A fee assessed on certain mutual funds or share classes permitted under an SEC rule to help cover the costs associated with marketing and selling the fund. 12b-1 fees may also be used to cover shareholder servicing expenses.
Accidental death and dismemberment (AD&D)
Coverage available on a life or disability policy, or an option benefit, which pays scheduled amounts in the event of an accidental death or dismemberment.
The trading of securities to take advantage of market opportunities as they occur, in contrast to passive management. Active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell.
Morningstar® defines this as: The investment is actively managed and subject to the risk that the advisor's usage of investment techniques and risk analyses to make investment decisions fails to perform as expected, which may cause the portfolio to lose value or underperform investments with similar objectives and strategies or the market in general.
Activities of daily living (ADLs)
Routine daily activities essential to self-care and independent living, including: bathing, dressing, toileting, continence, transferring or mobility and eating.
Adjusted Gross Income
An amount used in the calculation of income tax liability. Gross income (salary, dividends and interest, capital gains, business income, etc.) less certain adjustments.
The return on an investment taking into account the effect of any taxes due.
Debt securities (bonds) issued by various agencies of the U.S. government, such as the Federal National Mortgage Association, the Government National Mortgage Association and the Federal Home Loan Bank.
An investment approach that accepts above-average risk of loss in return for potentially above-average investment returns.
Aggressive Growth Fund
A mutual fund whose investment objective is long term capital growth. Aggressive growth funds carry a high degree of risk. Mutual funds are sold by prospectus; a prospectus contains complete information on risks, fees and expenses, and should be read carefully before investing.
Alternate care facility
A non-nursing home facility which offers around-the-clock personal assistance that can't be provided effectively in your home.
AMEX Major Market Index (XMI)
An index that is an average of 20 Blue Chip Industrial Stocks.
If the deviation between the portfolio's amortized value per share and its market-based net asset value per share results in material dilution or other unfair results to shareholders, the portfolio's board will take action to counteract these results, including potentially suspending redemption of shares or liquidating the portfolio.
A yearly report or record of an investment's (e.g., a mutual fund's or company's) financial position and operations.
Annual Rate of Return
The annual rate of gain or loss on an investment expressed as a percentage.
A contract issued by a life insurance company designed to provide regular payments immediately, or at some point in the future. As a long-term savings vehicle, a deferred annuity may be fixed or variable. A fixed annuity provides for a guaranteed minimum amount of interest, whereas a variable annuity's earnings are based on the performance of the underlying subaccounts. Any earnings accumulate tax-deferred until withdrawn.
Annuity Commencement Date
The date set forth in the annuity contract on which annuity payments will start. Also known as the "annuity start date."
An increase in the value of an investment.
Asset Transfer Program
The portfolio is subject to unique risks because of its use in connection with certain guaranteed benefit programs, frequently associated with insurance contracts. To fulfill these guarantees, the advisor may make large transfers of assets between the portfolio and other affiliated portfolios. These transfers may subject the shareholder to increased costs if the asset base is substantially reduced and may cause the portfolio to have to purchase or sell securities at inopportune times.
The process of placing a value on an asset.
A method of investing that distributes assets among different asset classes, such as stocks, bonds, and cash. The goal of asset allocation is to help manage the risk of the overall portfolio.
There are three broad asset classes: stocks, bonds and cash/cash equivalents.
Assisted daily living facility
A housing facility which provides food, shelter and limited personal care along with the capacity to respond to unscheduled medical needs.
Attending physician statement (APS)
A report completed by a physician, documenting the current and prior health history of the patient. This report is used in underwriting applications for life and disability insurance, and for processing claims under life and disability insurance.
Average Annual Total Return
The yearly average percentage increase or decrease in an investment's value that includes dividends, gains, and changes in share price.
A fee imposed by some funds when shares are redeemed (sold back to the fund) during the first few years of ownership. Also called a contingent deferred sales charge.
A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds.
Investments in bank loans, also known as senior loans or floating-rate loans, are rated below-investment grade and may be subject to a greater risk of default than are investment-grade loans, reducing the potential for income and potentially leading to impairment of the collateral provided by the borrower. Bank loans pay interest at rates that are periodically reset based on changes in interest rates and may be subject to increased prepayment and liquidity risks.
A short-term credit investment which is created by a non-financial firm and whose payment is guaranteed by a bank. Often used in importing and exporting and as a money market fund investment.
Barclay's Capital U.S. Aggregate Bond Index
A common index widely used to measure performance of U.S. bond funds.
One-hundredth of one percent, or 0.01%. For example, 20 basis points equal 0.20%. Investment expenses, interest rates, and yield differences among bonds are often expressed in basis points.
An extended period of declining values in the financial markets, usually by 20 percent.
A reference point that is chosen for the purposes of comparing related values.
The person, persons, or entity designated to receive benefits upon the death of the insured.
The length of time specified in a policy that benefits will be paid to an insured.
Blue Chip Stock Fund
A mutual fund that consists of a portfolio of large or well known companies for the purposes of achieving growth. Refer to the fund's prospectus for complete information on risks, fees and expenses.
A bond is an IOU issued by a corporation, the government or its agencies. The issuer promises to pay bondholders a stated rate of interest and to repay the principal at maturity.
A fund that invests primarily in bonds and other debt instruments.
A rating or grade that is intended to indicate the credit quality of a bond, considering the financial strength of its issuer and the likelihood that it will repay the debt. Agencies such as Standard & Poor's, Moody's Investors Service, and Fitch issue ratings for different bonds, ranging from AAA (highly unlikely to default) to D (in default).
A person who acts as an intermediary between the buyer and seller of a security, insurance product, or mutual fund, often paid by commission. The terms broker, broker-dealer, and dealer are sometimes used interchangeably.
A firm that sells securities. Brokerage firms are most known for the sale of stock..
A plan feature that permits participants to purchase investments that are not included among the plan's general menu of designated investment alternatives.
A good market in which prices of securities increase greatly over a specific time period.
Business overhead expense
Coverage which helps keep a business operating when a business owner is disabled. Provides short-term benefits to cover fixed operating expenses during total or partial disability.
The total market value of a company's outstanding equity.
Morningstar® defines this as: Concentrating assets in stocks of one or more capitalizations (small, mid, or large) may be subject to both the specific risks of those capitalizations as well as increased volatility because stocks of specific capitalizations tend to go through cycles of beating or lagging the market as a whole.
Capital appreciation is the increase in the value of your original investment.
Capital Appreciation Fund
An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise.
An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price.
The loss in the value of an investment, calculated by the difference between the purchase price and the net sale price.
An investment goal or objective to keep the original investment amount (the principal) from decreasing in value.
The portfolio may fail to meet its investment objective because of positions in cash and equivalents.
An investment that is short term, highly liquid, and has high credit quality.
Cash Refund Annuity
An annuity that makes periodic payments for the life of an individual and a benefit payable to a beneficiary upon death equal to the premium(s) paid less payments made to the individual.
Cash deposits, short-term bank deposits, money market instruments and Treasury bills.
Cash surrender value
The amount of money which an insurance policyowner will receive as a refund if the policyowner cancels certain types of insurance policies.
Redemptions of ETF shares for cash, rather than in-kind securities, may require the portfolio to sell securities. This may increase shareholder tax liability, potentially through capital gain distributions.
Certificates of deposit (CD)
A savings instrument offered by a bank which offers a specified interest rate for a specified period of time. Bank CDs are FDIC insured and offer a fixed rate of return.
Investing in the China region, including Hong Kong, the People's Republic of China, and Taiwan, may be subject to greater volatility because of the social, regulatory, and political risks of that region, as well as the Chinese government's significant level of control over China's economy and currency. A disruption of relations between China and its neighbors or trading partners could severely impact China's export-based economy.
A request for payment under the terms of a policy.
A type of fund that offers only a fixed amount of shares, usually sold through a brokerage firm by a broker.
Morningstar® defines this as: Investments in closed-end funds generally reflect the risks of owning the underlying securities, although they may be subject to greater liquidity risk and higher costs than owning the underlying securities directly because of their management fees. Shares of CEFs are subject to market trading risk, potentially trading at a premium or discount to net asset value.
The price of a stock or other security at the end of the day.
A diminished mental capacity such as difficulty with short-term memory, often associated with Alzheimer's Disease or Senile Dementia.
Collective Investment Fund
Investments created by a bank or trust company for employee benefit plans, such as 401(k) plans, that pool the assets of retirement plans for investment purposes. They are governed by rules and regulations that apply to banks and trust companies instead of being registered with the SEC. These funds are also referred to as collective or commingled trusts.
