Financial Advisor Services and Asset Management

INVESTOR's GUIDE

GLOSSARY

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

Administrator: A person appointed by the court to settle an estate when there is no will.
After-Tax Return: The return from an investment after the effects of taxes have been taken into account.
Alternative Minimum Tax: A method of calculating income tax that disallows certain deductions, credits, and exclusions. This was intended to ensure that individuals, trusts, and estates that benefit from tax preferences do not escape all federal income tax liability. People must calculate their taxes both ways and pay the greater of the two.
Annuity: An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Annuity contracts are usually purchased from banks, credit unions, brokerage firms, or insurance companies.
Ask: The lowest price at which someone is willing to sell a security.
Asset: Anything owned that has monetary value.
Asset: Anything owned that has monetary value.
Asset Allocation: The process of repositioning assets within a portfolio to maximize return for a given level of risk. This process is usually done using the historical performance of the asset classes within sophisticated mathematical models.
Asset Class: A category of investments with similar characteristics.

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Bear Market: When the stock market appears to be declining overall, it is said to be a bear market.
Beneficiary: A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, and so on.
Bid: The highest price at which someone is willing to buy a security.
Blue Chip Stock: Stock of a nationally known company that has a long record of profit growth and dividend payment; as well as, consistently meeting the listing requirements of the stock exchanges.
Bond: A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. Government bonds are usually issued in multiples of $1,000, corporates and municipals In multiples of $5,000.
Broker: An individual or firm which acts as an intermediary between a buyer and seller. For securities and most other products, a license is required.
Bull Market: When the stock market appears to be advancing overall, it is said to be a bull market.
Bulletin Board Stocks: These stocks are part of the non—Nasdaq over-the-counter market, which are not listed on an exchange.
Buy-Sell Agreement: An agreement between the owners of a business that provides that the shares owned by any one of them who dies or withdraws from the business shall be sold to and will be purchased by the surviving co-owners or by the entity itself at a value or formula previously agreed upon by the parties and stipulated in the agreement. Also applies to buyout arrangements between owners and key employees.
Bypass Trust: An estate planning device (also called a credit shelter trust, family trust, or B trust in "AB" plans where the A trust funds for the marital deduction) used to minimize the combined estate taxes payable by spouses whereby, at the death of the first spouse, the estate is divided into two parts and one part is placed in trust usually to benefit the surviving spouse without being taxed at the surviving spouse's death, while the other part passes outright to the surviving spouse or is placed in a marital deduction trust. A by-pass trust permits a maximum of $1.500,000 transfer to heirs of the spouses on a federal estate tax free basis under the unified gift and estate tax credits as they exist in 2005.

