Glossary

A B C D E F G H I K L M N O P Q R S T U V W Y Z

For your convenience, the following glossary can help you to understand many of the investment terms and jargon that have become common in today’s Investment & Finance community.

A

Accrued interest – The interest on a bond that has accrued since the last interest payment date. The buyer of the bond pays the market price plus accrued interest.

American Depositary Receipt (ADR) – a security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. currency and markets.

Amortization – Accounting for a company’s expenses or charges as applicable on the earnings statement, rather than as paid, e.g. depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges.

Annual report – The formal financial statement issued yearly by a corporation. The annual report shows the balance sheet at yearend, as well as an earnings (profit and Loss) statement, cash flow statement, etc. It also generally includes a narrative of the company’s activities and performance for the year, and various other data and information that aids in analyzing the company’s value and outlook.

Arbitrage – A two-part transaction to benefit by the differences in stock price of one security. For example, if a given stock can be bought in London for $20 a share and sold in Hong Kong for $21 a share, the arbitrageur may simultaneously purchase the stock in London and sell the same amount in Hong Kong, making a profit (before commissions or other expenses) of $1.00 a share.

Assets – All that a company owns, or is owed to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, mineral deposits, etc., which are known as fixed assets; and patents and goodwill, called intangible assets.

Auditor’s report – The statement of the accounting firm’s analysis and its opinion of the accuracy of a company’s financial statements, particularly if they conform to generally accepted rules and practices of accountancy.

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B

Balance sheet – A financial statement showing the types and amounts of a company’s assets, liabilities and capital as of a specified date.

Basis point – One gradation on a 100-point scale representing 1%; used especially in expressing changes in bond yields. Fixed income yields often change slightly within one percent and the basis point scale easily expresses these changes in hundredths of 1%. For example, the difference between 8.77% and 8.83% is 6 basis points.

Bear – Someone who believes the market will decline.

Bear market – A declining market.

Bearer bond – An unregistered, i.e. it does not have the owner’s name registered on the books of the issuer. Interest and principal, when due, are payable to the holder or “bearer”.

Bid and Ask – Often referred to as a quotation or quote. At a given point in time, the “bid” is the highest price anyone is willing to pay for a security, while the “Ask” is the lowest price anyone will accept at the same time.

Block – A large holding or transaction (Block Trade) of stock.

Blue chip – A company known nationally, or even globally, for the quality and wide acceptance of its products or services, and for its ability to earn profits and pay dividends, i.e. to prosper and grow.

Bond – Basically an IOU or promissory note of a company that issues (sells) bonds to raise debt capital. The bond is evidence of a debt on which the issuer promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the bond’s expiration date.
A bondholder is a creditor of the company, while a stockholder (equity holder) is a part owner of the company.

Book value – Is the fundamental value of a stock, determined by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. A company’s total book value is divided by the number of common shares outstanding to arrive at book value per common share. A company’s shares will often trade (market value) at a discount or premium to book value.

Broker – An agent who handles clients’ orders to buy and sell securities, commodities or other property and earns a commission on each transaction.

Bull – One who believes the market will rise.

Bull market – An advancing market.

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C

Callable – A bond issue, all or part of which may be redeemed by the issuing corporation under specified conditions before maturity. The term also applies to preferred shares that may be redeemed by the issuing corporation.

Capital gain or capital loss – Profit or loss realized when a stock or other capital asset is sold.

Capital stock – Consists of all shares (preferred and common) representing equity (ownership) of a business.

Cash flow – Total funds available to a company, i.e. net income plus amounts deducted for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.

Certificate – The actual piece of paper that is evidence of ownership of shares in a company’s stock.

Certificate of deposit (CD) – There are two basic types of CDs: Traditional bank CDs have a set date of maturity and interest rate, and typically incur an early-withdrawal penalty, while negotiable CDs trade in a secondary market, with investors receiving more or less than the original amount depending on market conditions.

Commodity Futures Trading Commission (CFTC) – Created by the United States Congress in 1974 to regulate exchange trading in futures.

Collateral – Securities or other property owned by a borrower but pledged to secure repayment of a loan.

Commercial paper – Debt instruments issued by companies to meet interim financing needs.

Commission – An agent’s or broker’s basic fee for purchasing or selling securities or property.

Commission broker – An agent who executes clients’ orders for the purchase or sale of securities.