Short-term debt (due in less than 90 days) issued by corporations. Commercial paper has no collateral backing it.
Compensation paid to a broker or other salesperson for his or her role when investments are bought or sold.
Investments in commodity-related instruments are subject to the risk that the performance of the overall commodities market declines and that weather, disease, political, tax, and other regulatory developments adversely impact the value of commodities, which may result in a loss of principal and interest. Commodity-linked investments face increased price volatility and liquidity, credit, and issuer risks compared with their underlying measures.
The shares offered by a corporation giving a shareholder partial ownership of the company as well as privileges including voting rights and receipt of dividends.
Community based care setting
Programs which provide services at a convenient location in the community. Commonly these programs provide assistance with meals, transportation or homemaking and also may include professional nursing or therapy services provided by licensed care givers in the home.
Company Stock Fund
A fund that invests primarily in employer securities that may also maintain a cash position for liquidity purposes.
An investment fund that is identified by the investment manager of another fund and which is subject to special rules relating to an investor's ability to buy and sell investments between the two funds. See Equity Wash Restriction.
The cumulative effect that reinvesting an investment's earnings can have by generating additional earnings of their own.
Morningstar® defines this as: Because the investment is managed to replicate a multiple or inverse multiple of an index over a single day (or similar short-term period), returns for periods longer than one day will generally reflect performance that is greater or less than the target in the objective because of compounding. The effect of compounding increases during times of higher index volatility, causing long-term results to further deviate from the target objective.
Interest earned not only on the original investment, but also on accumulated earnings.
Conflict of Interest
A conflict of interest may arise if the advisor makes an investment in certain underlying funds based on the fact that those funds are also managed by the advisor or an affiliate or because certain underlying funds may pay higher fees to the advisor do than others. In addition, an advisor's participation in the primary or secondary market for loans may be deemed a conflict of interest and limit the ability of the investment to acquire those assets.
An investment approach that accepts lower rewards in return for potentially lower risks.
Consumer Price Index
The index is compiled by the U.S. Bureau of Labor, a governmental agency, which follows the cost of living by tracking the changes in the price of basic goods and services over time. This index measures inflation.
A fund with an investing strategy that seeks the stock of out-of-favor companies which have good fundamentals, such as low debt or good potential earnings, in the belief that the stock will increase in value. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Contingent Deferred Sales Charge (CDSC)
A fee imposed when shares of a mutual fund or a variable annuity contract are redeemed (sold) during the first few years of ownership. Also called a back-end load.
Investments in convertible securities may be subject to increased interest-rate risks, rising in value as interest rates decline and falling in value when interest rates rise, in addition to their market value depending on the performance of the common stock of the issuer. Convertible securities, which are typically unrated or rated lower than other debt obligations, are secondary to debt obligations in order of priority during a liquidation in the event the issuer defaults.
Debt instruments issued by a private corporation, as distinct from those issued by a government agency or a municipality. Corporates typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity which means they come due all at once; (4) they are traded on major exchanges.
Cost of living rider
A benefit that can be added to a disability policy that increases the monthly benefit annually during a claim.
Country or Region
Investments in securities from a particular country or region may be subject to the risk of adverse social, political, regulatory, or economic events occurring in that country or region. Country- or region-specific risks also include the risk that adverse securities markets or exchange rates may impact the value of securities from those areas.
Credit and Counterparty
The issuer or guarantor of a fixed-income security, counterparty to an OTC derivatives contract, or other borrower may not be able to make timely principal, interest, or settlement payments on an obligation. In this event, the issuer of a fixed-income security may have its credit rating downgraded or defaulted, which may reduce the potential for income and value of the portfolio.
Credit Default Swaps
Credit default swaps insure the buyer in the event of a default of a fixed-income security. The seller of a credit default swap receives premiums and is obligated to repay the buyer in the event of a default of the underlying creditor. Investments in credit default swaps may be subject to increased counterparty, credit, and liquidity risks.
Credit quality is a measure of the likelihood that a debt (i.e., bond) issuer will make interest payments on schedule, as well as repay the principal on the promised date. A high quality rating indicates that the debt issuer may be in a good position to meet interest payments and repay the principal as scheduled.
The risk of default, in which a bond issuer may not make the complete payments. Any bond mutual fund may risk loss from credit risk.
Investments in securities traded in foreign currencies or more directly in foreign currencies are subject to the risk that the foreign currency will decline in value relative to the U.S. dollar, which may reduce the value of the portfolio. Investments in currency hedging positions are subject to the risk that the value of the U.S. dollar will decline relative to the currency being hedged, which may result in a loss of money on the investment as well as the position designed to act as a hedge. Cross-currency hedging strategies and active currency positions may increase currency risk because actual currency exposure may be substantially different from that suggested by the portfolio's holdings.
Variability in return caused by change in foreign exchange rates.
The current rate of return of an investment calculated by dividing its expected income payments by its current market price.
Foreign custodial and other foreign financial services are generally more expensive than they are in the United States and may have limited regulatory oversight. The investment may have trouble clearing and settling trades in less-developed markets, and the laws of some countries may limit the investment's ability to recover its assets in the event the bank, depository, or agent holding those assets goes into bankruptcy.
Custodial care consists primarily of attention to personal needs, such as help in walking, bathing and eating.
An annuity contract under which periodic income payments begin at a future date. See Annuity Commencement Date.
Deferred compensation plan
A plan established by an employer to provide benefits to an employee at a later date, such as after retirement.
Deflation is a decrease in the general price level of goods and services.
Investments in depositary receipts generally reflect the risks of the securities they represent, although they may be subject to increased liquidity risk and higher expenses and may not pass through voting and other shareholder rights. Depositary receipts cannot be directly exchanged for the securities they represent and may trade at either a discount or premium to those securities.
The decrease in the value of a security.
Investments in derivatives may be subject to the risk that the advisor does not correctly predict the movement of the underlying security, interest rate, market index, or other financial asset, or that the value of the derivative does not correlate perfectly with either the overall market or the underlying asset from which the derivative's value is derived. Because derivatives usually involve a small investment relative to the magnitude of liquidity and other risks assumed, the resulting gain or loss from the transaction will be disproportionately magnified. These investments may result in a loss if the counterparty to the transaction does not perform as promised.
Designated Investment Alternative
The investment options picked by your plan into which participants can direct the investment of their plan accounts.
Disability income insurance coverage
Health insurance under which benefits are payable in regular installments designed to replace some of the insured's income when he or she is totally disabled as defined in the policy.
Investments in distressed or defaulted investments, which may include loans, loan participations, bonds, notes, and issuers undergoing bankruptcy organization, are often not publicly traded and face increased price volatility and liquidity risk. These securities are subject to the risk that the advisor does not correctly estimate their future value, which may result in a loss of part or all of the investment.
The amount of money per share of a mutual fund that is paid to shareholders, coming from the income or the interest earned by the securities contained in the portfolio.
Within a fund, diversification is owning securities from a wide variety of unrelated businesses or industries. It allows the investor to help reduce the risk associated with a single security. For example, if one security experiences a price decline, it may be that another security's price will rise, off-setting the decline in the first security. Diversification cannot eliminate the risk of investment losses. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Income distributed to shareholders. Dividends can be received from the ownership of stock or from mutual funds
A system of investing in which an individual deposits or contributes money into the same investments or mutual fund on a regular basis; usually monthly. This strategy may help lower the average share price of the investment. Using dollar cost averaging does not assure a profit and does not protect against loss in a declining market. Also, using this investment method involves continuous investment in securities regardless of fluctuating price levels of securities. Therefore, an investor should consider his/her financial ability to continue purchasing through periods of low price levels.
Dollar rolls transactions may be subject to the risk that the market value of securities sold to the counterparty declines below the repurchase price, the counterparty defaults on its obligations, or the portfolio turnover rate increases because of these transactions. In addition, any investments purchased with the proceeds of a security sold in a dollar rolls transaction may lose value.
Dow Jones Industrial Average
The Dow Jones Industrial Average is considered representative of the general state of the stock market. It is a price-weighted index computed by summing the prices of the 30 companies and then dividing that total by an adjusted value to reflect stock splits over the years.
EAFE(R) International is one of the most widely used benchmarks by international portfolio managers. This is an index created by Morgan Stanley Capital International to track the devlopment markets of Europe, Australia and the Far East. It is widely used as the target to beat for global investing. An index is unmanaged and you cannot invest directly in an index.
