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- High-yield bonds
- Bonds that are rated as below investment grade. The issuers of these
bonds -- which are judged to be at a higher risk of default -- have to
pay an attractive dividend to compensate investors for the additional
risk.
- High-yield fund
- A mutual fund that invests in bonds with low credit ratings. Because
of the risky nature of high-yield bonds, high-yield funds have greater
volatility than the average bond fund.
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I
- Income
- See Earnings.
- Income fund
- A mutual fund that invests in bonds and stocks with
higher-than-average dividends.
- Index
- An unmanaged selection of securities whose collective performance is
used as a standard to measure investment results. Examples include the
Dow Jones Industrial Average, the Standard & Poor's 500, the
Wilshire 5000.
- Index fund
- A passively managed mutual fund that seeks to match the performance
of a particular market index. Partially due to lower expenses, index
funds outperform the majority of actively managed mutual funds. See The
Truth About Mutual Funds.
- Individual Retirement Account (IRA)
- A tax-deferred retirement account set up with a financial
institution such as a bank, broker, or mutual fund in which
contributions may be invested in many types of securities such as
stocks, bonds, money market funds, CDs, etc. See IRA
Glossary and All
About IRAs.
- Inflation
- A rise in the prices of goods and services.
- Initial public offering (IPO)
- A company's first offering of common stock to the public.
- Insider trading
- Trading done by a person with access to key non-public information.
- Institution investors
- Institutions investors include pension funds, insurance funds,
mutual funds, and hedge funds. Although institutions hold about 40% to
50% of all stock owned, they account for as much as 90% of daily trading
volume.
- International fund
- A mutual fund that invests in securities traded in foreign markets.
- Inventory
- Finished or near-finished products that a company has not yet sold.
It's considered an asset because it can be sold or liquidated for money.
But, from an investor's point of view, inventory is often more like a
liability because it represents a momentary failure on the company's
part to convert its business into cash. Investors ideally like to see
inventory growth comparable to, or less than, sales growth.
- Investment adviser
- An entity that makes the recommendations and/or decisions regarding
a portfolio's investments. Alternatively called a portfolio manager.
- Investment grade
- A bond whose credit quality is considered to be among the most
secure by any independent bond-rating agency. A rating of Baa or higher
by Moody's Investors Service or a rating of BBB or higher by Standard
& Poor's is considered investment grade.
- IPO
- See
Initial public offering.
- IRA
- See Individual
retirement account.
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J
- Junk bond
- See High-yield
bonds.
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K
- Keogh plan
- A qualified retirement plan that may be set up by self-employed
persons, partnerships, and owners of unincorporated businesses as either
a defined benefit or defined contribution plan. As defined contribution
plans, they may be structured as a profit sharing, a money purchase, or
a combined profit sharing/money purchase plan.
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L
- Large-capitalization ("large-cap") stocks
- Large caps are stocks of companies whose market value is above a
designated minimum, usually in the neighborhood of $10 billion. See the
Rule
Maker Portfolio for daily discussion of some representative
large-cap stocks.
- Liabilities
- Outstanding debts.
- Life insurance
- See Term
insurance and Whole-life
insurance.
- Limit order
- An order to buy or to sell a security at a specific price or better.
Example: "Buy 200 shares of Microsoft at $65." This would be placed when
Microsoft is trading above $65 a share, and the purchaser is interested
in waiting for a better price, and accepting the possibility that his
preferred price will not ever be available, in which case the order will
not be filled. See Market
order.
- Liquidity
- A measure of how quickly a stock can be sold at a fair price and
converted to cash. Illiquid stocks are stocks that don't trade in high
volume. Thus, having too many shares of a stock that doesn't trade
frequently would make for a position that cannot necessarily be sold.
- Load
- A sales commission paid when purchasing shares of a mutual fund
(called a front-end load) or when redeeming shares of a mutual fund
(called a back-end load). For example, if the fund has a front-end load
of 5%, for every $100 you place into the fund, only $95 is invested,
with $5 going to the salesperson and/or mutual fund company. Avoid
mutual funds with loads. See The Truth
About Mutual Funds: Loads.
- Long-term capital gain
- A profit on the sale of stock, mutual fund shares, or other
securities that have been held for more than one year. Taxes owed on
long-term capital gains are lower than those on short-term capital
gains.
- Long-term assets
- A long-term asset is one that is consumed or used over a number of
accounting cycles, from more than one year to 40 years. The long-term
asset accounts include assets such as land, buildings, equipment, and
intangibles such as goodwill and accrued organizational expenses. It
appears on the balance sheet.
- Lump-sum distribution
- A single payment that amounts to the entirety of a retiree's
interest in a qualified retirement plan. Severe tax consequences apply
to receiving a lump-sum distribution without retiring (or otherwise
being separated from employment).
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