A 401(k) is an employer sponsored investment account that allows employees to contribute a desired percentage or amount of income towards retirement. Your contribution to a 401(k) is tax deferred, which means you do not pay taxes until retirement.

A 10-K is a detailed annual report that is required to be filed with the Securities and Exchange Commission (SEC) within 60 days of a company's fiscal year end. 10-K's provide a thorough analysis of the company's status and include a business overview, a list of held equities, executive compensation.

A 10-Q is a detailed quarterly report that is required to be filed with the Securities and Exchange Commission (SEC) within 35 days of the end of each of a company's first three fiscal quarters (a 10-K takes its place after the fourth and final fiscal quarter).

A 403(b) is an employer sponsored plan that is similar to a 401(k) in that you can make tax-deferred contributions towards your retirement. 403(b)'s are reserved for employees that work in the public, religious, or other non-profit sectors.

529 plans are state sponsored college savings accounts for those looking to contribute tax-deferred savings towards their children's college expenses. Each state has slightly different rules and benefits for their 529 plans, prompting many parents to open plans in states where they are not a resident.

A balanced fund is a type of mutual fund that invests in a diversified portfolio of common stock, preferred stock, mutual funds, and sometimes money market accounts. If you are looking to distribute risk amongst multiple types of asset classes within a single mutual fund, a balanced fund may be of interest to you.

Bankruptcy occurs when a person or company legally declares that they are not able to pay off the debt that they owe to their creditors. In the majority of cases, the bankrupt party (debtor), voluntarily declares bankruptcy. However, at times, creditors file a bankruptcy petition against a debtor in order to reclaim debts that they are owed. The three most common types of bankruptcy are: Chapter 7 â basic liquidation for individuals and businesses, Chapter 11 â rehabilitation for businesses and individuals with significant assets, and Chapter 13 â rehabilitation for individuals that includes a basic repayment plan for those with enough income.

Bearish is Wall Street investing terminology that refers to an outlook on an investment. You are considered to be bearish when you believe that it is a good time to sell a given investment or see negative price movements in the market over a given period of time. Being bearish, or a bear, is the opposite of being bullish, or optimistic towards an investment or the market.

A bid is stock market terminology that refers to the highest price that a potential buyer of a given stock is willing to pay for shares of that stock. The bid price is often displayed on the user interface when you make a stock trade through a discount brokerage.

The bid/ask spread is stock market terminology that refers to the difference between the lowest price that a potential seller of a given stock is willing to accept (ask price) and the highest price that a potential buyer is willing to pay for a share (bid price). The smaller the bid/ask spread is, generally, the more liquid a stock is considered to be due to a higher trading volume.

A bond is a type of fixed-income security that is a form of debt. When an investor purchases a bond, they are essentially lending funds to the bond issuer. In exchange for lending the funds, the bond issuer pays interest to the purchaser at specified times, in addition to paying back the principal amount of the bond. Corporations, federal governments, and local and state municipalities all commonly issue bonds for purchase by investors. Purchasing a bond is similar to a bank lending money for a loan to the bond issuer.

A book value is a company's net asset value, or total assets, minus its liabilities, including debt. Book value is often compared to actual market value of a company as a measure of determining a stock's relative value compared to other stocks.

Bullish is Wall Street investing terminology that refers to an outlook on an investment. You are considered to be bullish when you believe that it is a good time to make a purchase in a given investment or see positive price increases in the market over a given period of time. Being bullish, or a bull, is the opposite of being bearish, or pessimistic towards an investment or the market.

A capital gain occurs when an investment is sold for more than it was purchased for. Capital gains are considered to be short-term when the investment was held for less than a year. They are considered to be long-term when the investment was held for more than a year. Capital gains must be claimed as a form of income when filing your income taxes.

Capital gains are taxed when an investment is sold for more than it was purchased for. In the U.S., short-term capital gains are currently taxed at the investor's regular tax rate for whichever tax bracket they are in. Long-term capital gains are taxed at 15% for all tax brackets with the exception of the lowest two brackets, which are taxed at 5%. These tax rates will last through 2010.

Capital loss occurs when an investment is sold for less than it was purchased for. Capital losses can be used as tax deductions by individuals up to $3,000 per year. If you have capital gains and losses within the same tax year, your losses will wipe out taxes on your gains if higher or be subtracted from your gains if lower. For this reason, many investors sell off poor investments at the end of the year to help in canceling out some of their taxable capital gains.

Cash flow is the amount of money that remains over a given period of time after all expenses and liabilities are paid for. A positive cash flow would enable you to build reserve savings. A negative cash flow would require you to withdraw from your savings or use credit and build debt.

Much like term life insurance, cash value life insurance involves paying premiums over time. The primary difference between the two is that cash value life insurance additionally involves contributing a portion of your premium towards a separate savings account that accrues value over time, which can later be reclaimed if the policy is ended. Premiums for cash value life insurance are typically 7-10 times higher than those of term life insurance. Whole life insurance and universal life insurance are both cash value policies.