Common stock – Securities that represent an ownership interest in a corporation. Common stockholders assume somewhat greater risk than preferred shareholders, but generally exercise the greater control and may gain the greater award in the form of capital appreciation plus dividends.

Conglomerate – A large company with diversified operations across a variety of industries.

Convertible – A bond, debenture or preferred share that may be exchanged for common stock or another security in accordance with specified terms.

Coupon bond – Bond with interest coupons attached. The coupons are clipped as they come due and presented by the holder for payment of interest. (Thus the term “coupon clipper”.)

Cumulative preferred – Most preferred shares have a provision that if one or more dividends are omitted, the omitted dividends (arrears) must be paid before dividends may be paid on the company’s common stock.

Current assets – Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, U.S. Government bonds, money market instruments, inventories, receivables and money due within one year.

Current liabilities – Money owed and payable by a company within one year.

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D

Day order – An order to buy or sell that expires at the end of trading day if it was not executed during that day’s trading session.

Debenture – A promissory note, usually ranking below a corporate bond, and backed by the general credit of a company.

Debit balance – In a margin account, that portion of the purchase price of stock or other investment type that is covered by credit extended by the broker to the margin customer.

Delayed opening – The postponement of trading of a stock beyond the normal opening of a day’s trading session because of an abnormal influx of either buy or sell orders, or pending corporate news that requires extra time for deemed dissemination.

Depository Trust Company (DTC) – A securities certificate depository through which members affect security deliveries between each other via computerized bookkeeping entries instead of each company having to deliver and receive physical stock certificates.

Director – Is a person elected by shareholders to serve on the company’s board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors establish corporate strategy and decide, among other matters, when a dividend shall be declared.

Discretionary Account – Is an account in which the customer gives the broker or someone else authority to buy and sell securities in the account, at their own discretion.

Diversification – In a portfolio, investments are usually spread among different types of securities, companies and industries so as to avoid the risks of having investment funds too concentrated in one particular asset.

Dividend – Is a payment designated by the board of directors to be distributed on a per share basis to stockholders, and paid for out of surplus (profits.)

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E

Earnings report – One of the key financial statements, also called an income statement, issued by a company showing its revenues, expenses, earnings or losses over a given period.

Equity – The ownership interest of preferred and common shareholders in a company.

Ex-dividend – Means "without dividend." The buyer of a stock selling ex-dividend does not receive the recently declared dividend.

Exchange Rate – The price of converting one country’s currency to the currency of another country. A "floating" exchange rate is normally determined by market conditions while a "fixed" rate is one that is held at one level regardless of the market.

Ex-rights – Without the rights. Corporations raising additional money may do so by offering their stockholders the right to subscribe to new or additional stock, usually at a discount from the prevailing market price. The buyer of a stock selling ex-rights is not entitled to the rights.

Extra – The short form of "extra dividend." A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying.

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F

Face value – The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value.

Fiscal year – The financial or accounting year of a corporation. A Fiscal Year is normally a 12 month period that may or may not follow the calendar year. At the end of a fiscal year, companies usually calculate their year-end profits and losses.

Fixed charges – A company’s fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings on equity capital are computed.

Fixed-Income Securities – General term for investments that pay a predictable stream of interest and generate income that does not vary over the life of the investment. Normally in the form of bonds, debentures and mortgages.

Flat income bond – This term means that the price at which a bond is traded includes consideration for all unpaid accruals of interest. Bonds that are in default of interest or principal are traded flat. Income bonds that pay interest only to the extent earned are usually traded flat. All other bonds are usually dealt in "and interest," which means that the buyer pays to the seller the market price plus interest accrued since the last payment date.

Forward Contract – A negotiated commitment or agreement to buy or sell an asset or commodity at a set date in the future for a specific price. Similar to futures contracts; however forward contracts trade "over the counter” and not on an exchange.

Floor broker – A member of the stock exchange who executes orders on the floor of the Exchange to buy or sell any listed securities.

Formula investing – An investment technique. One formula calls for the shifting of funds from common shares to preferred shares or bonds as a selected market indicator rises above a certain predetermined point – and the return of funds to common share investments as the market average declines.

Fundamental research – Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc.

Funded debt – Usually interest-bearing bonds or debentures of a company. Could include long-term bank loans. Does not include short-term loans, preferred or common stock.

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G

General mortgage bond – A bond that is secured by a blanket mortgage on the company’s property but may be outranked by one or more other mortgages.