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Capital Gain or Loss: The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss.
Cash Equivalents: Short-term investments, such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.
Cash Surrender Value: The equity amount available to the owner of a life insurance policy should he or she decide it is no longer wanted. Calculated separately from the legal reserve.
CERTIFIED FINANCIAL PLANNER® Practitioner: A credential granted by the Certified Financial Planner Board of Standards, Inc. (Denver, CO) to individuals who complete a comprehensive curriculum in financial planning and ethics. CFP®, CERTIFIED FINANCIAL PLANNER® and federally registered CFP (with flame logo)® are certification marks owned by the Certified Financial Planner Board of Standards. These marks are awarded to individuals who successfully complete the CFP Board's initial certification and ongoing education.
Certified Public Accountant (CPA): A professional license granted by a state board of accountancy to an individual who has passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled that state's educational and professional experience requirements for certification.
Charitable Remainder Annuity Trust: A charitable trust arrangement whereby the donor or other beneficiary is paid annually an income of a fixed amount of at least 5% but not more than 50% of the initial fair market value of property placed in the trust, for life or for a period of up to 20 years; one or more qualified charitable organizations must be named to receive the remainder interest upon the death of the donor or other income beneficiaries, and the value of the charitable remainder interest must be at least 10% of the net fair market value of all property transferred to the trust, as determined at the time of the transfer.
Charitable Remainder Trust: A trust established for the benefit of a charitable organization under which the trustor receives income from an asset for a set number of years or for the trustor's lifetime. Upon the termination of the trust, the asset reverts to the charitable organization. The trustor receives a charitable contribution deduction in the year in which the trust is established, and the assets placed in the trust are exempt from capital gains tax.
Codicil: A written amendment to a will.
Common Stock: A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and by capital gains or losses in the stock's share price.
Community Property: State laws vary, but generally all property acquired during a marriage - excluding property one spouse receives from a will, inheritance, or gift - is considered community property, and each partner is entitled to one half. This includes debt accumulated. There are currently nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Contingent Beneficiary: Beneficiary of a life insurance policy who is entitled to receive the policy proceeds on the insured's death if the primary beneficiary dies before the insured; or the beneficiary who receives the remaining payments if the primary beneficiary dies before receiving the guaranteed number of payments.
Cost Basis: Cost basis is used to determine capital gains and losses. Generally, cost basis is the original price of a security, including commissions and applicable fees. There are special rules for determining basis in some situations (i.e., property received by gift or bequest, as compensation or in a tax-free exchange). (See your tax advisor for more information.)
Credit Shelter Trust: See By-Pass Trust
Cross Purchase Buy Sell Plan: In a cross purchase plan, the surviving owners (rather than the business itself) agreed to buy the deceased or departing owner's business interests. That purchase is made for an agreed-on price or according to an agreed-on formula.
Crummy Trust: A trust established granting a beneficiary a limited power to withdraw income or principal or both. This power is exercisable during a limited period of time each year and is non-cumulative. The power of withdrawal is generally limited to the amount excludable from gift tax liability under the annual gift tax exclusion or to the greater of $5,000 or 5 percent of the trust property.

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Decedent: The person who has died.
Defined Benefit Plan: A qualified retirement plan under which a retiring employee will receive a guaranteed retirement fund, usually payable in installments. Annual contributions may be made to the plan by the employer at the level needed to fund the benefit. The annual contributions are limited to a specified amount, indexed for inflation.
Defined Contribution Plan: A retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.
Diversification: Investing in different companies, industries, or asset classes. Diversification may also mean the participation of a large corporation in a wide range of business activities.
Dividend: A distribution of company Earnings to shareholders. Dividends are typically paid to you in cash or stock. You may choose automatic Dividend Reinvestment to buy more shares.
Dividend: A pro rata portion of earnings distributed in cash by a corporation to its stockholders. In preferred stock, dividends are usually fixed; with common shares, dividends may vary with the fortunes of the company.
Dollar Cost Averaging: A system of investing in which the investor buys a fixed dollar amount of securities at regular intervals. The investor thus buys more shares when the price is low and fewer shares when it rises, and the average cost per share is lower than the average price per share. This strategy does not protect against loss in declining markets and involves continuous investments, regardless of fluctuating price levels.
Donee: The recipient of a gift.
Donor: A person who makes a gift. This term is also used to refer to a person who establishes a living trust.
Durable Power of Attorney: A written legal document which allows one person (the principal) to authorize another person (the attorney-in-fact or agent) to act on his or her behalf with respect to specified types of property, and which may remain in effect during a subsequent disability or incompetency of the principal.
Durable Power of Attorney for Health Care: A written legal document which grants decision-making powers related to health care to an agent; generally provides for removal of a physician, the right to have the incompetent patient discharged against medical advice, the right to medical records, and the right to have the patient moved or to engage other treatment.

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Equity: The value of a person's ownership in real property or securities; the market value of a property or business, less all claims and liens upon it.
Estate: This word has a number of meanings depending on the context in which it is used. For federal estate tax purposes, it refers to all of a deceased person's assets that are included in that person's estate for tax purposes (usually everything). It is also used to refer to those items of property that are subject to administration in the probate court. For example, life insurance owned by the decedent and payable to a named beneficiary such as a surviving spouse is not part of the deceased person’s estate that is subject to administration in the probate court, but it is included in the deceased person’s estate for federal estate tax purposes.
Estate Planning: The process of arranging one's personal and financial affairs.
Estate Tax: Upon the death of a decedent, federal and state governments impose taxes on the value of the estate left to others (with limitations). For year 2005, the first $1,500,000 of the decedent's estate Is exempt from federal estate tax. This number will change through year 2010.
Executor: The person or financial institution that is appointed to administer the estate of a deceased person who died with a will. This term is now obsolete in Michigan and Florida. This position is now called "personal representative."

