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Accrued Interest

The interest due on a bond or other fixed income security since the last interest payment was made. The buyer of a bond pays the market price plus accrued interest.


American Depositary Receipt (ADR)

A receipt issued by a U.S. Depository Bank that represents shares of a foreign corporation held by the bank. Because ADRs are quoted in U.S. dollars and trade just like any other stock, they make it simple for investors to diversify their holdings internationally.


American Stock Exchange (AMEX)

An open auction market similar to the NYSE, where buyers and sellers compete in a centralized marketplace. The AMEX typically lists small- to medium-cap stocks of younger or smaller companies. Until 1921, it was known as the New York Cumulative Exchange.



Property and items of value owned by a person or business. The primary classifications of assets are: Property and items of value owned by a person or business. The primary classifications of assets are: • Current assets—cash and other liquid instruments, including accounts receivable, that can be converted to cash within one year maximum • Long-term assets—plants, equipment, real estate, and other capital assets; net of depreciation • Prepaid and deferred assets—expenditures for future costs or expenses, such as insurance, interest, or rent, that are set up as assets to be amortized over an applicable period • Intangible assets—assets with a determined value but that may not be scalable, such as goodwill, patents, copyrights, and brand-name recognition


Asset Class

A type of investment, such as stocks, bonds, real estate, or cash.


Base Point

One one-hundredth of one percent. Such a small measurement is especially helpful in expressing the often small but significant variations in bond yields. For example, the difference between a 12.83-percent yield and a 12.88-percent yield is five basis points.


Bid and Ask

Collectively called the quote, the bid refers to the highest price a buyer is willing to pay for a stock, while the ask is the lowest price a seller will accept.


Blue Sky Laws

A popular name for various state laws enacted to protect the public against securities fraud. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky.


Capital Stock

All shares representing ownership of a business, including common and preferred.


Cash Flow

Reported net income of a corporation plus amounts charged for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.


Cash In Lieu

Receive cash in lieu of fractional shares.


Cash Sale

A transaction on the floor of the stock exchange that calls for delivery of the securities the same day. In regular stock trades, the seller is to deliver on the third business day. Bonds must be delivered on the day after a trade


Certificate of Deposit

An agreement with a bank that you will leave your money on deposit for a specified period of time in return for a specific amount of interest.



The broker's basic fee for purchasing or selling securities as an agent.


Common Stock

Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred stockholders have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.


Current Assets

Company assets that are reasonably expected to be realized in cash, sold, or consumed during one year. These include cash, U.S. government bonds, receivables, money due usually within one year, and inventories.


Current Liabilities

Money owed and payable by a company, usually within one year.



A system trademark that uniquely identifies securities trading in the U.S. It was developed in the late 1960s by the American Bankers Association as a way to standardize the identification and tracking of securities. The CUSIP number consists of nine digits—the first six identify the issuer, and seven through nine identify the issue. Please note that CUSIP numbers are a trademark of the American Bankers Association and, as such, cannot be posted on our website.


Depository Trust Company (DTC)

DTC provides a central securities certificate depository through which brokers deliver securities by computerized bookkeeping entries, vastly reducing physical transfer of stock certificates. DTC is operated by separate management and has an independent board of directors.


Discretionary Account

An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received.



A dividend is the payment designated by the board of directors to be distributed pro rata among the shares outstanding. For preferred shares, the dividend is usually a fixed amount. For common shares, the dividend varies with the company's fortunes and the amount of cash on hand and may be omitted if business is poor or if the directors determine to withhold earnings to invest in plants and equipment. Sometimes a company will pay a dividend out of past earnings, even if it is not currently operating at a profit. A dividend can either be paid in cash or reinvested into the security.


Dollar-Cost Averaging

A system of buying securities at regular intervals with a fixed dollar amount. Under this system, investors buy by the dollar's worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Temporary downswings in price benefit investors if they continue periodic purchases in both good times and bad, and the price at which the shares are sold is more than their average cost.


Dow Jones Industrial Average (DJIA)

The DJIA is an index used to measure the U.S. financial markets' performance. Introduced on May 26, 1896, by Charles H. Dow, the DJIA is the oldest stock price measure in continuous use. Over the past century, it has become the most widely recognized stock market indication in the U.S., and probably in the world. The 30 stocks included in today's DJIA are listed on the NYSE, except for Microsoft and Intel, and are all large blue-chip companies that reflect the health of the U.S. economy. All but a handful of these have major business operations throughout the rest of the world, thus providing some insight into the global economy's economic well-being. The DJIA has been repeatedly updated over the decades to reflect changes in corporate America. From the original 12 stocks used in 1896, it was increased to 20 stocks in 1916 and then to 30 stocks in 1928. The most recent modification occurred on November 1, 1999, when Home Depot, Intel, Microsoft, and SBC replaced Chevron, Goodyear, Sears, and Union Carbide, respectively. Intel and Microsoft, which both trade on the Nasdaq stock market, are the first Dow-30 components that are not listed on the NYSE since the DJIA was created in 1896. Though it is only the unweighted average of 30 stock prices, over the long run, the DJIA's tracking of market movements has closely paralleled more broadly based capitalization-weighted indices like the NYSE, the Standard & Poor's 500, and the Wilshire 5000. In 1896, the DJIA was computed as the sum of the prices of 12 stocks divided by the number of stocks. Since then, the divisor has been adjusted to compensate for stock splits and other distributions that would create distortions in the average and that would not reflect a change in the stocks' value. The adjusted divisor's value as of November 1, 1999, was 0.20435952. Its current value is printed in the Wall Street Journal every day.