Gilt-edged – High-grade bond issued by a company that has demonstrated its ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption.

Gold fix – The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank); the fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.

Guaranteed Investment Certificate (GIC) – Securities or deposit instruments issued by financial institutions that require a minimum investment and that pay a specified rate of interest for a specified term.

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H

Hedge – An investment strategy used to limit risk and protect against market volatility by making transactions that oppose existing positions or by taking an offsetting position in a related security.

Holding company – A corporation that owns the securities of another, in most cases with voting control.

Hypothecation – The pledging of securities as collateral – for example, to secure the debit balance in a margin account.

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I

Index – A statistical yardstick against which the performance of the stock market or groups of securities is compared. For example, the S&P 500 is a common stock market index that measures the performance of 500 large U.S. firms in various market sectors and is considered an indicator of the U.S. market as a whole. Economic indexes, such as the Consumer Price Index, are also used to track the rise and fall in value of goods and services and are an indicator of inflation.

Index Fund – A passively managed portfolio weighted to duplicate a specific index in order to match the performance of that index. See

Inflation – Occurs when purchasing power declines due to increase in the prices of goods and services based on a percentage change in the Consumer Price Index.

Institutional Investor – Organization or investment manager that invests funds on behalf of institutional parties such as pension funds, insurance companies and banks, as opposed to individual or retail investors.

Interest – Money charged to a borrower by a lender for a loan or investment. Also refers to the return earned on funds that have been loaned or invested. The interest rate is normally a percentage of the debt over a period of time.

Investment – The purchase of items of value in order to earn income and/or increase capital, i.e. putting money to work to make more money. Investments can include income-producing vehicles such as bonds, equity vehicles such as common and preferred stocks (which may or may not provide income) and other assets such as real estate.

Investment banker – Also referred to as an underwriter. The financial intermediary between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stocks or bonds on behalf of a company, estate, etc.

Investment Objective – The desired goal or outcome of an investment strategy, e.g. long-term growth and safety of capital.

Investment Strategy – An action plan for achieving an Investment Objective or goal through the allocation of funds among various asset classes and securities. Most strategies take into consideration factors such as Risk Tolerance and Time Horizon.

Issue – Any of a company’s securities, or the act of distributing such securities.

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K

Keogh plan – Tax-advantaged personal retirement program that can be established by a self-employed individual.

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L

Large Cap Stock – Stocks of companies that are among the largest capitalization in their market.

Leverage – The use of borrowed funds or debt to increase potential investment returns. The investment gain is magnified because it is not measured against the total investment, only against the portion that was not borrowed.

Liabilities – The debts and financial obligations of a company either current (payable within one year) or long-term (payable after one year) such as salaries, taxes and money owed. The concept also applies to pension plans and reflects the benefit promises of the plan (i.e. future pension payments).

Liquidity – The ease with which investors can convert securities into cash. Also refers to a corporation’s cash position, i.e. its assets relative to its liabilities.

Listed stock – The stock of a company that is traded on a securities exchange.

Long or Long Position – Signifies that an investor has ownership of a security and is entitled to receive any dividends from it, to sell it for profit or transfer it, or to hold it for potential capital gain..

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M

Margin – The amount paid by the customer when using a broker’s credit to buy or sell a security. Under U.S. Federal Reserve regulations, the initial margin requirement since 1945 has ranged from the current rate of 50% of the purchase price up to 100%. (See: Brokers’ loan, Equity)

Margin call – A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer’s account declines below a minimum standard set by the exchange or by the firm.

Market order – An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd.

Market price – The last reported price at which the stock or bond sold, or the current quote.

Maturity – The date on which a loan or bond comes due and is to be paid off.

Merger – Combination of two or more corporations.

Mid Cap Stock – Stocks of companies that are in the middle range capitalization in their market.

Money market fund – A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals. (See: Certificate of deposit, Commercial paper)

Mortgage bond – A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bonds issued against it. (See: Bond, Debenture)

Municipal bond – A bond issued by a state or a political subdivision, such as county, city, town or village. The term also designates bonds issued by state agencies and authorities. In general, interest paid on municipal bonds is exempt from federal income taxes and state and local taxes within the state of issue. However, interest may be subject to the alternative minimum tax (AMT).