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Fiduciary: Comes from a Latin word meaning trust and confidence. This is a generic term used to refer to a person (or entity) that serves in a representative capacity. Personal representatives, trustees, guardians, conservators, and agents under powers of attorney are all fiduciaries. A fiduciary stands in a position of confidence and trust with respect to each heir, devisee, and/or beneficiary.
529 college savings plan: A state-sponsored education savings program that allows parents, relatives and friends to plan and invest for a child's college education. An adult sets up the account for the student. While contributions aren't tax-deductible, earnings in the account grow tax-deferred until withdrawn to pay for college fees and expenses. Beginning in 2002, qualified withdrawals will be exempt from federal tax.

As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also a risk that the plan investments may lose money or not perform well enough to cover college expenses as anticipated. Qualified withdrawals are tax-free through December 31, 2010, unless Congress extends the tax-law provisions. The tax implications of 529 plans can vary significantly from state to state. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents and taxpayers.
Fixed Income: Income from investments such as CDs, Social Security benefits, pension benefits, some annuities, or most bonds that is the same every month.
Fixed income securities: Debt securities or IOUs for borrowed money. They obligate the borrower to pay the owner interest during the term of the loan and to return the principal or face value, when the loan matures. A variety of institutions issue debt obligations including the U.S. government, state and local governments, publicly held companies, banks, and savings and loans.
401(k) Plan: A defined contribution plan that may be established by a company for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 401(k) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59 ½. Contribution limits vary year to year.
403(b) Plan: A defined contribution plan that may be established by a nonprofit organization or school for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 403(b) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59 ½. Contribution limits vary year to year.

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G-H

Generation Skipping Trust: Any trust having beneficiaries who belong to two or more generations younger than the grantor.
Grantor: In a trust context, this refers to a person that established a living trust. It is also used to refer to one who is transferring real estate in a deed.
Gross Estate: The total value of all property in which a deceased had an interest. This must be included in his or her estate for federal tax purposes.
Growth strategy: An investment strategy that pursues capital appreciation over the long term by investing in growth stocks.
Guardian: An adult person appointed by a surviving parent in his or her will or by a court, who is responsible for a minor child or legally incapacitated person's personal care and nurturing.
Heir: Person, who inherits property from the estate of a deceased person who died without a will.

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Income Beneficiary: The beneficiary of a trust who is entitled to receive the income from it.
Index: A calculation that uses a selection of stocks or bonds to gauge a certain market. The Dow Jones Industrial Average, for example, is an index of 30 large industrial companies on the New York Stock Exchange.
Individual Retirement Account (IRA): Contributions to a traditional IRA are deductible from earned income in the calculation of federal and state income taxes if the taxpayer meets certain requirements. The earnings accumulate tax deferred until withdrawn, and then they are taxed as ordinary income. Individuals not eligible to make deductible contributions may make nondeductible contributions, the earnings on which would be tax deferred. Contribution limits vary based on contributor's age, Income and year of contribution.
Inflation: An increase in the price of products and services over time. The government's main measure of inflation is the Consumer Price Index.
Initial Public Offering (IPO): The first time a company makes its shares available for sale to the public.
Intestate: The condition of an estate left by a decedent without a valid will. State law then determines who inherits the property or serves as guardian for any minor children.
Irrevocable Trust: A trust that can no longer be amended or revoked by anyone. Most revocable trusts become irrevocable at some time, for example, when the person who establishes the trust, or upon the testator’s death.

