UGMA

See Uniform Gift to Minors Act.

UIT

See Unit investment trust.

Underwriter

A brokerage firm that helps a company come public in an initial public offering. The firm underwrites (vouches for) the stock. When a company has been brought public, the shares have been underwritten. See Initial public offering.

Uniform Gifts to Minors Act (UGMA)

A law adopted by many states that provides a method for giving irrevocable gifts to children while maintaining custodial control over the account. UGMA accounts are managed by you or some other custodian who acts on behalf of a minor. Eventually (at an age of 18 to 25, depending on the state) the assets have to be turned over to the child.

Uniform Transfers to Minors Act (UTMA)

Similar to the Uniform Gifts to Minors Act, this law permits the transfer of gifts in addition to cash and securities (such as real estate or art) to children, while maintaining custodial control over the account.

Unit investment trust (UIT)

An investment usually sold by brokers that purchases a fixed, unmanaged portfolio of stocks or other securities, and then sells shares in the trust to investors, usually in units of at least $1,000. Because they are unmanaged, unit investment trusts are somewhat like index funds. However, UITs typically have much higher sales loads and/or annual management fees, so they do not share the low-cost advantage of index funds.

Unrealized capital gain/loss

An increase (or decrease) in the value of a stock or other security that is not "realized" because the security has not yet been sold for a gain or loss.

Utility

A business that provides a service essential to almost everyone. Electric companies, natural gas providers, and local phone companies are often referred to as utilities.

UTMA

See Uniform Transfers to Minors Act.

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V

Value stocks

Stocks that have a lower-than-average price as measured by such metrics as price-to-earnings or price-to-book ratios. Value investing is often considered the opposite of growth investing, which concentrates on finding companies with above-average sales and earnings growth prospects.

Variable annuity

A variable annuity allows an investor to choose from a range of mutual fund look-alikes, called "subaccounts." they often carry the same name and are operated by the same investment managers as publicly offered mutual funds, and they will typically offer a selection of stock, bond, and money market subaccount investments. nevertheless, they are not the same funds because by law they cannot be.

Volatility

The degree of movement in the price of a stock or other security.

Volume

The amount (expressed in shares or dollars) of a stock that is traded during a specified period.

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W

Wall Street

The main drag in New York City's financial district, although the term is used mostly to refer to the establishment of investing professionals, frequently referred to around these parts as "The Wise." The street is so named because it was once the site of a wall built in the 1600s by the Dutch to protect what was then New Amsterdam.

Warrant

An entitlement to purchase a certain number of shares of stock at a predetermined price (usually higher than the current price) for an extended period of time. Typically, warrants are offered with a bond issue or an IPO. An example of a warrant might be the opportunity for an investor to buy 500 shares of ABC company for $50 until September 1, 2002. Although the warrant accompanies a bond or actual IPO shares, it trades separately after it is issued.

Wash sale rule

Under the wash sale rules, if you sell stock for a loss and buy it back within the 30 days, the loss cannot be claimed for tax purposes. This rule is designed to prevent taxpayers from selling stock to claim the loss while buying it back within a short period to retain ownership. Note that the rule applies to a 30-day period before or after the sale date to prevent "buying the stock back" before it's even sold. See Tax Q&A: Wash Sales.

Whole life insurance

A life insurance product with an investment component. You pay in substantially more money, which your insurance provider will invest for you while taking a porterhouse-sized cut for himself. This essentially turns your insurance into an estate-planning tool -- one with embarrassingly low annualized returns.

Wilshire 4500 Equity Index

A benchmark index made up of the Wilshire 5000 Equity Index, excluding the Standard & Poor's 500 Index. For those who own only or primarily S&P index funds, purchasing shares of the Wilshire 4500 would provide exposure to the rest of the market.

Wilshire 5000 Equity Index

A benchmark index made up of all U.S. stocks regularly traded on the three major U.S. exchanges (the New York Stock Exchange, the American Stock Exchange, and the Nasdaq). The name Wilshire 5000 is misleading since there are now more than 7000 companies traded on the three main exchanges.

Withdrawal

Money taken out of an account.

Working capital

The lifeblood of a company, it is the money the company has sloshing around, ready to stick into the business. Take the total current assets and subtract the total current liabilities. (Because they are "current," this means they will either be converted into cash shortly or need to be paid shortly.) In calculating a company's working capital, you compare money the company has at its disposal to money it needs to pay out in the near future.

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Y

Yield (or dividend yield)

The income relative to the current share price that a company will pay out to the shareholders on a regular basis, usually expressed in percentage terms.

Yield curve

A line plotted on a graph that depicts the yields of bonds of varying maturities, from short-term to long-term. The line, or "curve," shows the relationship between short- and long-term interest rates.

Z

Zero-coupon bond

These bonds are so named because the coupon rate (the amount of interest paid) is zero. Rather than paying interest on a periodic basis, these bonds are issued at a fraction of their par value and increase in value as they approach maturity (e.g., U.S. savings bonds). Also known as an accrual bond.