Mutual fund – A company or trust that uses its capital to invest in other companies. There are two principal types: the closed-end and the open-end or mutual fund. Shares in closed-end investment companies, some of which are listed on the New York Stock Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to alter it, which is seldom. Open-end funds sell their own shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.

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N

Nasdaq – An automated network (electronic stock market) used for trading Over the Counter stock, with an emphasis on high tech and developing companies. Originally referred to as NASDAQ (an acronym for the National Association of Securities Dealers Automated Quotations System), it also refers to several indices, e.g. the NASDAQ-100 Index and the NASDAQ Composite Index.

Nominal Interest Rate – The rate of simple interest on a debt or a bond that ignores any impact from inflation.

Net asset value – Usually used in connection with investment companies (mutual funds) to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share.

New York Stock Exchange (NYSE) – The largest organized securities market in the United States, founded in 1792. The Exchange itself does not buy, sell, own or set the prices of securities traded there. The prices are determined by public supply and demand. The Exchange is a non-profit corporation of 1,366 individual members, governed by a board of directors consisting of 10 public representatives, 10 Exchange members or allied members and a full-time chairman, executive vice chairman and president.

Noncumulative – A type of preferred stock on which unpaid dividends do not accrue.

NYSE Composite Index – The composite index covering price movements of all common stocks listed on the New York Stock Exchange. It is based on the close of the market December 31, 1965, as 50 and is weighted according to the number of shares listed for each issue. The index is computed continuously and printed on the ticker tape. Point changes in the index are converted to dollars and cents so as to provide a meaningful measure of changes in the average price of listed stocks. The composite index is supplemented by separate indexes for four industry groups: industrial, transportation, utility and finance.

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O

Odd Lot – An amount of stock less than the established 100-share unit, i.e. a Round lot.

Option – The right to buy or sell a specified amount of securities at a certain price within or at the end of a stipulated time period. A "put option" gives the holder selling rights while a "call option" gives buying rights.

Over the Counter (OTC) – Principal market for bonds and some stocks that are not traded on a recognized exchange. Normally brokers and dealers trade directly by phone or electronically. Also known as an Unlisted Market.

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P

Paper profit (loss) – An unrealized profit or loss on a security still held. Paper profits and losses become realized only when the security is sold. (See: Profit-taking)

Par – In the case of a common share, par means a dollar amount assigned to the share by the company’s charter. Par value may also be used to compute the dollar amount of common shares on the balance sheet. Par value has little relationship to the market value of common stock. Many companies issue no-par stock but give a stated per share value on the balance sheet. In the case of preferred stocks it signifies the dollar value upon which dividends are figured. With bonds, par value is the face amount, usually $1,000.

Participating preferred – A preferred stock that is entitled to its stated dividend and to additional dividends on a specified basis upon payment of dividends on the common stock.

Portfolio – The combined holdings of individuals or organizations that may contain a variety of investments and securities such as bonds, stock, cash, real estate and other assets. Portfolios are normally managed by a Fund or Portfolio Manager and contain securities from various companies, sectors and regions in order to reduce risk through diversification. Portfolios can range from aggressive to conservative, depending on the Investment Objectives and Risk Tolerance of the investor. Many private (individual) investors hold and manage their own portfolio of stocks and other investments.

Preferred Stock or Shares – Securities that entitle the holder to a specified rate of dividend that is paid before dividends to common shareholders are paid. Preferred shareholders normally have a priority claim on assets in the event of the liquidation of a company.

Present Value – The value today of a future sum of money or cash flow, given a specified rate of interest.

Price to Earnings (P/E) Ratio – Used as a measurement of the value of a stock and a method for comparing stocks within industries. Calculated by dividing the current price of common shares by the company’s earnings per share for a 12-month period.

Prime rate – The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.

Principal – The original investment amount or capital (not including earned interest) or the face amount of a bond.

Private Equity – Equity capital invested in a private company or made available to companies or investors outside of the stock market.

Profit-taking – Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain the reason for a downturn in the market following a period of rising prices. (See: Paper profit)

Prospectus – The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission.

Proxy – Authorization given by shareholders delegating another person, or a company manager, the rights and responsibilities to represent the holder and vote the holder’s shares at shareholders meetings.

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Q

Quote – The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your financial advisor for a "quote" on a stock, he or she may come back with something like "45 1/4 to 45 1/2." This means that $45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $45.50 was the lowest price that any seller would take at the same time. (See: Bid and asked)

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R

Rally – A brisk rise following a decline in the general price level of the market, or in an individual stock.