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J-K-L

Joint Tenancy: Co-ownership of property by two or more people in which the survivor(s) automatically assumes ownership of a decedent's interest.
Joint Tenancy with Rights of Survivorship (JTWRS): The holding of property by two or more individuals in a manner that upon the death of one tenant, the survivor(s) succeed to full ownership by operation of law.
Keogh Plan: This retirement plan, named for Eugene Keogh, is designed for self-employed individuals.
Large cap: Generally, companies with a market value (capitalization) of over $10 billion. Large cap companies are typically well-established with solid histories of growth and dividend payments.
Letters Testamentary: Document issued by the probate court giving the executor authority to administer the estate under the provisions of the decedent's will.
Limited Partnership: Limited partnerships pool the money of investors to develop or purchase income-producing properties. When the partnership subsequently receives income from these properties, it distributes the income to its investors as dividend payments.
Liquidity: The ease with which an asset or security can be converted into cash without loss of principal.
Living Trust: A trust that one establishes during one's lifetime which is not part of one's will, but is usually established by a separate written trust agreement. The same as "inter vivos trust." This type of document is also sometimes referred to as a revocable living trust.
Lump-Sum Distribution: The disbursement of the entire value of a profit-sharing plan, pension plan, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.

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M-N-P

Marital Deduction: A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free of estate and gift tax.
Municipal Bond: A debt security issued by municipalities. The income from municipal bonds is usually exempt from federal income taxes. In many states, it is also exempt from state income taxes in the state in which the municipal bond is issued.
Nasdaq: National Association of Securities Dealer Automated Quotations system, designed to facilitate over-the-counter stock trading.
Net Asset Value: The price at which a mutual fund sells or redeems its shares. The net asset value is calculated by dividing the net market value of the fund's assets by the number of outstanding shares.
Portfolio: All the investments held by an individual.
Pour Over Will: This is a Will used to transfer (pour over) into a trust any property that is left in a person's estate after death.
Power of Attorney: A written legal document that gives an individual the authority to act for another. If the authority is to act for the principal in all matters, it is a general power of attorney. If the authority granted is limited to certain specified things, it is a special power of attorney. If the authority granted survives the disability of the principal it is a durable power of attorney.
Preferred Stock: A class of stock with claim to a company's earnings, before payment can be made on the common stock, and that is usually entitled to priority over common stock if the company liquidates. Generally, preferred stocks pay dividends at a fixed rate.
Primary Beneficiary: Beneficiary of a life insurance policy who is first entitled to receive the policy proceeds on the insured's death.
Probate: The court-supervised process in which a decedent's estate is settled and distributed.
Profit-Sharing Plan: An agreement under which employees share in the profits of their employer. The company makes annual contributions to the employees' accounts. These funds usually accumulate tax deferred until the employee retires or leaves the company.

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Q-R

Qualified Domestic Relations Order (QDRO): At the time of divorce, this order would be issued by a state domestic relations court and would require that an employee's ERISA retirement plan accrued benefits be divided between the employee and the spouse.
Qualified Terminable Interest Property (QTIP): Property qualifying for the marital deduction at the election of the donor or the decedent's personal representative. The spouse retains a qualified income interest in the property for life, with the income payable at least annually. The corpus ultimately passes to a specified remainderman, under a special power of appointment given to the spouse
Registered Investment Advisor (RIA): An individual who is registered with the Securities Exchange Commission (SEC) in accordance with the Investment Advisors Act of 1940 or under various state laws. The amount of money under management determines required registration. Advisors registered with the SEC are required to register annually and to disclose any potential conflicts of interest they have concerning recommendations made for their clients.
Revocable Living Trust: A a living trust or inter vivos trust that can be amended and revoked, usually by the person who established the trust. This trust may become irrevocable and unamendable when the only person who can amend or revoke the trust dies or becomes incompetent.
Revocable Trust: A trust that can be changed after it is established. Assets can be added or removed from the corpus of the trust, the beneficiary(ies) can be changed, and other changes including termination of the trust, are allowed.
Risk: The chance that an investor will lose all or part of an investment.
Revocable Living Trust: A living trust or inter vivos trust that can be amended and revoked, usually by the person who established the trust. This trust may become irrevocable and unamendable when the only person who can amend or revoke the trust dies or becomes incompetent.
Rollover: A method by which an individual can transfer the assets from one retirement program to another without the recognition of income for tax purposes. The requirements for a rollover depend on the type of program from which the distribution is made and the type of program receiving the distribution.
Rollover IRA: A tax-free transfer of assets from one qualified retirement plan to another.
Roth IRA: A nondeductible Individual Retirement Account that allows retirement savings to grow tax-free . You pay taxes on contributions, but not on withdrawals when certain conditions are met. Income and contribution limits apply.