Early Close/Late Close/Trading Halt
The investment may be unable to rebalance its portfolio or accurately price its holdings if an exchange or market closes early, closes late, or issues trading halts on specific securities or restricts the ability to buy or sell certain securities or financial instruments. Any of these scenarios may cause the investment to incur substantial trading losses.
Earnings growth is the increase in the annual net income of a company. Companies whose earnings are growing at a higher than average rate possess greater potential for an increase in stock share price.
The policy deductible, or the amount of time (usually a number of days) the insured elects to wait before disability or long term care benefits are paid. Typically, the longer an individual can wait before receiving funds from the insurance company, the lower the price of the policy.
Investments in emerging- and frontier-markets securities may be subject to greater market, credit, currency, liquidity, legal, political, and other risks compared with assets invested in developed foreign countries.
Emerging Market Fund
A fund that invests primarily in emerging market countries.
Securities issued by an employer of employees covered by a retirement plan that may be used as a plan investment option.
An endorsement is an addition to your policy.
Ownership in property or securities. Generally refers to an asset's market value minus debts against it.
The value of equity securities, which include common, preferred, and convertible preferred stocks, will fluctuate based on changes in their issuers' financial conditions, as well as overall market and economic conditions, and can decline in the event of deteriorating issuer, market, or economic conditions.
Equity Wash Restriction
A provision in certain stable value or fixed income products under which transfers made from the stable value or fixed income product are required to be directed to an equity fund or other non-competing investment option of the plan for a stated period of time (usually 90 days) before those funds may be invested in any other plan-provided competing fixed
income fund (such as a money market fund).
Employee Retirement Income Security Act of 1974.
Exchange Traded Fund (ETF)
An investment company, such as a mutual fund, whose shares are traded throughout the day on stock exchanges at market-determined prices.
Morningstar® defines this as: Investments in exchange-traded funds generally reflect the risks of owning the underlying securities they are designed to track, although they may be subject to greater liquidity risk and higher costs than owning the underlying securities directly because of their management fees. Shares of ETFs are subject to market trading risk, potentially trading at a premium or discount to net asset value.
Investments in exchange-traded notes may be subject to the risk that their value is reduced because of poor performance of the underlying index or a downgrade in the issuer's credit rating, potentially resulting in default. The value of these securities may also be impacted by time to maturity, level of supply and demand, and volatility and lack of liquidity in underlying markets, among other factors. The portfolio bears its proportionate share of fees and expenses associated with investment in ETNs, and its decision to sell these holdings may be limited by the availability of a secondary market.
Event-Driven Investment/Arbitrage Strategies
Arbitrage strategies involve investment in multiple securities with the expectation that their prices will converge at an expected value. These strategies face the risk that the advisor's price predictions will not perform as expected. Investing in event-driven or merger arbitrage strategies may not be successful if the merger, restructuring, tender offer, or other major corporate event proposed or pending at the time of investment is not completed on the terms contemplated.
The term used to describe the completion of a transaction in which a stock is sold by a broker and purchased by a shareholder.
A measure of what it costs to operate an investment, expressed as a percentage of its assets or in basis points. These are costs the investor pays through a reduction in the investment's rate of return. See Operating Expenses and Total Annual Operating Expenses.
Mutual fund shareholders pay expenses that go towards the operation and management of a fund. Refer to a fund's prospectus for complete information on risks, fees and expenses.
The issuer of a security may repay principal more slowly than expected because of rising interest rates. In this event, short- and medium-duration securities are effectively converted into longer-duration securities, increasing their sensitivity to interest-rate changes and causing their prices to decline.
A mutual fund company which offers investors a choice of two or more mutual funds, each with different objectives or investment strategies.
Federal Deposit Insurance Corporation (FDIC)
A federal agency that insures money on deposit in member banks and thrift institutions.
Financial Industry Regulatory Authority (FINRA)
A self-regulatory organization for brokerage firms doing business in the United States. FINRA operates under the supervision of the SEC. The organization's objectives are to protect investors and ensure market integrity.
Concentrating assets in the financials sector may disproportionately subject the portfolio to the risks of that industry, including loss of value because of economic recession, availability of credit, volatile interest rates, government regulation, and other factors.
The written record of the financial status of a fund or company, usually published in the annual report. The financial statements generally include a balance sheet, income statement, and other financial statements and disclosures.
An annuity contract in which the insurance company makes fixed or guaranteed payments to an individual for the term of the contract.
Fixed Income Fund
A fund that invests primarily in bonds and other fixed-income securities, often to provide shareholders with current income.
The value of fixed-income or debt securities may be susceptible to general movements in the bond market and are subject to interest-rate and credit risk.
Fixed Return Investment
An investment that provides a specific rate of return to the investor.
Investments in foreign securities may be subject to increased volatility as the value of these securities can change more rapidly and extremely than can the value of U.S. securities. Foreign securities are subject to increased issuer risk because foreign issuers may not experience the same degree of regulation as U.S. issuers do and are held to different reporting, accounting, and auditing standards. In addition, foreign securities are subject to increased costs because there are generally higher commission rates on transactions, transfer taxes, higher custodial costs, and the potential for foreign tax charges on dividend and interest payments. Many foreign markets are relatively small, and securities issued in less-developed countries face the risks of nationalization, expropriation or confiscatory taxation, and adverse changes in investment or exchange control regulations, including suspension of the ability to transfer currency from a country. Economic, political, social, or diplomatic developments can also negatively impact performance.
Investments in forwards may increase volatility and be subject to additional market, active management, currency, and counterparty risks as well as liquidity risk if the contract cannot be closed when desired. Forwards purchased on a when-issued or delayed-delivery basis may be subject to risk of loss if they decline in value prior to delivery, or if the counterparty defaults on its obligation.
A sales charge on mutual funds or annuities assessed at the time of purchase to cover selling costs.
A group or "complex" of mutual funds, each typically with its own investment objective, and managed and distributed by the same company. A Fund Family also could refer to a group of collective investment funds or a group of separate accounts managed and distributed by the same company.
Fund of Funds
A mutual fund, collective investment fund or other pooled investment that invests primarily in other mutual funds, collective investment funds or pooled investments rather than investing directly in individual securities (such as stocks, bonds or money market securities).
Futures Contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed upon today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date.
Morningstar® defines this as: Investments in futures contracts and options on futures contracts may increase volatility and be subject to additional market, active management, interest, currency, and other risks if the contract cannot be closed when desired.
The change over time in a target date fund's asset allocation mix to shift from a focus on growth to a focus on income.
A fund that invests primarily in securities anywhere in the world, including the United States.
Any debt obligation issued by a government or its agencies (e.g., Treasury Bills issued by the United States).
Group Annuity Contract
An annuity contract entered into between an insurance company and an owner for the benefit of a designated group, such as retirement plan participants.
The type of insurance which provides coverage for a group of people under one contract, called a master contract. The master contract is issued to the group policyholder and the insured group members are not parties to the group contract.
Group long term disability
Disability income insurance issued as a master policy to an employer to provide income for employees should they suffer a long term disability.
A fund that invests primarily in the stocks of companies with above-average risk in return for potentially above-average gains. These companies often pay small or no dividends and their stock prices tend to have the most ups and downs from day to day.
Growth and Income Fund
A fund that has a dual strategy of growth or capital appreciation and current income generation through dividends or interest payments.
Growth securities may be subject to increased volatility as the value of these securities is highly sensitive to market fluctuations and future earnings expectations. These securities typically trade at higher multiples of current earnings than do other securities and may lose value if it appears their earnings expectations may not be met.
Guaranteed Interest Account
An account within a fixed annuity or a variable annuity that is guaranteed by the insurance company to earn at least a minimum rate of interest while invested in the contract.
Guaranteed Investment Contract
A contract issued by an insurance company that guarantees a specific rate of return on an investment over a certain time period.
Guaranteed Lifetime Withdrawal Benefit or Guaranteed Minimum Withdrawal Benefit
A feature that may be offered under an annuity contract in which the insurance company promises an individual may withdraw a specified amount from an account, even if the account balance is reduced to zero: (1) for the life of the individual, or the joint lives of two individuals (e.g., the individual and spouse); or (2) for a specified period of time.
Guarantee of insurability
An optional disability income policy benefit that enables an insured to make increases to the policy on specified dates with evidence of financial insurability only required (no evidence of medical insurability is required).
