansion rather than for paying dividends. They also are more volatile than large-cap companies and have a higher failure rate. The Russell 2000 Index, which includes the smallest companies of the Russell 3000 Index, is a commonly used index for small to mid-cap companies.

sovereign debt

Debt issued by a country's national government, often in a foreign currency.

Standard & Poor's 500 Index

A daily measure of stock market performance, based on the performance of 500 large-cap companies. Though it does not include transaction or management costs, the S&P 500 is often used as a yardstick for equity fund performance.

standard deviation

A measure of the degree to which a fund's actual returns varied from its average return over a certain period. The smaller the variation, the lower the standard deviation will be. The standard deviation is a common measure of volatility and risk.

statement of additional information (SAI)

An addendum to a mutual fund's prospectus that includes further disclosures about the fund's operations.

state municipal bond fund

Municipal bond funds whose objective is to provide current income that is exempt from regular federal, state and, in some cases, local income taxes by investing in a portfolio of municipal bonds from a single state.

street name account

An investor's account which is held in the name of a brokerage firm (in part to facilitate payment and delivery of securities).

structural leverage

The total of preferred shares and debt issued by the fund; this leverage is part of a fund’s capital structure.


An agreement between two parties to exchange a single payment or a series of cash flows over some period based on specified securities. There are many different kinds of swaps, including currency swaps, asset swaps, credit default swaps, and equity swaps. One of the most common swaps is an interest rate swap in which one party agrees to make a fixed rate payment in exchange for a floating rate payment for the counterparty.


A group of banks, investment companies, or other financial companies that agree to underwrite and distribute a security such as a loan or a closed-end fund.

systematic investment plan

An arrangement which permits regular investments in a mutual fund through payroll deductions, automatic transfers from a checking account, or automatic exchanges from another mutual fund.

systematic withdrawal plan

An arrangement that enables you to make regular withdrawals automatically from your mutual fund in the form of a check or an electronic transfer to your checking account.

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tax deferred

Income whose taxes can be postponed until a later date. Contributions to a 401(k) plan and earnings on those contributions, for example, are not taxed until they are withdrawn from the account, but when withdrawn, they are fully taxed at the tax rate applicable at the time of withdrawal.

taxable equivalent distribution rate

For a closed end fund, the taxable equivalent distribution rate represents the yield that must be earned on a fully taxable investment in order to equal the distribution rate on the closed-end fund on an after-tax basis. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 15%, the taxable equivalent distribution rate is lower. The taxable equivalent distribution rate shown is based on the fund's current distribution rate (on share price) on the indicated date and a federal income tax rate of 28% plus a state or city tax rate if appropriate. It is calculated by dividing the tax-exempt distribution rate by 1 minus the tax rate.

taxable equivalent yield

The yield an investor would have to realize on a fully taxable investment to equal the stated yield on a tax-exempt investment. It is calculated by dividing the tax-exempt yield by 1 minus the tax rate.

taxable preferred securities

Taxable preferred securities do not qualify for the dividends-received deduction for corporations (under Section 243 of the Internal Revenue Code of 1986, as amended). This is a relatively new asset class as most new issues have debuted since 1995. These securities often offer an additional yield spread versus other types of preferred securities due their tax treatment. They are usually junior liabilities of an issuer and pay either fixed or adjustable dividends.

The market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. Like other preferred securities, this class of stock has preference over a company's common stock in the payment of dividends and the liquidation of assets. Taxable preferred securities are generally divided into $25 par and institutional segments. The $25 par segment is typified by securities that are listed on the New York Stock Exchange and are quoted without accrued dividend income. The institutional segment is typified by $1000 par value securities that are traded over-the-counter an on accrued income basis.

tax year

The 12-month period used by an individual to report income for income tax purposes. For most individuals, their tax year is the calendar year.

tax-exempt bond

See municipal bond.

tax loss carry-forward

A tax benefit that allows an individual or a mutual fund to offset current profits with past losses.

technical analysis

Analysis of the supply and demand for securities using charts and graphs to identify price trends that may foretell future price movements.

Tender Option Bonds (TOBs)

Inverse floating rate security issued by a special purpose trust for the purpose of creating a leveraged bond security.

termination date

The date upon which an equity defined portfolio is terminated. Investors may then roll into a then-current equity defined portfolio, receive their distribution-in-kind or take their termination proceeds in cash.