A certificate of deposit, commonly referred to as a CD, is a type of long term savings account available to depositors at banks and other financial institutions. In exchange for depositing funds for a specified length of time, the depositor will receive interest rates that are typically higher than standard savings account rates. Certificates of deposit are commonly available in 3 month, 6 month, 9 month, 1 year, and multiple year lengths of time. Quite often, the longer the deposit term, the higher the interest rate you will receive.

A certificate of deposit, commonly referred to as a CD, is a type of long term savings account available to depositors at banks and other financial institutions. In exchange for depositing funds for a specified length of time, the depositor will receive interest rates that are typically higher than standard savings account rates. Certificates of deposit are commonly available in 3 month, 6 month, 9 month, 1 year, and multiple year lengths of time. Quite often, the longer the deposit term, the higher the interest rate you will receive.

A closed ended fund is a type of mutual fund that has a limited number of shares that trade on the open market, much like a stock does. Closed ended funds sometimes trade at a discount or premium to the net asset value (NAV) of their holdings, which is a strong indicator of their relative value.

Collateral is an asset that can be repossessed in the event a debtor, or borrower, defaults on a loan. For instance, if you take out an automotive loan, the automobile you are financing is collateral if you are unable to pay for your loan and it can be repossessed and sold if you default.

A commodity is any physical good that is bought and sold on a market exchange. Commodities are usually pure raw materials that are generic and meet a minimum quality standard. They can be traded through a variety of different investment vehicles and are often viewed as an investment hedge against inflation because their prices tend to increase during times of inflation. Commodities can include agricultural, energy-related, metals, precious metals, or animal products. Examples of commodities include corn, oil, copper, gold, and cattle.

Consumption tax is tax that is applied to the purchase of any good or service.

Contrarian investing is a strategy where an investor seeks profit by investing against current market trends. For instance, you would be a contrarian investor if you believe that it would be a good time to buy a stock that has been in disfavor by many investors, causing it to be priced below its true value. On the flip side, you would be a contrarian investor if you decided to sell a stock that has recently inflated in price due to excessive optimism in the market.

Credit is any amount of money loaned by one party to another party that is expected to be paid back in the future. Credit cards, car loans, and mortgages are all forms of credit.

Credit cards are a form of payment method in which a consumer is borrowing an amount of money to be paid back to a financial institution in the future. Credit cards typically charge higher interest than other forms of credit and have a limit on how much you can have on your balance at any one point in time. Credit cards differ from debit cards, which use funds that you already have within your bank account.

Credit card debt is the balance you owe on your credit cards from a month-to-month basis. Your debt accrues interest payments if you are unable to pay off the balance in full.

A creditor is any party that loans money to another party, or debtor.

Credit reports provide detailed data on all of the credit accounts that you currently have or have had open. This data includes your balances, amount of money borrowed, who the creditor is, and when the credit was used. Credit reports should be checked on regularly in order to make sure there are no inaccuracies or misuse. You are entitled to one free credit report per year from each of the three major credit bureaus, Equifax, TransUnion, and Experian.

A credit score is a mathematical calculation that is used by lenders to assign a numerical value to a borrower's credit history. Each of the three major credit bureaus, Equifax, TransUnion, and Experian have a different formula to determine credit scores and lenders may look at any combination of the three. In general, the higher your credit score is, the less risky you are in the eyes of a lender. Having a higher credit score may enable you to get highly competitive rates on the funds that you borrow.

Debit cards are similar to credit cards in that they can be used for all of the same payment purposes. The main difference between the two is that a debit card is tied to a bank checking account. Every time a purchase is made with a debit card, a debit (subtraction) of funds is taken from your account. With a credit card you are using borrowed funds from a financial institution that you must pay back. With debit cards, you can only spend what you have within your account. Many financial advisors recommend using debit cards versus credit cards as a way to prevent debt accumulation.

Debt consolidation is the combination of multiple higher interest loans or debts into one consolidated loan. Proponents of debt consolidation promote it as a way for debtors to focus all of their debt in one place at a lower interest rate. Detractors from the debt consolidation strategy warn against the dangers of moving multiple unsecured loans into one large secured loan, in which collateral such as houses or vehicles may have to be forfeited if the buyer defaults on the loan.

A debtor is any party that borrows money from another party, or creditor.

A deed of trust is a legal document most commonly used for land property or automobiles. A deed is held by a trustee as insurance in the event that a borrower defaults on a loan and the property must be forfeited and the title transferred.

A dependent is an individual who relies on another person for care. Claiming someone as dependent on your tax return increases the number of exemptions that you can claim, which may result in tax benefits. Dependents can be children or other qualifying relatives that meet certain IRS guidelines.

An asset depreciates when its value decreases over time. Depreciation can occur due to a decrease in demand, increase in supply, deflation, or decrease in interest rates. If you own a vehicle that has depreciated in value, it is now worth less than what it was when you purchased it. Depreciation is the opposite of appreciation, or an increase in value.