Action taken by an option holder that requires the writer to perform the contract's terms.


Exercise Price

The price at which an option may be exercised. Also called the strike price.


Exercise Settlement Amount

The difference between the option's exercise price and the index's exercise settlement value on the day an exercise notice is tendered, multiplied by the index multiplier.


Financial Industry Regulatory Authority (FINRA)

FINRA is the largest nongovernmental regulator for all securities firms doing business in the U.S. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.


Growth Stock

Shares of a company known for a history of rapid earnings growth. Most growth stocks do not pay dividends because management reinvests the earnings to feed the growth.


Income Stock

Common stocks that pay large dividends that an investor could use as income.


Industry Group

A classification of securities by industry.



The cost of borrowing money. Because bonds represent a loan to a company, they receive interest, while stocks represent ownership and so only receive a share of earnings.


Interest Rate

Another important economic indicator. The price, calculated as a percentage of the money loaned, that banks are charging borrowers for the use of the banks' money.



The use of money for the purpose of making more money, to gain income or increase capital, or both.


Investment Portfolio

A variety of securities owned by an individual or institution.



All claims against a corporation's assets. Liabilities can include accounts, wages, and salaries payable; dividends declared; taxes accrued; and fixed or long-term debt, such as bonds and bank loans.


Listed Stock

A company stock that is traded on a securities exchange. The various stock exchanges have different standards for listing. Some of the guides used by the NYSE for an original listing include national interest in the company and a minimum of 1.1 million shares publicly held among not fewer than 2,000 round-lot stockholders. The publicly held common shares should have a minimum aggregate market value of $18 million. The company should have a net income in the latest year of over $2.5 million before federal income tax, and $2 million in net income in each of the preceding two years.


National Association of Securities Dealers Automated Quotation System (Nasdaq)

Nasdaq is a global intranet providing brokers and dealers with price quotations on traded, over-the-counter securities. Unlike the NYSE auction market where orders meet on a trading floor, Nasdaq orders are paired and executed on a computer network. Level I service provides the best bid and offer (BBO) in a given security without identifying the market maker. Level II service provides the BBO and identifies the market maker. Level III service allows registered market makers to compete and trade by entering their own bids and offers.


New York Stock Exchange (NYSE)

The NYSE marketplace blends public pricing with assigned dealer responsibilities. Aided by advanced technology, public orders meet and interact on the trading floor with a minimum of dealer interference. The result is competitive price discovery at the point of sale. Individual and institutional investors, member firms trading for their own accounts, and assigned specialists provide liquidity in the NYSE auction market system. The NYSE is linked with other markets trading listed securities through the Intermarket Trading System (ITS). NYSE-assigned dealers, known as specialists, are responsible for maintaining a fair and orderly market in the securities assigned to them. Most trading, however, is conducted by brokers acting on behalf of customers, rather than by dealers trading for their own accounts. For this reason, the NYSE is often described as an agency auction market. The interaction of natural buyers and sellers determines the price of an NYSE-listed stock.


NYSE Composite Index

In 1966, the NYSE established the NYSE Composite Index to provide a comprehensive measure of the market trend for the benefit of many investors who are concerned with general stock market price movements. The indices consist of a Composite Index of all common stocks listed on the NYSE and four subgroup indices—Industrial, Transportation, Utility, and Finance. The indices are basically a measure of the changes in the aggregate market value of NYSE common stocks, adjusted to eliminate the effects of capitalization changes, new listings, and delistings. The market value of each stock is obtained by multiplying its price per share by the number of shares listed. The aggregate market value, which is the sum of the individual market values, is then expressed relative to a base-point market value. The base value was set at 50 on December 31, 1965, because this figure was reasonably close to the actual average price of all common stocks at that time. The arithmetic procedure in calculating the index is shown in the following simplified example: year-end total market value of common stocks, $5,943.5 billion, divided by adjusted base market value, $901.9 billion, multiplied by 50 equals the index, 329.51 at year-end. Every measure of changes in stock prices—index or average—must frequently be adjusted to reflect only movements resulting from auction market activity and to eliminate the influence of corporate actions. This index deals with any change in the capitalization of an individual issue or of all issues in aggregate by making a proportionate change in the base figure's market value.



Companies that have applied and been approved to have their shares traded on the NYSE.


