An option contract that gives the holder the right to purchase stock at a specified (exercise) price within a specified time period.

Assets that are used for the production of wealth. In accounting, the amount invested in a business.

An increase in the market price of an asset.

A payment to mutual fund shareholders of capital gains realized by a mutual fund on the sale of securities in the fund’s portfolio. The amount of these gains, less any losses are usually distributed to shareholders annually.

Profits distributed to shareholders resulting from the sale of securities held in the fund’s portfolio.

Also called “market capitalization (market cap)”. The absolute dollar value of a company’s outstanding stock, determined by multiplying the amount of publicly owned shares by the stock’s current market value.

Highly liquid, very safe investment, such as Treasury Bills and money market funds, that can be easily converted into cash.

The change in NAV from the prior day’s value.

A fund that issues a fixed number of shares which are listed and traded on a stock exchange. Unlike a mutual fund, a closed-end fund’s share price can trade above or below its net asset value.

A type of mortgage-related security in which a series of mortgage-related bonds are issued in multiple classes, or “tranches”. Each tranche has its own interest rate and maturity, and the principal and interest payments on the underlying mortgages can be allocated to the different tranches in many ways.

Unsecured, short-term notes issued by corporations who need an immediate short-term cash infusion. Like all fixed income securities, they pay interest.

A type of security that represents ownership in a public company.

An index that measures the cost of living. The CPI is published by the U.S. Bureau of Labor Statistics.

A fee imposed when shares are redeemed (sold back to the fund) during the first few years of ownership.

A corporate bond that can be exchanged by the holder for a specific number of shares of the issuing company’s preferred or common stock.

A debt security issued by a corporation.

A drop in the price of a stock, bond, commodity, index, or the overall market, following a rise.

Measure of the strength of the relationship between two asset classes. A correlation of 1.0 means that the asset classes tend to move in perfect tandem with each other. A correlation of zero means that the relationship is completely random. A negative correlation means that the asset classes tend to move in exactly opposite directions.

The cost of an asset used to determine tax liabilities. This number is the purchase price, including capital gains and losses, accrued interest, and other fees.

The interest rate on a fixed-income security, expressed as a percentage of face value.

A rating issued by independent organizations such as Standard & Poor’s Ratings group or Moody’s Investors Services, assessing the likelihood that the issuer of a bond will be able to make timely payments of principal and interest on that bond, based on such factors as the issuer’s financial condition and any collateral securing these obligations. Credit ratings typically range from AAA, the highest, to D, the lowest.

This is the risk that the issuer or guarantor of a debt security will be unable to make timely interest or principal payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating.

Credit Suisse First Boston High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the high yield debt market.

The ratio of interest to the current market price of a bond, expressed as a percentage.

An account which is created for the benefit of a minor, usually at a bank, mutual fund, or brokerage, with an adult as the custodian.

The organization (a bank) that has custody of securities and the other assets of a mutual fund.