Direct deposit is the process of your employer automatically sending funds electronically into a bank account of your choice. Direct deposit replaces the process of receiving your wages via paycheck and manually depositing at the bank. To enable direct deposit, you must elect to do so through your employer.

Disability insurance is a form of insurance that replaces a portion or your wages should you be faced with a disability, and no longer able to earn an income. Disability insurance may be offered as a workplace benefit or it can be purchased on an individual level.

A brokerage where investors are able to buy and sell stocks, bonds, mutual funds, options, and other securities at a discounted transaction fee. Discount brokers offer lower transaction fees than full service brokers, but offer little to no personal investment or financial planning advice. If you are willing to invest on your own and want to make simple transactions, discount brokers are a good option.

A reward given by companies to shareholders of stock on a quarterly basis as determined by company management. Dividends are most often given by very profitable and/or mature companies as an incentive for owning and holding shares. They are also paid out by mutual funds if the fund owns shares of companies that declare dividends. When you purchase an investment you are often given the option to receive dividends as cash or to reinvest dividends into more shares.

A plan that reinvests dividends given by a company into more shares of that company's stock. DRIP's are usually commission free and shares that come from reinvestment are sometimes at a discount to market prices. You must still pay taxes on DRIP reinvestments. Many companies and discount brokerages offer DRIP's at no additional charge to investors. DRIP's are a way to leverage dollar cost averaging as an investment strategy.

Dividend yield is percentage that is calculated when you take an investment's total annual dividends and divide them by the share price. For instance, if a stock in a company is selling for $20 and the stock rewarded $1 in dividends over the past year, its dividend yield is $1 divided by $20, or 5%.

Dollar cost averaging is an investment strategy in which the investor periodically purchases more shares of an investment at a fixed dollar amount and set intervals over time. With dollar cost averaging, investors hope to distribute the risk of price declines by purchasing more shares at lower prices that would ideally increase in value.

The Dow Jones Industrial Average, commonly known as the Dow, is a stock market index that measures the relative price performance of 30 of the largest and most commonly held companies within the United States over time. Companies are added and replaced on the index as they rise and fall in success.

Down payments are typically non-refundable up-front payments made by someone who is making a large purchase. Down payments are most commonly required by a creditor when a debtor purchases a vehicle or a home, but can also apply to any purchase in which the consumer does not pay for the entire price up front.

Earnings are also referred to as profit and net income. On the simplest level, it is the amount of cash remaining after all expenses have been subtracted.

A company's profit, or earnings, divided by the number of outstanding shares. For instance, if a company earned $10 million in a quarter and had 5 million outstanding shares, their earnings per share (EPS) would be $2. Earnings per share is a highly referenced metric by those measuring a company's profitability growth or decline over time.

Equity is a term with many meanings. It is commonly used interchangeably with the word 'stock'. Equity can also be used to refer to ownership in a non-stock venture. Homeowners may also refer to their homes in terms of how much equity they have in them. For instance, if you own a home worth $100,000 and only have $10,000 left on your mortgage, then you would have $90,000 in equity on your home.

An estate is anything of value that is owned by an individual. This can include all monetary assets, land, real estate, vehicles, life insurance policies, personal property, and valuables.

Estate planning is legal preparation and planning for the distribution of assets and properties owned by an individual prior to their death.

Estate tax is imposed by the federal government and some states on the assets an individual inherits from their heirs. There is no estate tax on the transfer of assets between spouses.

ETF's are investment securities that are commonly compared to index mutual funds. They track the performance of commodities, indexes, or a group of investments much like index funds, however, they trade like stocks because their price changes throughout the day with trading activity. ETF's are a good option for those looking for more liquidity and trading possibilities than index funds.

Exemptions are direct reductions from your gross income as permitted by the IRS. If you file your own income tax return, you may claim a personal exemption. If you are married and filing jointly, you may claim two exemptions. You may also claim exemptions for dependents such as children and relatives that rely on you for care. Each exemption is worth $3,500 in taxable deductions for the 2008 tax year.

An extended, or after hour trade, is a stock trade made on a business day prior to the stock market opening or after it closes. Pre-market trading generally runs from 8 AM to 9:30 AM EST and post-market trading commonly occurs from 4 PM to 6:30 PM EST in the U.S. markets. Brokers may have varying hours of availability for extended hours trading. If you are considering trading on extended hours, be aware that volume levels are lower than during the trading day and volatility on pricing can be high.

The Fed is the central banking system and monetary authority in the United States. It is an independent government institution that also has private aspects. Primarily, The Fed is known by the public for periodically determining the rate commercial banks must pay for loans. This rate then trickles down to debtors who take out the loans.

FHA loans are offered by Federal Housing Administration approved lenders under tight guidelines. They are usually offered to low and middle income and first-time home buyers. Many loans require a 20% down payment in order to avoid PMI, but FHA loans are known for only requiring a 3% down payment, which may be supported through a grant.