Guaranteed minimum death benefit
Variable annuity contract owners may have the option of assuring that their beneficiaries will receive a guaranteed minimum death benefit that protects their principal against market fluctuations. With this option, beneficiaries receive either the contract value on the date the claim is approved or the highest contract value on any policy anniversary date, whichever is greater. There may be an additional cost for this benefit. Refer to the variable annuity's prospectus for complete information on risks, fees and expenses.
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures or option contract.
The advisor's use of hedging strategies to reduce risk may limit the opportunity for gains compared with unhedged investments, and there is no guarantee that hedges will actually reduce risk.
High Portfolio Turnover
Active trading may create high portfolio turnover, or a turnover of 100% or more, resulting in increased transaction costs. These higher costs may have an adverse impact on performance and generate short-term capital gains, creating potential tax liability even if an investor does not sell any shares during the year.
Investments considered speculative with regard to the receipt of positive investment returns or the potential loss of principle.
Investments in below-investment-grade debt securities and unrated securities of similar credit quality, commonly known as "junk bonds" or "high-yield securities," may be subject to increased interest, credit, and liquidity risks.
Provides long term care for those with considerable assistance needs. Services include medical, nursing, personal care, social and assisted daily living assistance. Generally reserved for those who do not need acute care but require more attention than is provided in an assisted living facility. Skilled nursing home care is daily nursing care which can only be performed by or under the direct supervision of skilled medical personnel.
An annuity contract under which periodic income payments begin within 12 months of purchase.
The date that a fund began operations.
Stock dividends, bond interest and cash interest.
Morningstar® defines this as: The investment's income payments may decline depending on fluctuations in interest rates and the dividend payments of its underlying securities. In this event, some investments may attempt to pay the same dividend amount by returning capital.
A fund that primarily seeks current income rather than capital appreciation.
The portion of the company's return that comes from dividend income.
Increase in Expenses
The actual cost of investing may be higher than the expenses listed in the expense table for a variety of reasons, including termination of a voluntary fee waiver or losing portfolio fee breakpoints if average net assets decrease. The risk of expenses increasing because of a decrease in average net assets is heightened when markets are volatile.
A measure of securities used for the purposes of comparing the movement of securities of similar companies. An index is unmnagaed and you cannot invest directly in an index.
A fund that specializes in the purchase of securities that match or represent a specific index. These funds charge fees which will reduce overall performance. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Index Correlation/Tracking Error
A portfolio that tracks an index is subject to the risk that certain factors may cause the portfolio to track its target index less closely, including if the advisor selects securities that are not fully representative of the index. The portfolio will generally reflect the performance of its target index even if the index does not perform well, and it may underperform the index after factoring in fees, expenses, transaction costs, and the size and timing of shareholder purchases and redemptions.
Individual Annuity Contract
An annuity contract generally entered into between an insurance company and a person or persons.
Individual Retirement Account or Annuity (IRA)
A retirement savings plan for individuals. There are various types of IRAs, such as traditional and Roth.
Industry and Sector Investing
Concentrating assets in a particular industry, sector of the economy, or markets may increase volatility because the investment will be more susceptible to the impact of market, economic, regulatory, and other factors affecting that industry or sector compared with a more broadly diversified asset allocation.
The loss of purchasing power due to a general rise in the prices of goods and services.
A change of asset value may occur because of inflation or deflation, causing the portfolio to underperform. Inflation may cause the present value of future payments to decrease, causing a decline in the future value of assets or income. Deflation causes prices to decline throughout the economy over time, impacting issuers' creditworthiness and increasing their risk for default, which may reduce the value of the portfolio.
Unlike other fixed-income securities, the values of inflation-protected securities are not significantly impacted by inflation expectations because their interest rates are adjusted for inflation. Generally, the value of inflation-protected securities will fall when real interest rates rise and rise when real interest rates fall.
What a borrower pays a lender for the use of money. This is the income you receive from a bond, note, certificate of deposit, or other form of IOU.
Most securities are subject to the risk that changes in interest rates will reduce their market value.
Intermediate care calls for occasional nursing care on a skilled level.
A type of mutual fund which invests primarily in foreign stocks. International investing involves special risks not found in domestic investing, including increased political, social and economic instability, differences in regulation of financial data and reporting and currency exchnage differences. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Intraday Price Performance
The investment is rebalanced according to the investment objective at the end of the trading day, and its reported performance will reflect the closing net asset value. A purchase at the intraday price may generate performance that is greater or less than reported performance.
Investments in inverse floaters may be subject to increased price volatility compared with fixed-rate bonds that have similar credit quality, redemption provisions, and maturity. The performance of inverse floaters tends to lag fixed-rate bonds in rising long-term interest-rate environments and exceed them in falling or stable long-term interest-rate environments.
A person or organization hired by an investment fund or an individual to give professional advice on investments and asset management practices.
A corporation or trust that invests pooled shareholder dollars in securities appropriate to the organization's objective. The most common type of investment company, commonly called a mutual fund, stands ready to buy back its shares at their current net asset value.
Investments in investment-grade debt securities that are not rated in the highest rating categories may lack the capacity to pay principal and interest compared with higher-rated securities and may be subject to increased credit risk.
The goal that an investment fund or investor seeks to achieve (e.g., growth or income).
The gain or loss on an investment over a certain period, expressed as a percentage. Income and capital gains or losses are included in calculating the investment return.
The possibility of losing some or all of the amounts invested or not gaining value in an investment.
Services offered to shareholders such as telephone transaction services and automatic withdrawal plans.
Investing in initial public offerings may increase volatility and have a magnified impact on performance. IPO shares may be sold shortly after purchase, which can increase portfolio turnover and expenses, including commissions and transaction costs. Additionally, IPO shares are subject to increased market, liquidity, and issuer risks.
A stake in any individual security is subject to the risk that the issuer of that security performs poorly, resulting in a decline in the security's value. Issuer-related declines may be caused by poor management decisions, competitive pressures, technological breakthroughs, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Additionally, certain issuers may be more sensitive to adverse issuer, political, regulatory, market, or economic developments.
Joint and Last Survivor Annuity
An annuity that provides periodic payments for the joint lives of two individuals with benefits payable upon the death of one individual to the surviving individual at, for example, 50%, 75% or 100% of the original payment amount depending upon the terms of the contract.
Key person policy
An insurance policy that reimburses a business for financial loss during a key employee's disability until recovery or a suitable replacement can be found.
A large sized company or a mutual fund that invests in the stock of large, established companies.
Morningstar® defines this as: Concentrating assets in large-capitalization stocks may subject the portfolio to the risk that those stocks underperform other capitalizations or the market as a whole. Large-cap companies may be unable to respond as quickly as small- and mid-cap companies can to new competitive pressures and may lack the growth potential of those securities. Historically, large-cap companies do not recover as quickly as smaller companies do from market declines.
Large Cap Fund
A fund that invests primarily in large cap stocks.
Large Cap Stocks
Stocks of companies with a large market capitalization. Large caps tend to be well-established companies, so their stocks typically entail less risk than smaller caps, but large-caps also offer less potential for dramatic growth.
Lehman Brothers Aggregate Index
Lehman Brothers Aggregate Index is a corporate bond index composed of the Lehman Brothers Govt./Credit Index, the Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. The returns for this index are total returns, which include the reinvestment of dividends.
Lehman Brothers Government/Corporate Bond Index
An index used to generally gauge the performance of the U.S. bond market. An index is unmanaged and you cannot invest directly in an index.
Lehman Brothers Intermediate Treasury Bond Index
An index used to generally gauge the performance of U.S. government bond with maturities between one and 10 years. An index is unmanaged and you cannot invest directly in an index.
Investing in loans creates risk for the borrower, lender, and any other participants. A borrower may fail to make payments of principal, interest, and other amounts in connection with loans of cash or securities or fail to return a borrowed security in a timely manner, which may lead to impairment of the collateral provided by the borrower. Investments in loan participations may be subject to increased credit, pricing, and liquidity risks, with these risks intensified for below-investment-grade loans.
Leverage transactions may increase volatility and result in a significant loss of value if a transaction fails. Because leverage usually involves investment exposure that exceeds the initial investment, the resulting gain or loss from a relatively small change in an underlying indicator will be disproportionately magnified.
A creditor's claim against property. For example, a mortgage is a lien against a house; if the mortgage is not paid on time, the house can be seized to satisfy the lien. Similarly, a bond is a lien against a company's assets; if interest and principal are not paid when due, the assets may be seized to pay the bondholders. As soon as a debt is paid, the lien is removed. Liens may be granted by courts to satisfy judgments.
A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor's age or target retirement date through a mix of asset classes. The mix changes over time to become less focused on growth and more focused on income. Also known as "target date retirement" or "age-based" funds.
