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M

Margin
A partial payment on investment units, the remainder of which is loaned by the trader. When investors buy on margin, they hope the price will go up fast enough to cover a loan, thereby increasing buying power. If prices drop, however, losses increase.
 

Marital deduction
A deduction allowed under certain conditions for federal estate tax purposes for property left to a surviving spouse.
 

Maturity date
The date on which a loan or bond comes due and is to be paid off. 

Mutual company
An insurance company owned by the policyholders.
 

Mutual fund
A mutual fund pools the dollars of many people, and undertakes to invest those dollars more productively than individuals could for themselves. 

Money manager
A professional who manages your investments according to your investment objective.

N

Net asset value
The value of a mutual fund share.

Net death benefit
The insurance proceeds payable after adding accumulated dividends and deducting policy loans.

Net payment index
A method of comparing the cost of term life insurance policies developed and formalized by the National Association of Insurance Commissioners.

Net worth
The difference between the total value of assets and the total amount of liabilities.

No-load fund
A mutual fund that does not charge a sales fee for buying or selling shares.

Non-probate property
Property that passes without reference to a will.

O
P

Paid-up additions
A dividend option that permits the policyholder to use dividends to purchase additional life insurance.

Personal financial advisor
One who helps individuals in an ongoing process to arrange and coordinate their personal and financial affairs to enable the individuals to achieve their objectives. A typical financial advisor is a representative who has had one or more years of in service training in the field of financial planning.

Personal property
Generally, any property other than real estate.

Policy owner
The person who may exercise the rights and privileges in the policy contract. The policy owner may or may not be the insured.

Portfolio
All assets held by a mutual fund at any specific time and, thus, held by the shareholders. Or total investments held by an individual.

Power of appointment
A part of an individual's will, deed or trust document that gives someone the right to decide who will receive property or how the property will be used.

Power of attorney
A document that authorizes someone to act on someone else's behalf.

Preference item
Certain income and deduction items that receive preferential tax treatment, for example, accelerated depreciation. Some of these preferred items are subject to the alternative minimum tax in addition to regular income tax.

Preferred stock
A class of stock with a claim to the company's earning before payment to common stockholders can be made.

Principal
The amount of money that financed, borrowed or invested. Often considered the face value of the debt.

Probate
1) The process of proving that a will is genuine; 2) distributing property that passes according to the terms of a will.

Proxy
Written authorization given by a shareholder to represent and vote his or her shares at a shareholder meeting.

Q

Qualified Retirement plans
A plan sponsored by an employer to provide retirement benefits for employees that meets certain regulatory requirements. The employer may deduct contributions to the plan, and the employees do not include benefits in the their taxable income until received, usually after they retire.

 

R

Registered bond
A bond whose ownership is recorded with the bank that distributes the interest and principal payments.

Recapture
Additions to income for deductions or credits against tax taken in prior years.

Return
An investor's profits, whether through interest, dividends or capital appreciation.

Revocable
Susceptible to being altered, modified or cancelled.

Rider
A form attached to an insurance contract that modified the benefits and conditions of coverage.

S

Self-proving will
A will requiring witnesses to sign an affidavit indicating that the testator was of sound mind, etc., at the time the will was signed and witnessed.

Straight
line method of cost recovery
Provides equal periodic changes to expenses over the estimated life of an asset.

Security
An investment of money in a common enterprise with the expectation of profit from the effort of others.

Stock company
An insurance company owned by the stockholders.

 

T

Tenancy by the entirety
A form of joint ownership between husband and wife that includes a right of survivorship. At the death of the first spouse, his or her interest in the property will pass to the surviving spouse.

Tenancy in common
A form of co-ownership. Upon the death of a co
owner, interest passes to the estate and not the surviving owner or owners. Does not include a survivorship element. At the death of one of the owners, his or her interest in the property may be designated to a future owner.

Term insurance
Life insurance that does not have cash accumulation and provides pure insurance protection for a specified period of time.

Testamentary
Having to do with a will.

Testator
A person who makes a will.

Treasury bills
Short-term debt issued by the U.S. government.

Treasury note
Medium
term debt issued be the U.S. government.

Trust
A legal arrangement by which title to property is given to one party who manages it for the benefit of a beneficiary or beneficiaries.

Trustee
A person who holds money or property for the benefit of another.
 

U

Unified credit
A credit used to offset estate and/or gift taxes up to stated limits. The amount of the credit for 1998 is equal to $202,050. This will offset $625,000 of estate and/or gift taxes. The credit is scheduled to increase reaching $1,000,000 in 2006.

Unified gifts/transfers to minors
The Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) are state laws that enable gifts to be made to minors. An adult is designated a "custodian" of the property. The minor, however, is the owner of the property, pays taxes on the earnings generated by the property, and has an unrestricted right to use it upon age of majority.

 

V
W

Waiver of premium
A rider which provides that, if the insured becomes totally disabled, premiums on the life insurance policy will be waived and the policy will remain in force.

Whole life insurance
A level amount of permanent life insurance, with increasing cash values; premiums are paid for the entire life of the insured.

Will
A legal document in which a person declares how his or her possessions will pass after his or her death.

Wrap account
An account with an all inclusive annual fee paid to the brokerage firm. The fee includes the services of a money manager and all the trading costs associated with the account.
 

X
Y

Yield
The current cash income produced by an investment. For example, bonds provide income in the form of interest, and stocks in the form of dividends which are then paid to the investors.

Yield to call
The rate of return on a bond from the date acquired to its call date.

Yield to maturity
The rate of return on a bond from the date acquired to its maturity date.

Z

Zero coupon bond
A bond that is sold at a deep discount to its face value and does not pay interest. It can be redeemed for its face value at maturity.

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