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S&P 500 (Standard & Poor's 500 Index): Considered to be a benchmark of the overall U.S. stock market. This index is comprised of 500 widely-held, Blue Chip stocks representing industrial, transportation, utility and financial companies with a heavy emphasis in industrials.
SARSEP-IRA: This salary deduction plan was discontinued December 31, 1996 and replaced with the SIMPLE IRA. However, employers who already had a SARSEP in operation by that date can continue to operate a SARSEP plan.
Section 2503(c) Trust for Minors: A trust designed to comply with Section 2503(c) of the Internal Revenue Code so that a gift placed in such a trust for the benefit of a minor will qualify for the gift tax annual exclusion although they are not gifts of a present interest.
Section 457 Plan: A plan which provides an exclusion from gross income for a certain portion of salary deferred by a participant under the plan of a state or local government, a tax-exempt organization (excluding churches), or of an independent contractor of such government or organization (e.g., a physician providing independent services to a hospital).
Sector: A group of stocks that share common industry characteristics. For example, airline company stocks are a sector of the transportation industry.
Security: Evidence of an investment, either in direct ownership (as with stocks), creditorship (as with bonds), or indirect ownership (as with options).
Simplified Employee Pension Plan (SEP IRA): A type of plan under which the employer contributes to an employee's IRA. Contributions may be made up to a certain limit and are immediately vested.
Small cap: The stock of a company with a market value (capitalization) of less than $1.5 billion. Small-cap companies tend to be smaller emerging companies and are more volatile than large-cap companies.
Step Up In Basis: A decedent's capital gains property that passes to others escaping capital gains tax when sold by the person who inherits the property. Persons inheriting capital gains property receive the property at date-of-death fair market value. In effect, the basis in this property is deemed to be "stepped up" and does not reflect the decedent's original cost basis for determining applicable capital gains tax on the sale of the property.
Stock: A document that establishes proportionate company ownership represented as shares. Different types of stocks (e.g., common stock) have different advantages and responsibilities associated with them. As a stockowner, you share in the profits and losses of a company.
Stock dividends: A dividend paid in stock rather than cash.
Stop order: Indicates a request to Buy or Sell at the market price*, but only when the security trades at or past a price that you specify (called the Stop price). Once the stock price moves to or through the stop price, your pending Stop Order becomes a market order which guarantees execution, but not price.
Surrender Charge: The fee charged to a policy owner when a life insurance policy or annuity is surrendered for its cash value.

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Tax Basis: The owner's cost of an asset for income and estate tax purposes as determined under the Internal Revenue Code and IRS regulations.
Tax Bracket: The range of taxable income that is taxed at a certain rate. Brackets are expressed by their marginal rate.
Tax Credit: Tax credits, the most appealing type of tax deductions, are subtracted directly, dollar for dollar, from your income tax bill.
Tax Deferred: Interest, dividends, or capital gains that grow untaxed in certain accounts or plans until they are withdrawn.
Tenancy in Common: A form of co-ownership. Upon the death of a co-owner, his or her interest passes to his or her chosen beneficiaries and not to the surviving owner or owners.
Term Insurance: Term life insurance provides a death benefit if the insured dies. Term insurance does not accumulate cash value and ends after a certain number of years or at a certain age.
Testamentary Trust: A trust that is part of a person's will.
Testator: One who writes or has written and signs a will.
Ticker symbol: The unique 1-5 character designation used to identify a security for trading. Another name for symbol.
Time horizon: The amount of time, usually years, that you expect to keep an amount of money invested.
Total Return: The total of all earnings from a given investment, including dividends, interest, and any capital gain.
Traditional IRA: Another name for a standard Individual Retirement Account. This name more clearly distinguishes it from other types of IRAs, such as a Roth IRA.
Treasury bill: A short-term debt security of the U.S. government, also known as a "T-Bill." T-Bills are usually held for a short time period (i.e., three months to one year) and can easily be converted into cash. T-Bills are typically sold at a discount and are exempt from state and local taxes. The money you will make on a T-Bill is the difference between the face value of the T-Bill and what you paid for it. T-Bills are sold in $1000 increments.
Treasury note: A mid-term debt security of the U.S. Government, with maturities ranging from two to ten years that pay a fixed rate of interest every six months and returns its face value at maturity. Minimum denomination is $5,000 plus $1,000 increments for a two to three year maturity, or $1,000 plus $1,000 for a four to ten year maturity.
Treasury security: Debt obligations of the U.S. Government that are issued through the Department of the Treasury. Since they are backed by the full faith and credit of the U. S. Government, they are considered virtually free from risk of default. For individual investors, the income of Treasuries is exempt from state and local taxes.
Trust: A legal entity created by an individual in which one person or institution holds the right to manage property or assets for the benefit of someone else. Types of trusts include: Testamentary Trust – A trust established by a will that takes effect upon death; Living Trust – A trust created by a person during his or her lifetime; Revocable Trust – A trust in which the creator reserves the right to modify or terminate the trust; Irrevocable Trust – A trust that may not be modified or terminated by the trustor after its creation
Trustee: An adult individual or financial institution that is designated to be responsible for the administration of a trust. There may be more than one trustee (co-trustees), and an individual and a financial institution may serve as co-trustees.