Letters that identify a security for trading purposes. For example, a closed-end fund typically has a three-letter ticker, a mutual fund ticker symbol is usually four letters followed by an "X." The "X" indicates that the security is a Mutual Fund. Closed-end funds also typically have a five-letter ticker symbol representing per share Net Asset Value, which is usually the three-letter ticker surrounded by an “X” at the beginning and the end. For example, closed-end fund trading ticker JRS has a NAV ticker of XJRSX. NAV tickers do not trade.

top-down approach

An approach to investing in which the investor first looks at general trends in the economy and then chooses specific industries and particular companies that will benefit from these broad trends.

total borrowings

The total of all outstanding indebtedness of the fund.

total return

The return on your investment which takes into account the change in price of a fund's shares-capital appreciation-plus net investment income. The total return for a fund assumes the reinvestment of all distributions in additional shares of the fund.

trade date

The actual date on which your units or shares are purchased or sold.

traditional IRA

A personal, tax-deferred retirement account that allows you to make contributions from your current income. Your contributions may be tax-deductible subject to certain earned-income limitations and age restrictions.

transfer agent

An institution, usually a bank, used by an issuer of units or shares to maintain its unit holder and shareholder records and perform all account transactions.

transfer of assets

Refers to an IRA being transferred directly from one custodian or trustee to another. The IRA holder does not have actual receipt of the funds. All transfers are non-reportable transactions to the IRA holder and the IRS.

Treasury bill, note, bond

Negotiable debt obligations issued by the U.S. government and backed by its full faith and credit. Treasury bills are short-term securities with maturities of one year or less. Treasury notes are intermediate-term securities with maturities of 1 to 10 years. Treasury bonds are long-term securities with maturities of 10 years longer.

triple tax-exempt fund

A municipal bond fund whose dividends and interest are exempt from regular Federal, state and local income taxes within a particular state and locality.

turnover rate

See Portfolio Turnover.

Type of Preferred

Taxable Auction Market Preferred Shares, MuniPreferred® and Auction Market Preferred shares are auction rate preferred shares. Variable Rate Demand Preferred is a new form of preferred share featuring a put option.

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Uniform Gift to Minors act (UGMA)

State laws that allow any adult to contribute to a custodian account in a minor child's name without having to name a legal guardian or establish a trust.

undistributed net investment income (UNII)

Represents the life-to-date balance of a fund's net investment income less distributions of net investment income. UNII appears in shareholder reports as a line item on a fund's statement of changes in net assets.

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value investing

A strategy for equity investing that emphasizes stocks with below-average price-to-book or price-to-earnings ratios, and sometimes above-average dividend yields.

value stocks

Stocks that sell at relatively low prices in relation to their earnings or book value.

Variable Rate Demand Preferred (VRDP)

Preferred shares featuring floating rate dividends and a mandatory put option. Issued via private placement.

Variable Rate MuniFund Term Preferred (VMTP)

Preferred shares featuring floating rate dividends and fixed term with mandatory redemption. Issued via private placement.


The fluctuations in market value of a mutual fund or other security. The greater a fund's volatility, the wider the fluctuations between its high and low prices.

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weighted average rating factor (WARF)

A measure that is used by credit rating companies to determine the credit quality of a portfolio. This measure allows rating companies to look at a portfolio as a single security and assign it a single rating. WARFs are usually calculated by rating companies for collateralized debt obligations (CDOs).

wash sale

The sale and repurchase of the same asset within 30 days. The IRS does not allow an investor to claim a tax loss on a wash sale.

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Appears next to a mutual fund's listing in the newspaper to indicate that the fund recently paid a capital gain or dividend. This amount was previously included in the fund's net asset value and is deducted from the net asset value when it is paid out. The "x" stands for "ex-dividend."

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Yankee bond

A bond denominated in U.S. dollars and issued in the United States by foreign banks and corporations. This type of bond is known as a foreign bond.


The rate of return on an investment expressed as a percentage. See dividend yield and SEC yield.

yield curve

A graph or "curve" that depicts the yields of bonds of varying maturities, from short-term to long-term. The graph shows the relationship between short- and long-term interest rates. Long-term rates are typically higher than short-term rates. When short-term rates are higher than long-term rates, this is called an "inverted" yield curve.

yield spread

The variation between yields on different types of debt securities; generally a function of supply and demand, differences in maturities, or credit quality. Treasury bonds, for example, because they are perceived to be safe, will normally yield less than corporate bonds of the same maturity. Corporate bonds, then, are said to trade at a "spread" above Treasury rates.

yield to call

The yield on a bond assuming it is called by the issuer at the next available call date.

yield to maturity

The annual return on a bond, assuming the bond is held until its maturity date. It is calculated by dividing the bond's coupon payments by the current price of the bond and assumes that coupon payments can be reinvested at the same rate.

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Appears after a fund's name in the daily newspaper if the price isn't available in time to meet the NASDAQ reporting deadline, usually due to an extremely tight reporting schedule.


The z-score measures how many standard deviations the current discount is from the average discount, taking into account the discount’s volatility over a specific period of time. For instance, a 3-year z-score of -2.0 means that the discount is 2 standard deviations below the fund’s 3-year average discount, which statistically should occur only 2.3% of the time, given a normal distribution.

zero coupon bond

A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.

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