A financial planner, also known as a financial adviser, is a professional that charges a fee and/or commission for financial advice. Many financial planners, whether fee based or on commission, have ties to certain financial products and investments. Fee-only financial planners charge a flat fee for their service and are not permitted to have compensation-based affiliations to any investment related products or services. When choosing a planner, make sure that they have a Certified Financial Planner (CFP) designation.

Planning for short-term and long-term financial goals such as investing advice, retirement planning, and debt payment strategy.

Flexible spending accounts (FSA's) are tax advantaged medical savings accounts usually offered as part of an employer's benefit plan. FSA's allow employees to set aside an amount of money per plan year. The money that is deducted and placed into an FSA is not subject to payroll taxes. Unlike with health savings accounts (HSA's) which allow you to roll funds over from year to year, FSA funds must be used within the plan year or they are forfeited back to the employer.

A home is foreclosed upon when the mortgage lender chooses to seize the property of an owner that has not made interest and/or principal payments on time. The lender does this in hopes of being able to sell the home to recoup potential lost value from lack of payment. Before foreclosing, it is usually in the lenders best interests to work out a modified payment plan with the borrower to avoid having to sell and take a loss on the home.

A type of brokerage where investors are able to buy and sell stocks, bonds, mutual funds, options, and other securities with the assistance and advice of professional brokers. Full service brokers charge a fee premium over discount brokers for transactions made or they may charge percentage of total assets for the enhanced level of advice and support given.

Mutual funds are assigned to categories based on a wide number of factors. Funds may be assigned based on the type of security they invest in: stocks, bonds, money market accounts, etc. Stock funds may be assigned based on the size of company they invest in: micro-cap, small cap, mid cap, and large cap. They may also be categorized by the maturity of the types of companies they invest in: companies in their growth stage or more mature companies in their income stage. They are categorized based on the location of the companies they invest in: domestic, international, global, or region specific. They may also be classified based on the industry of the companies they invest in: commodities, real estate, technology, health care, etc.

Global funds are mutual funds that invest in securities all over the world. Whereas domestic funds invest in the United States and international funds invest in securities in any country other than the United States, global funds invest in both.

Gross income is a person or company's total taxable income before all deductions or taxes are taken into account. Gross income includes wages earned, capital gains, interest income, dividends, royalties, rental income, and more.

Growth funds are a category of mutual funds that invest in fast growing companies that have a history of and potential for future capital gains, or share price growth.

An investing strategy that aims to invest in fast growing companies that have a history of and potential for future capital gains, or share price growth. Growth stocks typically trade at high price to earnings (P/E) ratios due to their potential to sustain or increase their high growth rates. They also rarely give out dividends, choosing instead to reinvest income towards maintaining the company's high growth levels.

Health insurance is a form of insurance that assists in paying for medical expenses. Depending on the type of plan, health insurance may cover a portion of the cost of regularly scheduled preventative appointments, prescription medications, emergency situations, major surgery, rehabilitation, etc. Many employers offer health insurance as an employee benefit but it can also be purchased on an individual level.

Health savings accounts (HSA's) are tax-free accounts from which medical related products or services can be purchased. HSA's are typically offered by employers as an added employee benefit. They are funded by employees and/or employers and funds transfer from year to year, unlike with flexible savings accounts (FSA's). Contributions are not taxed, offering a significant benefit to employees.

A type of insurance policy that is used to protect a homeowner from damage or loss of property. Home insurance policies also have the ability to protect personal property within the home and provide liability protection. Many also provide the option to add a rider to cover high priced possessions such as jewelry. Homeowners insurance does not typically cover loss due to flood, earthquake or other 'acts of God', or acts of war. All mortgage lender's require proof of homeowners insurance prior to extending financing.

A line of credit that is used by homeowners where equity in a home is used as collateral. HELOC's differ from home equity loans in that they are credit lines with adjustable rates of interest versus a lump sum loan with a fixed interest rate.

A loan where the borrower uses equity in their home as collateral to secure a lump sum loan with a fixed interest rate. Home equity loans differ from HELOC's in that the interest borrowed is at a fixed rate versus a revolving line of credit with an adjustable rate of interest.

A type of mutual fund that invests in bonds and/or stocks of companies that have consistently paid dividends to shareholders over time. When investing in stocks, income funds invest in mature companies with slow or no growth rates versus high growth companies that do not offer dividends.

Market indexes measure the relative value of a group of investments over time. Some of the more popular indexes are the S&P 500 (largest 500 companies), the NASDAQ index (technology companies), the Dow (30 of the largest companies), and the Russell 2000 (2,000 small cap companies). Indexes can measure a wide variety of different sectors, industries, sizes, or geographic locations of companies and can also follow bonds or other types of securities.

Index funds are a type of mutual fund that attempts to mimic the performance of a market index. Index funds periodically change investments based on a set of rules versus actively choosing and managing the funds. Many index funds take the human element out of investing completely. Index funds are not actively managed allowing them to typically have lower management fees than professionally managed mutual funds. Index funds aim for average returns, making them lower risk than managed funds and good for novice investors.

