Glossary of Terms

  • Dictionary



    Accrued Interest


    Accrued interest refers to the interest that has accumulated since the last interest payment. The sum is calculated by multiplying the number of days since the last interest payment, by the coupon rate.

    Accumulation/Distribution Line


    A technical indicator which is used to predict the movement of prices and sustainability of the current trends. Accumulation/Distribution Line is a volume indicator. This means that it measures the quantity of shares traded within a given period. When the close is higher than the previous day’s, volume has “accumulated,” and a new data point, higher than the previous, is created. When the close falls below the previous day’s, volume has “distributed,” and a new data point, lower than the previous, is created.

    Divergences are an important consideration. A positive divergence occurs when the Accumulation/Distribution Line rises consistently, while prices fall. This could signify that prices will begin to rise soon.

    When the indicator is falling while prices rise, it is known as a negative divergence. This could signify that the soon prices will fall, as a result of a reversed trend.

    Active Management


    Active Management refers to the process of deliberately hand selecting and choosing specific investments in attempt to outperform the benchmark index. Active portfolio managers look for investments that are less risky or likely to perform better than others. They use indicators such as investment research, economic data, and market forecast in making their investment decisions. This is the opposite of indexing, or passive management.

    Actual 12b-1 Fee Ratio


    This is a calculation of the shareholder servicing and/or amount of distribution related expenses paid over its last fiscal year; paid according to the 12b-1 distribution plan of the fund.

    Affidavit of Domicile


    An Affidavit of Domicile is a document or statement written by the executor of an estate that affirms the place of residence of the decedent at the time of his death. Before transferring securities from an estate, it is necessary to verify the absence of any liens living in the decedent’s home state that may exist against them.

    After Tax Return


    The return on an investment after taking into account and deducting all income taxes.

    The return from an investment after all income taxes have been accounted for and deducted. The SEC has adopted a number of rule and form amendments requiring mutual funds to disclose standardized after-tax returns. The amendments require a mutual fund to disclose standardized after-tax returns for 1-, 5-, and 10-year periods in the risk/return summary of the prospectus.


    Back-End Load


    Back-end loads are imposed by some mutual funds. They are a contingent deferred sales charges which apply when you sell the fund’s shares within six or seven years subsequent to your purchasing them. A percentage of the value of the goods is charged. The percentage usually decreases every year that the charge applies and is eventually dropped. However, the asset-based annual management fee on back-end load funds is is higher than on front-end load funds. This is because the sales charge on front-end load funds is paid at the time of purchase.



    A bid price refers to the price which a broker or market maker agrees to pay for a commodity or security. This contrasts with the “ask price;” the price which another broker or market maker asks for that security. The “spread” is the difference between these two prices. Bid prices and ask prices are usually told to the media for over-the-counter transactions and commodities.


    Call Risk


    Risk that a bond might be redeemed before the scheduled maturity. The primary risk to the bondholder, here, is the possibility that investor will not be able to replace the bond’s returns with a bond of similar quality which pays the same yield.

    Capital Loss


    When an asset is sold for less than it was bought for, the difference between these two prices is called the capital loss. For example, if someone buys 200 shares of stock at $50 a share and sells when the price drops to $40 a share, the capital loss is $10 a share.


    Date of Maturity


    Also known as the maturity date. The ending date of a bond’s term, when its issuer pays the final interest payment and repays the principal. When the term is used relating to mortgages or other kinds of personal loans, the date of maturity is the date on which the final payment is due, and the debt is fully repaid.



    A dealer is a person or company which buys and sells properties for its personal account. Most brokerage firms act as both broker, making transactions on the client’s behalf, and dealer, making transactions on its own behalf, and therefore are known as broker-dealers.


    Efficient Market


    A market theory which dissuades investors from applying fundamental research to discover mis-priced or undervalued securities. The principal is that the investors’ full knowledge is already reflected in the market prices, which makes the market impossible to outperform.



    A physical or electronic marketplace where financial instruments such as commodities, securities and derivatives are traded. Exchanges ensure the orderly and fair exchange of these products.


    Federal Reserve


    This is the central bank of the United States, where the money supply and short-term interest rates are raised and lowered, in order to control the economy.