A fund that maintains a predetermined risk level and generally uses words such as "conservative," "moderate," or "aggressive" in its name to indicate the fund's risk level. Used interchangeably with "target risk fund."
An annuity that makes periodic payments only for the life of one individual. Also known as "single life annuity."
The age an average person is expected to live, as calculated by an actuary. Insurance companies base their projections of benefit payouts on actuarial studies of such factors as sex, heredity and health habits and base their rates on actuarial analysis. Life expectancy can be calculated at birth or at some other age and generally varies according to age. Thus, all persons at birth might have an average life expectancy of 70 years and all persons aged 40 years might have an average life expectancy of 75 years. Life expectancy projections determine such matters as the ages when an individual may start and finish withdrawing funds from an Individual Retirement Account. Annuities payable for lifetimes are usually based on separate male or female tables, except that a qualified plan or trust must use unisex tables.
A type of insurance which provides a sum of money when the person who is insured dies while the policy is in effect.
An organization made up of a general partner, who manages a project and limited partners, who invest money but have limited liability, are not involved in day-to-day management and usually cannot lose more than their capital contribution. Usually limited partners receive income, capital gains and tax benefits; the general partner collects fees and a percentage of capital gains and income. Typical limited partnerships are in real estate, oil and gas and equipment leasing, but they also finance movies, research and development and other projects. Typically, public limited partnerships are sold through brokerage firms, for minimum investments of $5,000, whereas private limited partnerships are put together with fewer than 35 limited partners who invest more than $20,000 each.
A leading mutual fund research and tracking firm. Lipper categorizes funds by objective and size, and then ranks fund performance within those categories.
Cash or assets easily convertible into cash. Some examples: money-market fund shares, U.S. Treasury bills, bank deposits.
The degree to which an investment may be quickly sold in exchange for cash.
A sales charge assessed on certain investments to cover selling costs. A front-end load is charged at the time of purchase. A back-end load is charged at the time of sale or redemption.
Long run or long term
A period of time in which short-term volatility or risk of the market does not play a significant role. Long term can be considered a time period of ten years or more.
Long-Term Outlook and Projections
The investment is intended to be held for a substantial period of time, and investors should tolerate fluctuations in their investment's value.
The risk that you will live longer than expected with the potential result that you run out of money before you die.
Loss of Money
Because the investment's market value may fluctuate up and down, an investor may lose money, including part of the principal, when he or she buys or sells the investment.
Low risk investments
Investments considered stable with respect to capital preservation.
Lump sum distribution
A single payment to a beneficiary covering the entire amount of an agreement. Participants in Individual Retirement Accounts, pension plans, profit sharing, and executive stock option plans generally can opt for a lump sum distribution if the taxes are not too burdensome when they become eligible.
MSCI EAFE Index
An index known by an acronym for the Europe, Australasia, and Far East markets produced by Morgan Stanley Capital International (MSCI). Markets are represented in the index according to their approximate share of world market capitalization. The index is a widely used benchmark for managers of international stock fund portfolios.
MSCI World Index
An index of major world stock markets, including the United States. The index is a widely used benchmark for managers of global stock fund portfolios.
An annual charge to maintain certain types of brokerage accounts.
Performance is subject to the risk that the advisor's asset allocation and investment strategies do not perform as expected, which may cause the portfolio to underperform its benchmark, other investments with similar objectives, or the market in general. The investment is subject to the risk of loss of income and capital invested, and the advisor does not guarantee its value, performance, or any particular rate of return.
A fee or charge paid to an investment manager for its services.
A mutual fund may be run by one manager or a team of managers who make decisions regarding the fund's portfolio. Holdings are chosen according to the goal of the mutual fund, as stated in the prospectus and according to the manager's unique investment strategy. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Refers to the exchanges, traders and investors involved in the transfer of goods and services and securities, as in the stock market. The term also may refer to goods and services in general, the producers who produce them and/or the consumers who buy them.
Market Capitalization or Market Cap
The total market value of a company's outstanding securities, excluding current liabilities.
Refers to the potential of loss that is possible as a result of short-term volatility in the stock market. Factors include political, social and economic events.
Market timing involves trying to predict what the market will do and purchasing or selling stocks to benefit from the movements of the market. It has not been proven that anyone can time the market successfully for any length of time.
Because shares of the investment are traded on the secondary market, investors are subject to the risks that shares may trade at a premium or discount to net asset value. There is no guarantee that an active trading market for these shares will be maintained.
An investment account whose value fluctuates with the market prices of the specific securities within the account's portfolio and offers no guarantee of principal and interest.
The market value of the portfolio's securities may fall rapidly or unpredictably because of changing economic, political, or market conditions, which may reduce the value of the portfolio.
The portfolio is subject to unique risks related to the master/feeder structure. Feeder funds bear their proportionate share of fees and expenses associated with investment in the master fund. The performance of a feeder fund can be impacted by the actions of other feeder funds, including if a larger feeder fund maintains voting control over the operations of the master fund or if large-scale redemptions by another feeder fund increase the proportionate share of costs of the master fund for the remaining feeder funds.
The date on which a debt is due for payment or a bond is repaid. The average weighted maturity of a bond portfolio is the portfolio's time to maturity, weighted by the dollar value of the bonds comprising the portfolio.
Securities with longer maturities or durations typically have higher yields but may be subject to increased interest-rate risk and price volatility compared with securities with shorter maturities, which have lower yields but greater price stability.
Merrill Lynch High Yield Master Index
An index used to gauge the general performance of high yield (junk) debt securities. An index is unmanaged and you cannot invest directly in an index.
A medium sized company or a mutual fund that invests almost exclusively in medium sized companies. A company's size is usually determined by the dollar value of its assets and earnings.
Morningstar® defines this as: Concentrating assets in mid-capitalization stocks may subject the portfolio to the risk that those stocks underperform other capitalizations or the market as a whole. Mid-cap companies may be subject to increased liquidity risk compared with large-cap companies and may experience greater price volatility than do those securities because of more-limited product lines or financial resources, among other factors.
Mid Cap Fund
A fund that invests primarily in mid-cap stocks.
Mid Cap Stocks
Stocks of companies with a medium market capitalization. Mid caps are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps).
Most funds have an initial minimum investment that may range from $50-$2,500.
Investments in master limited partnerships may be subject to the risk that their value is reduced because of poor performance of the underlying assets or if they are not treated as partnerships for federal income tax purposes. Investors in MLPs have more-limited control and voting rights on matters affecting the partnership compared with shareholders of common stock.
Money Market Fund
Money market funds are subject to the risk that they may not be able to maintain a stable net asset value of $1.00 per share. Investments in money market funds are not a deposit in a bank and are not guaranteed by the FDIC, any other governmental agency, or the advisor itself.
Money market investments
Money market investments are short-term securities that carry little risk, such as banker's acceptances, commercial paper, repos, negotiable certificates of deposit and Treasury bills. Money market mutual funds invest in these types of short-term investments; as a result, the risk of losing any of the principle investment is lower. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money. A money market mutual fund is not insured or guaranteed by the FDIC.
Mortgage-Backed and Asset-Backed Securities
Investments in mortgage-backed and asset-backed securities may be subject to increased price volatility because of changes in interest rates, issuer information availability, credit quality of the underlying assets, market perception of the issuer, availability of credit enhancement, and prepayment of principal. The value of ABS and MBS may be adversely affected if the underlying borrower fails to pay the loan included in the security.
A leading mutual fund research and tracking firm. Morningstar categorizes funds by objective and size, and then ranks fund performance within those categories.
Securities backed by a pool of mortgages. Mortgage payments are "passed through" to the investor. Mortgage-backed securities are primarily issued by federal agencies.
Managers' individual investing styles may not complement each other. This can result in both higher portfolio turnover and enhanced or reduced concentration in a particular region, country, industry, or investing style compared with an investment with a single manager.
Municipal Obligations, Leases, and AMT-Subject Bonds
Investments in municipal obligations, leases, and private activity bonds subject to the alternative minimum tax have varying levels of public and private support. The principal and interest payments of general-obligation municipal bonds are secured by the issuer's full faith and credit and supported by limited or unlimited taxing power. The principal and interest payments of revenue bonds are tied to the revenues of specific projects or other entities. Federal income tax laws may limit the types and volume of bonds qualifying for tax exemption of interest and make any further purchases of tax-exempt securities taxable.
Investments in municipal bonds that finance similar types of projects, including those related to education, health care, housing, transportation, utilities, and industry, may be subject to a greater extent than general obligation municipal bonds to the risks of adverse economic, business, or political developments.