Real Estate Investment Trust (REIT) – An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90% of their income.

Rebalancing – The process of realigning or adjusting a portfolio to reflect the changes in performance of different assets over time and to remain on track with investment goals.

Record Date – The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.

Redemption price – The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock.

Refinancing – Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.

Registered Bond – A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner.

Return – Also known as Rate of Return. The amount gained or lost on an investment over a period of time, normally as a percentage of initial investment. Real Return is a return that has been adjusted for inflation.

Return on Investment (ROI) – A measurement of the profitability of a company based on income in the fiscal year divided by stock equity and debt.

Rights – When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder.

Risk Tolerance – The amount of risk that an investor is prepared to accept, given the potential return. The Risk Tolerance of each investor is affected by such influences as Time Horizon, Investment Objectives and Individual Temperament.

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S

Scale order – An order to buy (or sell) a security, that specifies the total amount to be bought (or sold) at specified price variations as the stock price changes.

S&P 500 Index – An index made up of 500 widely-held stocks in mid and large-cap companies, which are considered to be representative of the US equity market. The performance of this group of stocks is generally used as a benchmark for the overall performance of the US stock market.

S&P/TSX Composite Index – A benchmark index made up of the largest capitalization stocks on the Toronto Stock Exchange, normally used as an indicator of the performance of the overall Canadian equity market. This is the successor to the TSE 300 Index.

Securities – Transferable investment products represented by certificates or documents of ownership or claim on income payments. Stocks, bonds, mortgages, derivatives, certificates of deposit and options are all examples of securities.

Sell side – The portion of the securities business in which orders are transacted. The sell side includes retail brokers, institutional brokers and traders, and research departments. If an institutional portfolio manager changes jobs and becomes a registered representative, he or she has moved from the buy side to the sell side.

Settlement – The completion of a transaction between the buyer and seller of a security.

Short Selling – The sale of a borrowed security in anticipation that the price of the security will decline and that a profit can be made by buying back the security at a lower cost (and returning it to the lender) in the future.
Small Cap Stock – Stock of companies that are in the lower market capitalization range in the market, i.e. the birthplace of all blue chip or Large Cap stocks.

Split – The division of the outstanding shares of a corporation into a larger number of shares. A 3-for-1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3-for-1 split would have 300 shares, although the proportionate equity in the company would remain the same; 100 parts of 1 million are the equivalent of 300 parts of 3 million. Ordinarily, splits must be voted by directors and approved by shareholders.

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T

Tax Shelter – Investments that offer some form of income tax protection in the form of deductions, deferrals or credits.

Technical research – Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.

Tender offer – A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to "tender" (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum (or maximum) number of shares.

Top Down – An investment strategy that builds portfolios of securities based on the country, region, sector or industry in which they operate as well as on economic and other factors. This approach delays research and analysis of individual companies until after it has determined that a candidate company is in a preferred “space”.

Transfer agent – A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner.

Treasury Bill (T-Bill) – Short-term security offered by a government for terms of up to one year.
T-bills pay no interest but are offered at a discount and then redeemed at par, thus providing a predetermined yield.

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U

Unlisted stock – A security not listed on a stock exchange.

Up tick – A term used to designate a transaction made at a price higher than the preceding transaction. Also called a "plus" tick. A "zero-plus" tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or "minus" tick, is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign, or a minus sign, is displayed throughout the day next to the last price of each stock at the trading post on the floor of the New York Stock Exchange.

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V

Volatility – A measure of the rate or degree that the price of a security or investment fluctuates over time, normally used as an indicator of risk.

Voting Rights – The entitlement of stockholders, as part owners, to have a say, through a vote, in company affairs such as the composition of the board of directors and policy issues.

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W

Warrants – Certificates giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy.

Weighting – The amount (usually percentage) that a specific variable represents overall. For example, the proportion of exposure that a specific asset, region or sector represents in a portfolio, compared to the benchmark against which the portfolio is measured.

When issued – A short form of "when, as and if issued." The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All "when issued" transactions are on an "if" basis, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled.

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Y

Yield – Also referred to as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8% ($3.20÷$40.00). The current yield on a bond is figured the same way.

Yield to maturity – The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

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Z

Zero coupon bond – A bond that pays no interest but is priced, at issue, at a discount from its redemption price.

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