A traditional individual retirement account (IRA), is an investment account that allows you to save up to an IRS set level each year towards your retirement. Any contributions you make to a traditional IRA can be deducted from your taxes, however, you must pay taxes on your distributions when you withdraw money. Distributions can be made without penalty at age 59 and 1/2. Traditional IRA's differ from Roth IRA's, which allow you get distributions tax free in exchange for contributing post-tax funds.

An IPO is the first time a company sells its stock to the general public. IPO's are also known as 'going public'. Typically, IPO's are offered by fast growing or immature companies in order to raise money for investment within the company. If a company offers more stock to the public at a later time it is called a secondary offering. Often time, elite investors or investment companies are the only buyers allowed to purchase at the IPO price.

Insurance is a contract that is intended to safeguard an individual against loss or future expenses in exchange for periodic payments called premiums. Insurance policies can be purchased for health expenses, disability, automotive, travel, home, life, and more. When purchasing any type of insurance, shop around to make sure that you are getting a good rate from a financially secure company.

A periodic payment from an insured party to an insurance company in exchange for coverage. Premiums are most often paid on a monthly, semi-annual, or an annual basis. Some insurance companies offer monthly or semi-annual payment plans and will offer a discount should you pay one year in advance for coverage. If you end your policy, the amount of time that was paid for and remaining is refunded on a pro-rated basis.

International funds are a type of mutual fund that invests in stocks only outside of the United States.

Keogh plans are tax deferred retirement pension plans for self employed individuals. Contributions made to Keogh's are tax deductible and can total up to 20% of earnings or $48,000 (2008). If you are self employed, Keogh's are a great way to save for retirement while lowering your taxable income at the same time.

Large cap funds are mutual funds that invest in stocks that have large capitalizations, or market values, of $5 billion and more. Many investors choose large cap stocks or funds because they are usually less volatile than small or mid caps. The downside is that their growth rates tend to be lower.

A liability is an obligation owed to another party. For instance, if you have a home mortgage, it is considered to be a liability.

Liability insurance is a form of insurance that covers you if you are legally responsible for loss, damage, or injury. Any associated legal fees are covered up to an amount indicated within the policy. Liability coverage is usually built into automotive and home insurance policies and is also used by small business owners to protect assets. It is required insurance in many states.

A lien gives the creditor a right to sell collateral property associated with a loan if the debtor defaults on the loan. For instance, a mortgage lien would give the bank a right to foreclose and sell a house that is being financed by the mortgage if the borrower is unable to meet their financial commitment.

A limit order is a type of stock trade in which you agree to buy or sell a specified number of shares at or better than a price that you set. With buy limit orders, your trade is executed if the market price reaches your specified limit or goes lower. A sell limit order trade will be executed if the market price reaches your specified limit or goes higher.

Liquidity is the ease and speed in which assets can be turned to cash without a significant impact on price or value. It is important to have high liquidity with emergency savings in the event that you need cash in short order. Therefore, it is recommended that emergency savings are placed in savings or money market accounts. Stocks and bonds are also considered to be liquid, but not as liquid as bank accounts. Real estate or businesses, for instance, are considered to be illiquid assets.

Living trusts are legal documents that are widely used to declare what assets should be distributed to beneficiaries if the granter or trustee were to become incapacitated or die. One major benefit of living trusts is that it allows assets to be passed to beneficiaries without having to go through the court probate process, which allows beneficiaries to save significant time and legal expense. Additionally, privacy with trusts is maintained for beneficiaries and the deceased versus probate being on public record.

A legal document that specifies what kind of medical care you would like to receive or avoid in the event of incapacity or terminal illness. For instance, if you know that you never want to be placed on life support for any reason, then you can specify this in a living will.

A market order is a type of stock trade in which you agree to buy or sell a specified number of shares immediately at whatever the best current market price is. With market orders you set a total dollar amount that you want to buy or sell for, but are not able to specify a price per share. With buy market orders, your trade is executed at the real time ask price. With sell market orders, your trade is executed at the real time bid price.

Medicaid is a federal, state, and sometimes county sponsored program to help provide health care assistance to low income individuals.

Medicare is a federally sponsored health insurance program to assist those 65 and older and those under 65 with certain disabilities with medical expense coverage. Medicare Part A is a form of hospital insurance, while Medicare Part B is supplemental medical insurance. Additionally, Medicare Part D was recently added to assist with prescription drug purchases.

Mid cap funds are mutual funds that invest in stocks that have mid-level capitalizations, or market values, between $1 billion and $5 billion. Many investors choose mid cap stocks or funds because they are usually less volatile than small caps, yet they tend to have more growth potential than large cap stocks.

A money market account is a bank deposit savings account that earns interest while also allowing you to make a limited number of transactions per month. Money markets are a good option if you would like to earn higher rates of interest similar to a certificate of deposit (CD), while keeping your assets highly liquid or easy to turn into cash. For that reason, they are a good option for emergency savings. The drawback to money market accounts is that you typically must maintain a high minimum balance in order to avoid account fees.