A life insurance company owned by policyowners rather than stockholders.
An investment company registered with the SEC that buys a portfolio of securities selected by a professional investment adviser to meet a specified financial goal (investment objective). Mutual funds can have actively managed portfolios, where a professional investment adviser creates a unique mix of investments to meet a particular investment objective, or passively managed portfolios, in which the adviser seeks to parallel the performance of a selected benchmark or index.
NASDAQ Composite Index
The NASDAQ Composite Index is generally considered representative of high growth stocks. It is a market-weighted index where each company's stock value affects the index in proportion to its market value. An index is unmanaged and you cannot invest directly in an index.
Negotiable certificates of deposit
A CD with a very large denomination, usually $1 million or more. Usually bought by institutional investors. Also called a jumbo CD.
Net asset value (NAV)
The value of a mutual fund share. Determined by dividing the total value of the fund's assets by the number of outstanding shares. This value is calculated daily by the fund.
The value resulting from assets minus liabilities.
Investments with a limited history of operations may be subject to the risk that they do not grow to an economically viable size in order to continue operations.
New York Stock Exchange Composite Index
The New York Stock Exchange Composite Index is an average of the price changes of all the common stocks listed and traded on the New York Stock Exchange. It is expressed in index points relating the current index value to a base index value. (The base for the NYSE Composite Index was set at 50.00 on Dec. 31, 1965.) The NYSE Composite Index is the only major measure that reflects the whole NYSE market.
A nondiversified investment, as defined under the Investment Act of 1940, may have an increased potential for loss because its portfolio includes a relatively small number of investments. Movements in the prices of the individual assets may have a magnified effect on a nondiversified portfolio. Any sale of the investment's large positions could adversely affect stock prices if those positions represent a significant part of a company's outstanding stock.
No-load mutual fund
A fund that does not charge a sales fee. However, funds may charge 12(b)1 fees as well as other management expenses. Refer to the fund's prospectus for complete information on risks, fees and expenses.
No minimum fund
A mutual fund with no minimum investment required.
Not FDIC Insured
The investment is not a deposit or obligation of, or guaranteed or endorsed by, any bank and is not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other U.S. governmental agency.
The category assigned to an insured by the insurance company based on the individual's job duties. The insured's category dictates the policy premium and contractual grouping.
The price to buy one share of a specific stock or mutual fund.
Fund expenses which are incurred annually, including management fees.
Open-end mutual fund
A mutual fund that does not have a fixed number of shares and will offer as many shares as investors are willing to buy. Refer to the fund's prospectus for complete information on risks, fees and expenses.
The expenses associated with running or operating an investment fund. Operating expenses may include custody fees, management fees, and transfer agent fees. See Expense Ratio and Total Annual Operating Expenses.
Investments in options may be subject to the risk that the advisor does not correctly predict the movement of an option's underlying stock. Option purchases may result in the loss of part or all of the amount paid for the option plus commission costs. Option sales may result in a forced sale or purchase of a security at a price higher or lower than its current market price.
A contract that allows the holder to buy or sell an underlying security at a given price, known as the strike price.
Investments traded and privately negotiated in the over-the-counter market, including securities and derivatives, may be subject to greater price volatility and liquidity risk than transactions made on organized exchanges. Because the OTC market is less regulated, OTC transactions may be subject to increased credit and counterparty risk.
The investment's performance may be impacted by its concentration in a certain type of security, adherence to a particular investing strategy, or a unique aspect of its structure and costs.
A term defining the most liberal interpretation of total disability where only one test is applied to determine the insured's eligibility for total disability benefits: the ability to perform the duties of one's own occupation.
Built into some disability policies, available as a rider with others, this provision pays a portion of the total disability benefit to insureds unable to perform one or more of their occupational duties because of disability.
The process or approach to operating or managing a fund in a passive or non-active manner, typically with the goal of mirroring an index. These funds are often referred to as index funds and differ from investment funds that are actively managed.
Morningstar® defines this as: The investment is not actively managed, and the advisor does not attempt to manage volatility or take defensive positions in declining markets. This passive management strategy may subject the investment to greater losses during general market declines than actively managed investments.
A fund set up by a corporation, labor union, governmental entity, or other organization to pay the pension benefits of retired workers.
The performance of an investment is the increase (or decrease) in its value over time. Past performance, however, is not a guaranteed indicator of future performance.
A payment feature that may be available in an annuity contract which guarantees periodic payments for no less than a set period of time. For example, in a life annuity, periodic payments would be made for the longer of either: (1) the guaranteed period, to the individual or a beneficiary, or (2) the life of the individual.
Policy is a contract between the insurer and the insured which determines the claims the insurer is required to pay in exchange for premium payments. The insurer pays for claims covered under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts.
The group of individual securities and/or mutual funds held by a person or an institution.
Investments that concentrate their assets in a relatively small number of issuers, or in the securities of issuers in a particular market, industry, sector, country, or asset class, may be subject to greater risk of loss than is a more widely diversified investment.
The individual, team or firm who makes the investment decisions for an investment fund, including the selection of the individual investments.
Portfolio turnover refers to the percentage of stocks or bonds that are bought and sold each year within the fund.
The issuer of a debt security may be able to repay principal prior to the security's maturity because of an improvement in its credit quality or falling interest rates. In this event, this principal may have to be reinvested in securities with lower interest rates than the original securities, reducing the potential for income.
Most contributions are made to a retirement plan before taxes are calculated. Your taxable pay is reduced by the amount contributed to a retirement plan. Taxes will be due upon distribution.
The shares offered by a company which pay a pre-stated dividend, issued before common stock dividends are issued. The benefits of owning preferred stock are realized if the company ever goes bankrupt. If this occurs, preferred stock shareholders receive their money first. Common stockholders may not receive any money, if none is remaining after paying preferred stockholders.
Morningstar® defines this as: Investments in preferred stocks may be subject to the risks of deferred distribution payments, involuntary redemptions, subordination to debt instruments, a lack of liquidity compared with common stocks, limited voting rights, and sensitivity to interest-rate changes.
The payment, or one of a series of payments, required by the insurer to put an insurance policy in force and to keep it in force.
Price appreciation is the increase in the value of your original investment.
Price Earnings Ratio definition
Ratio of the price of a stock to the total earnings of the company. Companies with very high ratios are considered to be overpriced. Company stocks with a low ratio are considered undervalued and potentially good investments. Mutual funds with a value investment strategy seek a portfolio consisting of stocks which have low ratios, with the expectation that they will increase in price.
Price fluctuation refers to changes in the price of a security. Stocks tend to have more price fluctuation than bonds, although any security that is actively traded will experience changes in price.
A measure of the current price of a stock compared to its book value (assets minus liabilities). Price-to-book ratios are one commonly used measure to determine whether stocks are "cheap" or "expensive."
The current stock price divided by annual earnings per share. Price-to-earnings calculations are one measure used to determine whether stocks are "cheap" or "expensive."
A measure that compares the sales per share to the market price of a stock. This measure is used to identify the relative value of stocks within a common industry.
Some investments may not have a market observed price; therefore, values for these assets may be determined through a subjective valuation methodology. Fair values determined by a subjective methodology may differ from the actual value realized upon sale. Valuation methodologies may also be used to calculate a daily net asset value.
The original amount of money invested or loaned.
Something which is legally owned by an individual or entity.
A written record of personal property owned, along with price paid and current value, used for tax or insurance purposes.
A formal written offer to sell securities, which sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. Prospectuses also are issued by mutual funds, describing the history, background of managers, fund objectives, a financial statement and other essential data including the risks and fees associated with investing. The prospectus contains financial information and a description of the company's business history, officers, operations, pending litigation (if any) and plans (including the use of the proceeds from the issue). Offerings of limited partnerships also are accompanied by prospectuses. Real estate, oil and gas, equipment leasing and other types of limited partnerships are described in detail and pertinent financial information, the background of the general partners and supporting legal opinions also are given. A prospectus should be read carefully before investing.
Holdings selected by quantitative analysis may perform differently from the market as a whole based on the factors used in the analysis, the weighting of each factor, and how the factors have changed over time.
Real Estate/REIT Sector
Concentrating assets in the real estate sector or REITs may disproportionately subject the portfolio to the risks of that industry, including loss of value because of changes in real estate values, interest rates, and taxes, as well as changes in zoning, building, environmental, and other laws, among other factors. Investments in REITs may be subject to increased price volatility and liquidity risk, and shareholders indirectly bear their proportionate share of expenses because of their management fees.