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U-V

Unified Credit: A credit that may be applied against an individual's gift or estate taxes. The unified credit will increase in gradual steps until it eventually exempts an estate valued up to $3,500,000 from federal estate taxes in 2009.
Uniform Gifts (Transfers) To Minors Act (UGMA or UTMA): A method to hold property for the benefit of a minor, which is similar to a trust but the rules are governed by state law.
Universal Life Insurance: A type of life insurance that combines a death benefit with a savings element which accumulates tax deferred at current interest rates. Under a universal life insurance policy, the policyholder can increase or decrease his or her coverage, with limitations, without purchasing a new policy.
Vesting: An ERISA guideline stipulating that employees must be entitled to their entire retirement benefits within a certain period of time even if they are no longer with the employer.

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W-Y-Z

Wait-and-See Buy-Sell Agreement: A special type of buy-sell agreement between the owners of a business and the business itself, in which, typically, the business entity has a first option to purchase a deceased owner's interest; the surviving owners then have a second option to purchase any portion of the interest not already acquired by the business; and finally, the business entity is required to purchase any remaining interest not already sold under the two options.
Waiver-of-Premium Provision: Benefit that can be added to a life insurance policy providing for waiver of all premiums coming due during a period of total disability of the insured.
Whole Life Insurance: A type of life insurance that offers a death benefit and also accumulates cash value, tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as "ordinary" or "straight" life insurance.
Will: A written document which disposes of one's property at death. The will also is used to nominate personal representatives. It may also be used to express burial and funeral instructions, make anatomical gifts, and designate a guardian and conservator for a minor child or an legally incapacitated adult.
Yield: In general, the yield is the amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation.
Zero coupon bond: Zeros are securities that do not pay interest during their terms but are sold at a discount from their face value. A zero coupon bond generally increases in value as it approaches maturity, and the return comes solely from its appreciation. The dollar amount difference between the purchase price and the maturity value represents the yield or accretion value. Maturities range from 1 to 30 years.

The use of trusts involves a complex set of tax and legal considerations. You shold consult with CIG planner before implementing such strategies.

Distributions from traditional IRAs and most company-sponsored retirement plans are taxed as ordinary income and, if taken prior to age 59 ? may be subjected to additional 10 percent federal tax penalty. For a Roth IRA to qualify for the tax-free, penalty-free withdrawal of earnings, the account must be in place for at least five tax years, and the distribution must take place after 59.5 due to death, disability, or a first-time home purchase ($10,000 lifetime maximum).

The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index. Past performance is never a guarantee of future results. Investments offering the potential for higher rates of return also involve a higher degree of risk.

All definitions in the above glossary are for informational purposes only. Please consult your CIG professional before implementing any financial, legal, insurance, or tax planning.