    The amount of outstanding shares a company has which are available to investors. A company that has 20 million outstanding shares, but only 15 million in the market for trading, has a float of 15 million shares. Larger floats, in general, are most stable than small floats. Small floats can lead to volatility since one large trade is able to affect the stock’s availability.


    Good ’til Canceled


    Also known as an open order, a good ‘til canceled (GTC) can be requested from your broker, enabling you to buy or sell securities for a specific price. The broker can issue the order or place an order online. The trade will then be executed as soon as the security reaches your indicated price. Your order remains in effect until you cancel it, it is filled, or the time limit which the brokerage firm has set for GTC orders is reached.

    GTCs orders are the opposite of day orders, which, if not filled, are cancelled automatically when the trading day ends.

    Gross Expense Ratio


    A fund’s gross expense ratio can be calculated by diving total gross expenses by the average net assets of the fund. When the gross expense ratio is not the same as the net expense ratio, it indicates the what the fund’s expenses would be, if it hadn’t waived some or all of its fees. Thus, it indicates the fee contracts, to some degree.




    Reducing the risk involved in one investment by making a second one. Generally, this involves the sale of a futures contract to market stock at a given price, or taking a counterbalancing position in an associated security.

    Holdings Details


    These details display the aggregate assets of the fund’s highest 10 portfolio holdings. The figure, shown as a percentage, is intended as a measure of portfolio risks and concentration. The greater the percentage is, the greater the concentration of the fund will be in a few issues or companies, and the greater the susceptibility of the fund to the fluctuations of the market in these holdings.




    Indicators are the mathematical calculations which are employed to measure the security performance and other current conditions and to forecast future trends. Some fundamental analysis indicators are the Consumer Price Index (CPI) and unemployment rates. Some technical analysis indicators are Fibonacci studies and moving averages.

    Inflation Risk


    The danger that the value of income or assets will erode when inflation reduces a country’s currency value.


    Joint Account


    An account established and owned, jointly, by two or three people.

    Joint Tenants with Rights of Survivorship


    In a joint account, the common agreement is that following the death of an account holder, the ownership of the assets in the account is passed to the surviving account holders. Depending on the sum of transferred assets, estate taxes may need to be paid. The transfer does, however, escape probate.


    Kroll Rating


    The Kroll Bond Rating Agency (KBRA) assesses the financial health of institutions and determines their probability of meeting credit obligations, then gives a credit measurement, known as a Kroll Rating. The credit rating of a bond or CD can help investors make informed decisions concerning the risk linked with owning the fixed income investment from the institution.

    Below is a scale which KBRA uses to rate financial strength. Each rating represents the ability of the issuing institution to fulfill its credit obligations under harsh financial, economic, and business conditions.

    A Highly likely

    B Likely

    C Fairly likely but susceptible to adverse change

    D Relatively weak

    E Likely to have financial problems

    NB New institution, less than three years old, not rated

    NT New savings & loan, less than three years old, not rated

    NR Atypical bank, bank holding company, savings & loan, or an institution missing key financial data necessary for rating

    Plus (+) or minus (-) modifiers may be used throughout ratings A-C, to indicate increased or decreased risk levels within particular rating categories.


    Last Exchange


    The last exchange on which a security has traded. Although securities can only be registered on one main exchange through the SEC, they can still trade on multiple other exchanges.

    Limit Order


    An order to either buy or sell a decided amount of shares at a particular price or better. The limit order only guarantees price; not execution. The order may be placed with additional instructions, such as GTC (good ’til cancelled) and AON (all or none).

    Buy limit orders are executed only when the market falls to the arranged price or lower. Sell limit orders are executed only when the market reaches the designated price or higher.


    Market Capitalization


    A value calculated by multiplying the current market price of one share by the amount of total outstanding shares. Market capitalization is applied when drafting a portfolio strategy as a foundation for asset allocation and risk/return parameters.

    Market Order


    An order to immediately buy or sell a stock at the best current price available. Market orders guarantee execution, but do not guarantee price.

    Be cautious in giving market orders for stocks with low average daily volumes; the current market price can be a lot lower than the ask price, which will result in a large spread. This means you could end up paying much more than you anticipated originally.

    Generally, buy market orders are executed at the ask price, and sell market orders are executed at the bid price.