A moneylender is a creditor that lends small personal loans to debtors that have a poor credit score or are at or below poverty level. The debtor often has no other option and since the risk of default with the debtor is very high and the loans are not secure, they carry very higher interest rates, often over 100% APR. Moneylenders are a last resort loan option.

Mortgages are loans that are secured by using real estate as collateral in the event of default. If the borrower defaults on mortgage payments, their property may be foreclosed on. Mortgages can vary in terms, length of payback period, and interest rates, but all require payback of the principal amount borrowed plus interest over a specified period of time.

An investment that re-distributes your contribution of monetary funds into a variety of stocks, bonds, money market accounts, or other types of investments, allowing you to diversify your money and cut down on risk. If you do not want to spend a great deal of time learning how to invest, a mutual fund is a way for you to leave the investing to professional investment managers in exchange for fees.

Mutual fund managers are investment professionals charged with the duty of carrying out a mutual funds investment philosophy through the purchase and selling of various investments. A mutual fund can be managed by one fund manager, a team of fund managers, or automatically by software based on set criteria. In exchange for their management of a portfolio of investments, fund managers receive a fee based on a percentage of assets contributed to the fund.

An electronic stock market that is run by the National Association of Securities Dealers. NASDAQ is an acronym for the National Association of Securities Dealers Automatic Quotation System. The NASDAQ is a stock exchange for over 3,200 stocks, making it the largest exchange in terms of represented companies. It is heavily comprised of technology stocks.

Net Asset Value (NAV) is the total value of all of a fund's assets after liabilities are taken out. The net assets are then divided by the number of outstanding shares for the fund, and results in the price that investors buy and sell a share of a fund for. Whereas stock prices are determined based on the laws of supply and demand, mutual fund share prices are determined based on the total value of its holdings divided by the number of shares that have been purchased, which are unlimited in all open-ended mutual funds. There are no supply and demand forces at work, with the exception of closed-ended mutual funds. NAV is calculated at the end of each trading day.

The total amount of assets remaining in a mutual fund after liabilities such as operating costs are subtracted. When selecting mutual funds, one of the factors to consider is the amount of net assets that the fund manages. A fund's performance can suffer when net assets are very large because the fund managers are no longer able to move in and out of holdings without other investors noticing and taking action.

Net income is the profit that a company is left with after all expenses, taxes, and other liabilities have been subtracted. Net income is also referred to as profit or earnings. If a companies expenses exceed it's income, then it is left with a net loss.

Acronym for the New York Stock Exchange. The NYSE is the largest securities exchange in the world. Most trades are made electronically, however, traders on the market floor are used for large institutional exchanges and to set prices.

Most mutual funds are open-ended in nature, meaning there is an unlimited amount of shares of that fund that can be sold to investors. An open-ended mutual fund's share price is calculated by determining its net asset value (NAV). Stock prices are determined in part based on the laws of supply and demand, but with an open-ended mutual fund there is no limit to the supply of shares that can be sold. Therefore, prices of open-ended mutual funds are not influenced by buyers and sellers.

Opportunity cost is the cost associated with choosing one investment over another. An example of this would be keeping long-term savings in a savings account that earns 1% per year versus moving the savings to a certificate of deposit (CD) that would have earned 4%. Your opportunity cost for not moving your savings would be 4% minus 1%, totaling 3%. Another example would be leaving a job that paid $50,000 per year in order to pursue a Masters degree or MBA for two years. The opportunity cost of your advanced education would be $100,000.

An option is an agreement that gives an investor the option to buy or sell a stock, bond, or other security at a given price within a specific time period without the obligation to do so. Call options are purchased by investors that expect the price of a security to rise above the option price, while put options are purchased by investors that expect the price of a security to fall below the option price. If an option is not exercised by its expiration date, then the price of the option is forfeited. Options are not recommended for novice investors.

Over the counter (OTC) is a term for a market of decentralized dealers that trade securities not listed on a stock exchange such as the New York Stock Exchange (NYSE). The trades are directly between two parties. Despite the visual image its name provokes, it is primarily high speed electronic trading, although the volume of trades is much lower than on market exchanges. Securities that trade over the counter are not monitored as heavily as those traded on major exchanges and should be approached cautiously.

Payday loans, also referred to as payday advances, cash advances, or paycheck advances, are small loans that are due within two weeks (at next paycheck) from date of borrow. These loans can have very high interest rates of 400% APR and higher. Payday lending is legal in 37 out of 50 states and is facing increased legal scrutiny for questionable practices. Payday loans should be considered as a last resort due to their extremely high interest rates.

A pension is a fund that pays retirement income to workers. Defined benefit pensions are paid for by the employer and pay retirees fixed monthly payments based on salary, age, and length of service. When people refer to 'getting their pension', they are referencing defined benefit plans. Defined contribution plans, such as 401(k)'s and 403(b)'s, put the responsibility on the worker to contribute funds that may or may not be matched by an employer. Over the last few decades, many employers are making the move from defined benefit to defined contribution plans.