Term used to describe situations where a disability occurs, the insured recovers for a short period of time, then experiences a recurrence of the same or a related disability. Insureds with recurrent disabilities do not have to wait until their elimination period is over before they receive benefits.
To sell fund shares back to the fund. Redemption can also be used to mean the repayment of a bond on or before the agreed upon pay-off date.
A fee, generally charged by a mutual fund, to discourage certain trading practices by investors, such as short-term or excessive trading. If a redemption fee is charged it is done when the investment is redeemed or sold.
The business of the issuer of an underlying security may be adversely impacted by new regulation or government intervention, impacting the price of the security. Direct government ownership of distressed assets in times of economic instability may subject the portfolio's holdings to increased price volatility and liquidity risk.
Payments from debt securities may have to be reinvested in securities with lower interest rates than the original securities.
Reliance on Trading Partners
Investments in economies that depend heavily on trading with key partners may be subject to the risk that any reduction in this trading may adversely impact these economies.
The investment does not seek investment returns in excess of the underlying index. Therefore, it will not generally sell a security unless it was removed from the index, even if the security's issuer is in financial trouble.
A contract in which the seller of debt securities, usually Treasury bills, agrees to buy them back at a specified time and price. Also known as a repurchase agreement or buy back.
Repurchase agreements may be subject to the risk that the seller of a security defaults and the collateral securing the repurchase agreement has declined and does not equal the value of the repurchase price. In this event, impairment of the collateral may result in additional costs.
Residual disability benefit
Built into some policies, available as an option with others, this benefit pays the insured a portion of the total disability benefit after a return to work based on the percentage of income lost due to the disability.
Restricted and illiquid securities may fall in price because of an inability to sell the securities when desired. Investing in restricted securities may subject the portfolio to higher costs and liquidity risk.
The gain or loss on an investment. A positive return indicates a gain, and a negative return indicates a loss.
Uncertainty regarding the expected rate of return and/or principal value or loss of an investment.
The ability of an investor to tolerate the risk of losing money for the potential to make money.
Round Trip Restriction
A policy that limits the number of times an investor can exchange into and out of a fund within a given time frame. This is intended to discourage frequent trading that increases the costs to all the fund's investors.
Russell 2000 Index
The Russell 2000(R) Index measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8 percent of the total market capitalization of the Russell 3000(R) Index. As of the latest reconstitution, the average market capitalization was approximately $580 million.
Statement of Additional Information, which can be requested in addition to the prospectus.
SEC required performance
There may be two sets of performance numbers shown for a registered insurance product (such as a variable annuity or mutual funds). The first set, which is obligatory, called "SEC required performance numbers," include deduction of the surrender charges along with all of the usual charges that apply if one withdraws funds early (within one, five or 10 years of the last calendar quarter, or since inception). The SEC required performance also is called "standardized performance". The second set of performance figures, which is optional but must be used in conjunction with the SEC required performance numbers, does not include surrender charges but does include the other charges and fees that must apply to the contract.
A charge for buying an investment.
Although the portfolio tracks an index, it maintains a smaller number of holdings than does the index. Use of this representative sampling approach may lead the portfolio to track the index less closely.
A type of mutual fund that invests in the stocks of companies representing a specific industry, such as technology, utilities or health care. Funds that concentrate investments in one industry may carry greater risk than more broadly diversified funds. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Stocks, bond or other types of investments that represent equity ownership or a debt obligation. The holdings of a mutual fund are securities.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission a commission created by Congress to regulate the securities markets and to protect investors. The SEC does not guarantee an investor against the loss of money from an investment.
An insurance company account that is segregated or separate from the insurance company's general assets. Also refers to a fund managed by an investment adviser for a single plan.
A representation of ownership in a company or investment fund.
Some investment funds and companies offer more than one type or group of shares, each of which is considered a class (e.g., "Class A," "Advisor" or "Institutional" shares). For most investment funds each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.
What an investor who holds mutual fund or stock shares is called.
Frequent purchases or redemptions by one or multiple investors may harm other shareholders by interfering with the efficient management of the portfolio, increasing brokerage and administrative costs and potentially diluting the value of shares. Additionally, shareholder purchase and redemption activity may have an impact on the per-share net income and realized capital gains distribution amounts, if any, potentially increasing or reducing the tax burden on the shareholders who receive those distributions.
Any fee charged against your investment for purchase and sale, other than the total annual operating expenses.
Selling securities short may be subject to the risk that an advisor does not correctly predict the movement of the security, resulting in a loss if a security must be purchased on the market above its initial borrowing price to return to the lender, in addition to interest paid to the lender for borrowing the security.
Usually one year or less, often used to refer to bonds or loans.
Usually associated with group insurance, this type of insurance pays a monthly benefit for total disability after a brief waiting period for a short period of time (typically up to three, six, nine or 12 months).
Refers to either small companies or mutual funds which hold the stock of small companies. Small-caps have higher volatility as well as higher potential for greater capital gains. The illiquidity of the small-cap market may adversely affect the value of these investments so that shares, when redeemed, may be worth more or less than their original cost. Many small-cap funds come under the heading of an aggressive growth mutual fund. Refer to the fund's prospectus for complete information on risks, fees and expenses.
Morningstar® defines this as: Concentrating assets in small-capitalization stocks may subject the portfolio to the risk that those stocks underperform other capitalizations or the market as a whole. Smaller, less-seasoned companies may be subject to increased liquidity risk compared with mid- and large-cap companies and may experience greater price volatility than do those securities because of limited product lines, management experience, market share, or financial resources, among other factors.
Small Cap Fund
A fund that invests primarily in small-cap stocks.
Small Cap Stocks
Stocks of companies with a smaller market capitalization. Small caps are often considered to offer more growth potential than large caps and mid caps but with more risk.
Adhering to social, moral, or environmental criteria may preclude potentially profitable opportunities in sectors or firms that would otherwise be consistent with the investment objective and strategy.
Investments in debt securities issued or guaranteed by governments or governmental entities are subject to the risk that an entity may delay or refuse to pay interest or principal on its sovereign debt because of cash flow problems, insufficient foreign reserves, or political or other considerations. In this event, there may be no legal process for collecting sovereign debts that a governmental entity has not repaid.
S&P 500 Index
The S&P 500 Index is considered the most accurate reflection of the U.S. stock market today. It is the benchmark against which judging the overall performance of money management is used. It is a large capitalization market-weighted index where each company's stock value affects the index in direct proportion of the company's market value relative to the total market value of the index. An index is unmanaged and you cannot invest directly in an index.
S&P BARRA Growth
The S&P BARRA Value is a capitalization-weighted index comprised of stocks of the S&P 500 with high book-to-price ratios relative to the S&P 500 as a whole. Each company of the S&P 500 is assigned to either the Value or Growth index so that the sum of the two indices reflects the total S&P 500.
S&P BARRA Value
The S&P BARRA Value is a capitalization-weighted index comprised of stocks of the S&P 500 with high book-to-price ratios relative to the S&P 500 as a whole. Each company of the S&P 500 is assigned to either the Value or Growth index so that the sum of the two indices reflects the total S&P 500.
S&P Midcap 400 Index
The S&P Midcap 400 Index is a widely recognized, unmanaged index of 400 medium capitalization stocks.
Stable Value Fund
An investment fund that seeks to preserve principal, provide consistent returns and liquidity. Stable value funds include collective investment funds sponsored by banks or trust companies or contracts issued by insurance companies.
In life insurance, a company initially funded by the sale of ownership shares (stock) in a corporation.
A fund that invests primarily in stocks.
An abbreviation using letters and numbers assigned to securities to identify them. Also see Ticker Symbol.
A stock investment represents ownership in a public company.
Investments in structured products may be more volatile, less liquid, and more difficult to price than other assets. These securities bear the risk of the underlying investment as well as counterparty risk. Securitized structured products including CMOs, CDOs, and other securitized products may increase volatility and be subject to increased liquidity and pricing risks compared with investing directly in the assets securitized within the product. Assets invested in structured products may be subject to full loss of value if the counterparty defaults on its obligation.
Investors are expected to select investments whose investment strategies are consistent with their financial goals and risk tolerance.
A short-form prospectus that mutual funds generally may use with investors if they make the long-form prospectus and additional information available online or on paper upon request.
Investments in swaps, such as interest-rate swaps, currency swaps and total return swaps, may increase volatility and be subject to increased liquidity, credit, and counterparty risks. Depending on their structure, swaps may increase or decrease the portfolio's exposure to long- or short-term interest rates, foreign currency values, corporate borrowing rates, security prices, index values, inflation rates, credit, or other factors.
