Estrella Tax Services

Source: Essence
Publication date: 2003-03-01
Arrival time: 2003-03-07

You don't have to know a debenture from a derivative to secure your financial future. But by familiarizing yourself with the following terms, you'll enhance your investment savvy:

ANNUITY: A contract with an insurance company that provides for periodic payments in return for an investment.

ASSET: Property with monetary value, including real estate, securities, bank accounts, jewelry.

BEAR MARKET: Period of falling stock-market prices.

BULL MARKET: Period of rising stock prices.

COMPOUND INTEREST: Earnings on the earnings of an investment that significantly increase its value over time.

DEPRECIATION: Decline in an investment's value.

DIVERSIFICATION: Investing in different types of securities to reduce risk.

DOLLAR-COST AVERAGING: Regularly investing a fixed amount when market prices are rising or falling.

INDEX: Group of securities, such as Dow Jones, used as a standard to measure investment performance.

IPO (initial public offering): A company's first sale of public stock.

IRA (individual retirement account): Tax-deferred account in which you invest funds until retirement.

JUNK BOND: Bond with a high yield but a low credit rating.

MUTUAL FUND: Investment company that buys a portfolio of securities managed by a professional and sells ownership shares to investors.

NET WORTH (WEALTH): Total value of assets minus outstanding debts.

PENNY STOCK: Speculative stock usually selling for under $1 a share.

PORTFOLIO: An array of investments.

SECURITIES: Investment vehicles such as stocks, bonds, money- market instruments.

TAX-DEFERRED INCOME: Earnings on an investment account that are not taxed until withdrawal.

VOLATILITY: Fluctuation in the value of an investment.

ZERO COUPON BOND: Bond sold at deep discount from its face value, with no periodic interest payments.

And by the way, a DEBENTURE is a debt secured solely by the borrower's integrity; a DERIVATIVE is a security whose worth is largely derived from the value of another underlying security.