Price to earnings (P/E) ratio is a commonly referenced metric in stock market investing that is used to help determine a stock's relative value compared to other similar stocks. P/E is a mathematical computation that takes a stock's current stock price and divides it by its previous annual earnings per share. Forward P/E's calculate a stock's current price divided by expected earnings for the following year. A stock that sells for $20 dollars per share that earned $2 per share over the previous year would have a P/E of 10. The stock sells for 10 times earnings.

PMI is insurance that protects a lender against losses that would result from a default on the loan by the borrower. PMI is most often paid for by the mortgage borrower and is very common on first time home purchases. A borrower typically must pay PMI unless the down payment is 20% or more than the loan or home's total value. Preferably, the terms of your mortgage should state that once the principal is reduced to 80% of the loan's value, PMI will no longer be required. PMI is tax deductible as of 2007.

Profit margin is a commonly referenced stock investing metric that is used to help determine a stock's relative profitability compared to other similar stocks. Profit margin is calculated by dividing net income by revenue for the same period of time. For example, a company that has $1 billion in net income and $5 billion in revenue would have a profit margin of 20%.

Property tax is a tax on the value of the property that you own, which can come in one of three forms: land, improvements to land (construction), and personalty (mobile man-made objects). Property tax occurs at the city and county level and is typically deductible on your federal income taxes.

Quarterly report is the unofficial name of the SEC required 10-Q form, which must be filed within 35 days of the end of each of a company's first three fiscal quarters. Quarterly reports provide a detailed analysis of the state of the company and are focused primarily on the financial results of a fiscal quarter. They are useful reading material if you are interested in purchasing and holding a company's stock.

Real estate investment trusts (REIT's) are publicly traded companies that manage a portfolio of real estate and loan-based investments, much like a mutual fund invests in different securities. 90% of an REIT's taxable earnings must be distributed annually to investors in the form of dividends, which often leads to high income yields of over 5%.

Return on investment (ROI) is a measure of how much a company or person earns on top of their original investment. ROI is calculated by taking the return dollar total and subtracting the initial investment, then dividing by the initial investment to get a percentage. For instance, if you received $150 on an initial investment of $100, you would have an ROI of ($150-$100)/$100 = 50% ROI.

A Roth IRA, is an investment account that allows you to save up to an IRS set level each year towards your retirement. Any contributions you make to a Roth IRA are after tax, however, you do not have to pay tax on your distributions when you withdraw money in retirement. Distributions can be made without tax and penalty at age 59 and 1/2. Any contributions to a Roth IRA may be withdrawn tax free. Roth IRA's differ from traditional IRA's, which allow you to deduct taxes when you contribute funds in exchange for having to pay tax on distributions down the road.

The S&P 500 is an index that tracks the relative performance of the 500 of the most widely held publicly traded companies in the United States. Companies that are included in the index are selected by a committee to ensure that the index is representative of the entire economy.

Sales tax is a percentage based tax on the sale of goods and services. Sales tax is set on a state-by-state level and it is collected by the seller during a transaction and submitted to the state.

Sallie Mae is the common name for the Student Loan Marketing Association (SLMA), a publicly traded company. Sallie Mae is responsible for creating a secondary market for student loan trading, which increases their availability to students.

Sector funds are mutual funds that invest only in one industry or type of company. For instance, there are sector funds available that only invest in companies in the health care, real estate, oil, or technology industries. Due to lack of diversification in their holdings, sector fund performance is highly volatile.

A secured loan is a loan in which a borrower uses an asset as collateral, which can be repossessed by the lender if the borrower defaults. An example of a secured loan is a mortgage, where the house is used as collateral should the borrower not be able to pay for the mortgage. Secured loans are in contrast to unsecured loans, in which no collateral is used. Because secured loans are safer investments for the lender than unsecured loans, they typically offer longer payback terms and lower interest rates.

An SEP IRA is a type of retirement account that an employer or self-employed can establish. SEP IRA's have the same contribution limits as Keogh plans and contributions are tax deductible. You may open an SEP IRA if you have self-employment income from freelance or other work. Other than contribution limits, SEP's operate in the same way as traditional IRA's.

Short selling is a trading strategy where the investor anticipates a short-term loss in value in a share price. In a short sale, the investor borrows money from a broker to sell a security and create a short position. The borrowed money is paid back when the investor repurchases the shares at a new price. If the share price drops from the short position price, the investor profits by buying the shares back at a lower price than what they sold for. If the share price increases from the short position price, the investor loses money by being forced to purchase the shares at a higher price than what they sold for.

Small cap funds are mutual funds that invest in stocks that have small capitalizations, or market values, of $1 billion and lower. Many investors choose small cap stocks or funds because they typically have much higher revenue growth rates than mid or large caps. The downside with small caps is that they tend to have much higher volatility levels and they rarely pay high dividend yields.

Social Security is a government run welfare insurance plan. It was created to assist retirees and their survivors by adding additional income and also to support those with disabilities, unemployed workers, and lower income individuals and families. Social Security payments are funded through FICA taxes that are pulled from payroll income.