Target-date funds, also known as lifecycle funds, shift their asset allocation to become increasingly conservative as the target retirement year approaches. Still, investment in target-date funds may lose value near, at, or after the target retirement date, and there is no guarantee they will provide adequate income at retirement.
Target Date Fund
A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor's age or target retirement date through a mix of asset classes. The mix changes over time to become less focused on growth and more focused on income. Also known as a "lifecycle fund."
Target Risk Fund
A fund that maintains a predetermined asset mix and generally uses words such as "conservative," "moderate," or "aggressive" in its name to indicate the fund's risk level. Often used interchangeably with "lifestyle fund."
Federal or state income tax is not paid on contributions or earnings until the money is withdrawn.
There are basically two parts to an annuity contract. That is, the accumulation phase (when deposit(s) are made) and the pay-out phase (when the annuitant receives income). During the accumulation phase of an annuity contract the capital accumulates on a tax-deferred basis. This accumulation is not taxed until it is withdrawn (at a later date, usually retirement). Withdrawals taken prior to age 59 1/2 may incur a 10 percent federal income tax penalty.
Tax-exempt securities could be reclassified as taxable by the IRS or a state tax authority, or their income could be reclassified as taxable by a future legislative, administrative, or court action. This may result in increased tax liability as interest from a security becomes taxable, and such reclassifications could be applied retroactively.
A tax-sensitive investment strategy that uses hedging or other techniques may fail to limit distributions of taxable income and net realized gains and therefore create some tax liability for shareholders.
Investors may be liable to pay state and federal taxes on income and capital gains distributions paid out by the investment.
Concentrating assets in the technology sector may disproportionately subject the portfolio to the risks of that industry, including loss of value because of intense competitive pressures, short product cycles, dependence on intellectual property rights, legislative or regulatory changes, and other factors.
Temporary Defensive Measures
Temporary defensive positions may be used during adverse economic, market, or other conditions. In this event, up to 100% of assets may be allocated to securities, including cash and cash equivalents that are normally not consistent with the investment objective.
Term life insurance
Life insurance under which the benefit is paid if the insured dies during a specified period of time. Benefits are not payable if the insured survives to the end of the term.
An abbreviation using letters and numbers assigned to securities and indexes to identify them. Also see Stock Symbol.
The amount of time that an investor expects to hold an investment before taking money out.
Total Annual Operating Expenses
A measure of what it costs to operate an investment, expressed as a percentage of its assets, as a dollar amount, or in basis points. These are costs the investor pays through a reduction in the investment's rate of return. See Expense Ratio and Operating Expenses.
Insureds are considered totally disabled if they are unable to perform the important duties of their regular occupation because of injury or sickness, aren't working in another gainful occupation and are under a physician's care.
Treasury Bill Index (90-day)
A commonly used benchmark to gauge the performance of money market, short-term securities. An index is unmanaged. You cannot invest directly in an index.
A negotiable debt obligation issued by the U.S. government and backed by its full faith and credit, having a maturity of one year or less. Treasury bills are exempt from state and local taxes.
A person or entity (e.g., bank, trust company, or other organization) that is responsible for the holding and safekeeping of trust assets. A trustee may also have other duties such as investment management. A trustee that is a "directed trustee" is responsible for the safekeeping of trust assets but has no discretionary investment management duties or authority over the assets.
A representation of ownership in an investment that does not issue shares. Most collective investment funds are divided into units instead of shares. See Share.
An owner of units in an investment. See Shareholder.
Investment funds that are divided into units (e.g., collective investment funds) instead of shares may offer more than one type or group of units, each of which is considered a class (e.g., "Class A"). For most investment funds, each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.
The unit value (accumulation unit or annuity unit) is a standard measurement for exchange. The "unit" is used to calculate the contract value on the variable portion of a variable annuity or life contract. For example, if you own 100 units of a given fund (or subaccount) and the unit value of each unit is $2.35, your account value for that fund would be $235. If the unit value increases to $3, the value of your account is $300. It is important to note that the number of units does not change; you still own 100 units. The account value equals the unit value x the number of units owned.
Universal life insurance
A form of life insurance first marketed in the early 1980s, that combines the economical protection of term life insurance with a cash value portion. Premiums are invested in a tax-deferred account earning interest. The policy is flexible; that is, as age and income change, a policyholder can increase or decrease premium payments and coverage, or shift a certain portion of premiums into the account, without additional sales charges.
U.S. Federal Tax Treatment
Changes in the tax treatment of dividends, derivatives, foreign transactions, and other securities may have an impact on performance and potentially increase shareholder liability. Additionally, this includes the risk that the fund fails to qualify as a regulated investment company, potentially resulting in a significantly higher level of taxation.
U.S. Government Obligations
Investments in U.S. government obligations are subject to varying levels of government support. In the event of default, some U.S. government securities, including U.S. Treasury obligations and Ginnie Mae securities, are issued and guaranteed as to principal and interest by the full faith and credit of the U.S. government. Other securities are obligations of U.S. government-sponsored entities but are neither issued nor guaranteed by the U.S. government.
U.S. State or Territory-Specific
Investments in the municipal securities of a particular state or territory may be subject to the risk that changes in the economic conditions of that state or territory will negatively impact performance.
U.S. Treasury notes
An IOU issued by the U.S. government. Treasury notes (and treasury bills) are considered to be generally low risk investments if held to maturity. Notes are issued from 2-10 year time periods.
Underlying Fund/Fund of Funds
A portfolio's risks are closely associated with the risks of the securities and other investments held by the underlying or subsidiary funds, and the ability of the portfolio to meet its investment objective likewise depends on the ability of the underlying funds to meet their objectives. Investment in other funds may subject the portfolio to higher costs than owning the underlying securities directly because of their management fees.
Investments in unrated securities may be subject to increased interest, credit, and liquidity risks if the advisor does not accurately assess the quality of those securities.
Net asset value is not calculated on days and times when the U.S. exchange is closed, though foreign security holdings may still be traded. In this event, the net asset value may be significantly impacted when shareholders are not able to buy or sell shares. Conversely, performance may vary from the index if the NAV is calculated on days and times when foreign exchanges are closed.
A fund that invests primarily in stocks that are believed to be priced below what they are really worth.
Value securities may be subject to the risk that these securities cannot overcome the adverse factors the advisor believes are responsible for their low price or that the market may not recognize their fundamental value as the advisor predicted. Value securities are not expected to experience significant earnings growth and may underperform growth stocks in certain markets.
An annuity contract under which the insurance company promises to make payments beginning immediately or at some future date. The value of the annuity and amount of the benefits paid by the insurance company will vary depending on the performance of the investment options.
Investments in variable-rate securities, which periodically adjust the interest-rate paid on the securities, may be subject to greater liquidity risk than are other fixed-income securities. Because variable-rate securities are subject to less interest-rate risk than other fixed-income securities, their opportunity to provide capital appreciation is comparatively reduced.
Variable Return Investment
Investments for which the return is not fixed. This term includes stock and bond funds as well as investments that seek to preserve principal but do not guarantee a particular return, e.g., money market funds and stable value funds.
Variable universal life
Variable universal life provides a death benefit where the cash value varies with performance of an underlying portfolio of investments.
The degree to which a securities share price will change in value.
Waiver of premium
A policy provision that exempts insureds from making premium payments until they recover once they've been disabled for a specified number of days.
Investments in warrants may be subject to the risk that the price of the underlying stock does not rise above the exercise price. In this event, the warrant may expire without being exercised and lose all value.
Whole life insurance
Life insurance under which coverage remains in force during the insured's entire lifetime, provided premiums are paid as specified in the policy.
To redeem shares of a mutual fund or stock. In a mutual fund, partial or full redemptions may be made over the phone. Some funds may impose an extra redemption fee to discourage market timers from pulling their money immediately after investing. If this is a fund's policy, it will be stated in the prospectus.
A fee or expense that is added to or "wrapped around" an investment to pay for one or more product features or services.
A system administered at the state level that provides benefits to workers who are hurt or contract an illness on the job.
The return of an investment expressed as a percentage of cost or market. These include the income or dividends received from a security or mutual fund.
Investments in zero-coupon bonds, which do not pay interest prior to maturity, may be subject to greater price volatility and liquidity risks than are fixed-income securities that pay interest periodically. Still, interest accrued on these securities prior to maturity is reported as income and distributed to shareholders.