Penny Stocks

Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues.


Preferred Stock

A type of stock that pays a fixed dividend, regardless of corporate earnings, and that has priority over common stock in the payment of dividends. It carries no voting rights, however, and should earnings rise significantly, the preferred holder is stuck with the same fixed dividend while common holders collect more. The fixed income stream of preferred stock makes it similar in many ways to bonds.



The official document that, according to SEC regulations, the issuer must provide to potential purchasers of a new securities issue. It highlights the much longer registration statement filed with the SEC that gives information on the financial well-being of the issuer and the specifics of the issue itself. Potential investors can consult this information before buying.


Real Estate Investment Trust (REIT)

An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90 percent of their income.


Registered Bond

A bond that is registered on the books of the issuing company in the owner's name. It can be transferred only when the registered owner endorses it.


Registered Representative

The person, normally employed by a brokerage firm or broker/dealer, who acts as an account executive for customers by buying and selling securities. The term registered means the individual has passed qualifying securities examinations and is registered with FINRA.



Funneling of profits back into a company to enhance its operations. An individual stockowner can also reinvest by designating that dividends paid on stock be used to purchase additional shares of that stock.



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


S&P 500

A capitalization-weighted index of 500 stocks. Standard & Poor's 500 Index represents the price-trend movements of the major common stock of U.S. public companies. It is used to measure the performance of the entire U.S. domestic stock market.



A distinct subset of a market, society, industry, or economy, whose components share similar characteristics.



An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization that offers evidence of debt or equity. The official definition, from the Securities Exchange Act of 1934, is, "Any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease; any collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit; for a security; any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, any instrument commonly known as a security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase any of the foregoing; but shall not include currency or any note, bill of exchange, or banker's acceptance, which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof, the maturity of which is likewise limited."



To transfer ownership of a security or other asset in exchange for money or value.


Short Position

Stock options or futures contracts sold short and not covered as of a particular date. On the NYSE, a tabulation is issued once a month listing all issues on the exchange in which there was a short position of 5,000 or more shares or in which the short position had changed by 2,000 or more shares in the preceding month. Short position also means the total amount of stock an individual has sold short and has not covered as of a particular date.


Short Sale

A transaction by a person who believes a security will decline and sells it, though the person does not own the security. For instance, you instruct your broker to sell 100 shares of XYZ. Your broker borrows the stock so delivery of the 100 shares can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later, you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices—not counting commission and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes, people will sell short a stock they already own in order to protect a paper profit. This is known as selling short against the box.



A type of tax-advantaged employer-provided retirement plan that certain small business employers can establish for the benefit of their employees. A SIMPLE may be established as an IRA-based plan, or as part of a 401(k) plan.



The separation of a subsidiary or division of a corporation from its parent by issuing shares in a new corporate entity. Parent shareowners receive shares in the new company in proportion to their original holding, and the total value remains approximately the same.



The division of the outstanding shares of a corporation into either a larger or smaller number of shares, without any immediate impact in individual shareholder equity. For example, a 3-for-1 forward split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the split would have 300 shares worth less, although the proportionate equity in the company would stay the same. A reverse split would reduce the number of shares outstanding, and each share would be worth more.


Stock Dividend

A dividend paid in securities rather than cash. The dividend may be additional shares of the issuing company or shares of another company (usually a subsidiary) held by issuing the company.


Stock Split

When a company increases the number of shares outstanding by splitting existing shares. A 2-for-1 split means every stockholder gets two new shares for each one he or she owns, and a 3-for-2 split means each stockholder gets three shares for every two he or she owns. The price of an individual share falls, but stockholders do not lose money because they are being given the equivalent number of new shares. In a reverse stock split, a company reduces the number of the shares outstanding by consolidating existing shares. A 1-for-5 reverse split, for example, means for each five shares owned, the stockholder receives a single new share instead. The new share's price is five times higher but only to reflect the shortened supply. If a company's stock is trading at a very low price, this process makes the company look more attractive to investors.


Ticker Symbol

A three- or four-letter abbreviation used to identify a security, whether on the floor, a TV screen, or a newspaper page. Ticker symbols are part of the lore of Wall Street. They were originally developed in the 1800s by telegraph operators to save bandwidth. One-letter symbols were therefore assigned to the most active stocks. Railroads were the dominant issues at the time, so they retain a majority of the one-letter designations. Ticker symbols today are assigned on a first-come, first-served basis. Each marketplace—the NYSE, the AMEX, and others—allocates symbols for companies within its purview, working closely to avoid duplication. A symbol used for one company cannot be used for any other, even in a different marketplace.



The legal change in ownership after a security sale. This task may involve the physical delivery of a stock certificate or the change of ownership on the books of the corporation by the transfer agent.


Transfer Agent

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


Wilshire 5000

A capitalization-weighted index of all U.S.-headquartered companies (currently about 6,800). The portfolio's capitalization is the sum of the market capitalizations of all the companies.