A stock is a share of ownership in a corporation's assets and earnings. Stock may be common or preferred. Common stock allows for voting rights, but they don't guarantee dividend payments while preferred stock does not carry voting rights, yet guarantees a set dividend payment. Preferred stock carries priority over common stock in claims for company assets if it goes bankrupt.

A stock split occurs when a company changes the number of outstanding shares that are available for purchase. The most common type of split, a 2-for-1 split, results in a doubling of the number of shares available and a cut in half on the stock price. For instance, if you owned 20 shares of a company that had a share price of $100, and the stock had a 2-for-1 split, you would then end up with 40 shares at a price of $50. Stock splits can result in any multiple of outstanding shares or even a reverse split, where the number of shares declines in order to increase the share price. Stock splits are performed by a company with a goal of making the stock more appealing and purchasable to a wider audience.

Tariffs are a form of taxation on goods and services imported into a country or exported out of a country, and are also commonly referred to as duties. When you purchase something 'tariff-free' or 'duty-free', you are not paying tax on it.

A tax credit is an amount of money that may be subtracted from final taxes that you owe. Credits are a dollar-for-dollar decrease in taxes and differ from tax deductions, which are amounts subtracted from your total income. Credits are highly desired for their strong dollar-for-dollar impact on your taxes.

A tax deduction is an expense that a taxpayer is allowed to subtract, or deduct, from their taxable income. Some expenses that are tax deductible include health insurance, traditional retirement contributions, and mortgage interest. Tax deductions differ from credits, which offer a dollar-for-dollar decrease in taxes owed, versus a decrease in taxable income.

Tax deferred refers to not paying taxes on investment earnings until when they are withdrawn. Earnings could be in the form of dividends, capital gains, or interest. Examples of tax deferred accounts are traditional IRA's and traditional 401(k)'s. Tax deferred accounts are a great way to grow investments tax-free.

A tax refund is money that you receive back from a federal, state, or local government after a tax year because too much of your income has been withheld over the year. Many look forward to a yearly tax refund and view it as a form of income to be spent. In reality, a tax refund is money that you earned that resulted in an interest free loan for the government.

Term life insurance is a form of life insurance that covers you for a specified time period. You are covered until the end of the time period so long as you pay a periodic premium for the insurance. If you become deceased while the term insurance policy is active, your beneficiaries will receive the amount of specified coverage. Term insurance policies typically last 10, 15, 20, 30 or 35 years from when they begin. They differ from cash value policies in that your premiums do not partially go towards a savings plan and are much lower.

Title insurance is a form of insurance that covers a property owner from potential challenges to the title for that property.

Transfer tax is a federally imposed tax on the transfer of title between owners. Transfer tax is applicable to investment securities such as stocks and bonds and on the transfer of estates or large gifts.

Travel insurance is a form of insurance that covers medical expense, loss of property, theft, damage to property, legal expenses, and other unexpected expenses while traveling.

An unsecured loan is a loan in which a borrower is not required to use an asset as collateral in order to receive credit. An example of an unsecured loan is a credit card. Unsecured loans are in contrast to secured loans, which use collateral that may be repossessed should the borrower default on the loan. Because unsecured loans are not as safe for the lender as secured loans, they typically offer shorter payback terms and higher interest rates.

Value added tax is a tax charged during each stage of production and at the point of sale. The amount of VAT that the end consumer pays is a percentage of the final purchase price minus all previously taxed cost of materials. For example, if you purchase a soccer ball from a manufacturer that costs $20 and it costs $5 to make, you would pay VAT on the previously untaxed $15. VAT is charged primarily within the European Union and not in the United States.

A value fund is a type of mutual fund that invests in stocks that are thought, by the fund manager, to be undervalued relative to similar stocks. Stocks purchased in a value fund are typically of slower growth, mature companies.

An investment strategy where an investor seeks profit by investing in stocks that are not in favor and deemed to be on sale relative to others. Value stocks tend to be slower growth, mature companies with lower price to earnings ratios. Warren Buffet is is the world's most popular value investor.

Volatility is the measure of risk a security has in relation to the overall market. A security may more volatile due to a number of factors, including the number of outstanding shares available, or current news. Beta is a measure of a stock or mutual funds volatility, while standard deviation measures a mutual fund's historical volatility.

Whole life insurance is a type of cash value life insurance policy that collects take a portion of premiums paid and places them into a savings account that may be redeemed in the event the individual that the policy covers does not die. If the person covered does die, their beneficiaries receive the coverage value on the policy. Whole life insurance policy premiums are much higher than term life insurance premiums.

Workers compensation is insurance that covers medical expense and wage loss in the past and future when an employee is injured while on the job. If a worker is killed on a job, dependents of the worker may be eligible for financial assistance. Benefits provided are exchanged for the worker's right to bring litigation against his/her employer for negligence.

Yield is the percentage based return received from dividends paid on stocks or the interest paid on bonds relative to their price. For instance, a stock that is priced at $100 that paid annual dividends totaling $5 would have a yield of 5% ($5/$100).