    The order may not be placed with additional instructions, such as GTC (good ’til cancelled) and AON (all or none).

    Keep in mind that the execution price is not guaranteed and can be a few points lower or higher than the quoted ask/bid, particularly during fast markets.




    An option whose strike price is closest to the last sale of the underlying stock.

    Net Change


    Also referred to simply as change; the difference between the previous day’s closing price and the closing price of a current mutual fund, stock, bond, or latest price of a commodity contract.

    When a stock’s value rises, the net change is modified by a plus sign, as in +0.30, which means that the price rose 30 cents since the last trading day. When the stock’s value falls, the net change is modified by a minus sign.


    Offering Date


    The date when a bond or stock becomes available publicly for purchase. For example, the offering date of an initial public offering (IPO) is its first trading day.


    Passive Management


    The opposite of active management, passive management is a market strategy involving the selection of a benchmark index in order to assure that investment performance will be on par with the underlying index. This ensures that the investor will not outperform or underperform a market index.

    Performance Drag


    A decrease in portfolio performance caused by several factors. For example, when gains inside a portfolio are diminished by various expenses: transaction costs, research costs, management fees, etc. These expenses cause a negative effect, or drag, on the performance of the portfolio.

    A reduction of portfolio performance due to various factors. An example of performance drag occurs when gains within a portfolio are offset by various expenses, such as management fees, transaction costs, research costs, etc. These expenses create a drag or negative effect on the portfolio’s performance.




    The quantity of a trade is defined by the amount of contracts or shares traded on a security.




    A period lasting several months or more of severe economic decline which affects various divisions of the economy. A recession is identified following the negative economic growth in two consecutive quarters, as evaluated by a country’s gross domestic product (GDP).


    Safekeeping Account


    A traditional account which holds all of the client’s trades which are processed through a live broker. All stock and stock proceeds are kept in the account.

    Secondary Market


    When a brokerage account is used by investors to buy and sell securities, these transactions are made on the “secondary market.”

    Also called the Aftermarket, the secondary market hosts all of the trading rooms, electronic networks, and exchanges where these transactions take place. The issuer — government or company — which initially sold the security receives no profit from these trades, as it did when the securities were sold the first time.


    Tax Exempt


    Not liable to pay taxes.

    Total Net Assets


    A figure representing the total asset base, expenses, and net of fees of a fund. The figure is reported in millions of dollars.


    Unit Investment Trust


    Registered with the SEC under the Investment Company Act of 1940.

    An investment vehicle that buys an arranged portfolio of securities, such as mortgage-backed securities, government, municipal, or corporate bonds, preferred stock or common stock.

    Brokers sell the units in the trust to investors for a sales charge. When bonds mature, the trust expires. For equity funds, the trust expires at a designated future date. An undivided interest in both the income portion and principal of the portfolio is given to unit holders, proportionate to their investment of capital.




    The amount of shares traded over a specified period (typically a day) in an entire market or in a company’s stock. External events are typically the cause of any unusual market activity, either lower or higher than average.




    A warrant is issued by a corporation to allow you to purchase a company’s stock at a set price in a fixed period of time, usually 10 or 15 years, although sometimes no expiration date is given.

    Corporations generally issue warrant to motivate investors to obtain preferred stocks or bonds that will pay lower rates of dividends or interest than would be paid otherwise.





    The rate of a return for a security, expressed as a percent. Yield is generally calculated by dividing the annual profit in interest or dividends by the amount spent purchasing the investment.

    In the case of bonds, yield is the interest divided by the sum you paid. Current yield is the dividends or interest divided by the latest market price. With stocks, it is the dividend you collect per share divided by the price of stock per share.

    With bonds, the interest rate paid by your investment and the yield on your investment are occasionally the same. If, when buying a bond, you pay a price which is higher or lower than par, the yield will not match the interest rate.


    Zero Coupon CD


    Certificate of deposit sold at a discount to face value that will pay the entire face value at maturity.

    A certificate of deposit (CD) which was purchased at a discount to face value, that will pay the full face value when reaching maturity.


If you have a terminology question that isn’t covered in this Glossary, and/or would like to speak to an advisor, please don’t hesitate to contact us immediately. A member of our team will be happy to help with your enquiry.