> VIEW FULL GLOSSARY

> BROWSE BY SUBJECT

 Mutual Fund Investing Terms

12b-1 plan Permits a mutual fund adviser to use fund assets to pay for distribution costs. The 12b-1 fee is an annual charge based on the value of the investment. Named after the rule adopted by the SEC.

automatic reinvestment plan A plan offered by a mutual fund in which the fund automatically reinvests all distributions to a shareholder account.

balanced fund Mutual fund that combines investments in common stock, bonds, and preferred stock. Its goal is to provide income plus some capital appreciation.

capital gain An increase in the value of a capital asset such as common stock. If the asset is sold, the gain is a "realized" capital gain. A capital gain may be short-term (one year or less) or long-term (more than one year.)

capitalization-weighted Weighting the holdings of a fund or index based on market capitalizations (larger companies take a larger position in the portfolio).

closed-end fund A pooled investment fund that has a fixed capitalization after the initial issue. Fund shares are traded on an exchange (see open-end fund).

cyclical industry An industry, such as automobiles, whose performance is closely tied to the condition of the general economy.

dividend yield Annual dividends per share divided by price per share. An indication of the income generated by a share of stock. The dividend yield plus capital gains percentage equals total return.

exchange privilege A feature offered by a mutual fund in which a shareholder is able to move money between various funds at a very minimal processing charge and without a commission.

exchange-traded fund Passively managed portfolio of securities that tracks an index and trades on an exchange.

family of funds A group of mutual funds under the same management company.

foreign currency effects To the extent a foreign currency appreciates relative to the dollar, returns on foreign investments will increase in terms of dollars. The opposite would be true for declining foreign currencies.

front-end load Initial sales commission at the time of the purchase of mutual funds.

index fund A mutual fund whose portfolio is designed to track a particular market index.

load A sales commission to buyers that a mutual fund may charge.

low-load fund A mutual fund that charges a small commission for investment.

money market mutual fund A mutual fund that invests in very short-term financial securities, usually of less than 30 days maturity.

municipal bond Tax-free debt instrument issued by a state or local government.

mutual fund A pool of investors' money invested and managed by an investment adviser. Money can be invested in the fund or withdrawn at any time, with few restrictions, at net asset value (the per share market value of all securities held) minus any loads and fees.

net asset value The market value of a mutual fund's total assets, after deduction of liabilities, divided by the number of outstanding shares; the per share price of no-load mutual funds.

no-load fund A mutual fund that sells its shares at net asset value, without the addition of a sales fee (load).

open-end fund A mutual fund that continuously sells shares to investors and redeems shares when investors wish to sell. Open-end funds have no limit to the number of shares they can issue.

portfolio manager One responsible for managing large pools of funds. Portfolio managers may be employed by insurance companies, mutual funds, bank trust departments, pension funds, and other institutional investors.

prospectus The written statement that discloses the terms of a securities offering or a mutual fund. Strict rules govern the information that must be disclosed to investors in the prospectus.

redemption fees Charges assessed upon redemption of mutual fund shares.

return Consists of income plus capital gains relative to investment.

risk Possibility that an investment's actual return will be different than expected; includes the possibility of losing some or all of the original investment. Measured by variability of historical returns or dispersion of historical returns around their average return.

RiskGrade A measure that standardizes risk by taking the average standard deviation of all the world's equities and assigning it a standard deviation value of 100. All other standard deviations are expressed as a percentage of that figure. Developed by RiskMetrics Group (www.riskgrades.com).

standard deviation A measure of the degree to which returns of an asset vary around the mean.

ticker Letter or group of letters that designates a security for trading purposes.