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Definitions (15)
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adviser
An organization employed by a mutual fund to give professional advice on the fund's investment and asset management practices. Also called investment adviser. Asset Allocation: The process of dividing your money between different types of assets, such as stocks, bonds and cash, to generate the overall return you need in a manner that is consis [..]
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Bond
An IOU issued by a corporation, municipality or government agency. A bond issuer is borrowing money from you and other members of the public and, in exchange, promises to pay interest at regular intervals until the bond matures, at which time investors receive their principal back.
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Capital Appreciation
The growth of your principal. If you invest $100 in a stock mutual fund and its value increases to $120, the $20 increase is called capital appreciation. Capital appreciation or growth is a specific long-term objective of many mutual funds. Compounding: A process by which investment earnings build up not only on the money originally invested but al [..]
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Diversification
The strategy of investing broadly across a number of different investments to reduce risk; a hallmark of mutual fund investing. Dollar Cost Averaging: The strategy of investing a fixed amount of money at regular intervals regardless of financial market movements. The goal is to reduce the average cost per share, since you buy more shares when the p [..]
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Exchange Privilege
The option of enabling mutual fund shareholders to transfer their investment from one fund to another within the same fund family.
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Fixed-income securities
Another term for bonds, which pay a fixed rate of interest until they mature. Bond mutual funds are called fixed-income funds, but the name is misleading because in a bond mutual fund your income and principal value both fluctuate.
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growth stock
A stock in a company characterized by above-average growth in earnings or sales. Growth stocks tend to have a high price relative to earnings and provide little, if any, dividend.
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Index
A statistical model that serves as a reference or benchmark for judging how well an investment is performing. The benchmark most often used for stock market performance, for example, is the Standard & Poor's 500® Index, which measures the average performance of 500 widely held large-company stocks. Investment Grade: Investment-grad [..]
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Liquidity
The measure of how quickly an investment can be turned into cash. A mutual fund generally is considered a very liquid investment, because shares can be redeemed at any time. In contrast, a house is a very illiquid investment.
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Maturity
The date on which an issuer returns investors' principal, thus satisfying its final obligation to those investors. Mutual Funds: An investment company that pools the money of many individual investors and uses it to buy a diversified portfolio of securities.
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