Investment Glossary

Glossary of Terms
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Aggressive Investment Strategy: referring to an investment philosophy that seeks above-average returns by accepting above-average risks. An example of an aggressive investment strategy would be limiting one's investments to the common stocks of companies in young industries with high growth potential.

Annuity: in general, a form of contract sold by life insurance companies that guarantees a fixed or variable payment to the annuitant at some future time, usually retirement. In a fixed annuity the amount will ultimately be paid out in regular installments varying only with the payout methods elected. In a variable annuity, the payout is based on a guaranteed number of units; unit values and payments depend on the value of the underlying investments. In the Annuity Plan for the United Church of Christ ("the Annuity Plan"), "annuity" refers to the lifetime income benefit paid by the Fund to the member.

Annuitization: the act of converting accumulation balances in the Annuity Plan into an annuity.

Asset class: in investments, the general type or category into which an investment falls. Asset classes include equities, debt securities, and short-term investments.

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Benefit: monthly benefit can increase or decrease based on changes in the value of underlying stocks and bonds in the Fund.

Balanced Fund: an investment option in the Annuity Plan. Click here to learn more.

Balances: the total accumulations in a member's accounts.

Benchmark return: the investment returns of a portfolio against which the returns of a given investment option can be compared for the purpose of determining the value added by the investment manager. A benchmark portfolio must be of the same type and style as that of the manager and similar in terms and risks.

Bond Fund: an investment option in the Annuity Plan. Click here to learn more.

Bonds: any interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. Bondholders have an IOU from the issuer, but no corporate ownership privileges, as stockholders do.


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Commercial Papers: short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations, and other borrowers to investors with temporarily idle cash. Such instruments are unsecured and usually discounted, although some are interest-bearing. They can be issued directly - direct issuers do it that way - or through brokers equipped to handle the enormous clerical volume involved. Issuers like commercial paper because the maturities are flexible and because the rates are usually marginally lower than bank rates. Investors - actually lenders, since commercial paper is a form of debt - like the flexibility and safety of an instrument that is issued only by top-rated concerns and is nearly always backed by bank lines of credit. Both Moody's and Standard & Poor's assign ratings to commercial paper.

Conservative: referring to an investment philosophy that accepts below-average investment returns in order to avoid significant risks.

Contributions: in the Annuity Fund, amounts paid into a member's account by an employer or the member.


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Debenture: security representing money borrowed that must be repaid and having a fixed amount, a specific maturity or maturities, and usually a specific rate of interest of an original purchase discount. For instance, a bill, bond, commercial paper or note.

Diversification: (1) spreading of risk by putting assets in several categories of investments - stocks, bonds, money market instruments, and precious metals, for instance, or several industries, or a mutual fund, with its broad range of stocks in one portfolio. (2) at the corporate level, entering into different business areas, as a conglomerate does.

Dividend: distribution of earnings to shareholders, prorated by class of security and paid in the form of money, stock, scrip, or, rarely, company products or property. The amount is decided by the board of directors and is usually paid quarterly. Dividends must be declared as income in the year they are received. Mutual fund dividends are paid out of income, usually on a quarterly basis from the fund's investments. The tax on such dividends depends on whether the distributions resulted from capital gains, interest income, or dividends received by the fund.


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Earnings: in investments, the interest and/or dividends generated by an investment, plus the appreciation in the investment's market value. Earnings can also refer to income of a business.

Economic growth: increased production levels of goods and services. If measured in monetary terms, the increases must occur after adjustments for inflation have been made.

Equities: securities representing ownership interest possessed by shareholders in a corporation - stock as opposed to bonds.

Equity Benefit Annuity: a variable annuity whose monthly benefit can increase or decrease periodically based on changes in the value of the underlying securities in the Fund.

Equity Fund: an investment option in the Annuity Plan. Click here to learn more.


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Financial Asset: assets in the form of stocks, bonds, rights, certificates, bank balances, etc., as distinguished from tangible, physical assets. For example, real property is a physical asset, but shares in a real estate investment trust (REIT) or the stock or bonds of a company that held property as an investment would be financial assets.

Fixed Benefit Annuity with Optional Dividend: an annuity paying a fixed base amount plus a variable monthly dividend based on the Fund's investment experience.

Fixed Benefit Fund: an investment option in the Annuity Plan. 

Flexibility: the ability to change investments or strategies as circumstances dictate.

Fund: in the Annuity Plan, one of the investment options available to members, including the Stable Value Fond, Bond Fund, Balanced Fund, Equity Fund, and Fixed Benefit Fund.


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High Grade Bond: designating a bond with little risk of default on the part of the issuer. High quality or high grade is usually reserved for bonds rated AAA or AA by the rating services.

Holding period: length of time an asset is held by its owner.


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Income: typically refers to the interest and dividends paid to investors in bonds and stocks.

Increasing Benefit Annuity: an annuity paying a base amount, with an annual increase to the base amount each January as earnings permit.

Inflation: rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market - in other words, too much money chasing too few goods. Moderate inflation is a common result of economic growth. Hyperinflation, with prices rising at 100% a year or more, causes people to lose confidence in the currency and put their assets in hard assets like real estate or gold, which usually retain their value in inflationary times.

Interest rates: rate of interest charged for the use of money, usually expressed at an annual rate. The rate is derived by dividing the amount of interest by the amount of principal borrowed. For example, if a bank charged $10 per year in interest to borrow $100, they would be charging a 10% interest rate. Interest rates are quoted on bills, notes, bonds, credit cards, and many kinds of consumer and business loans.

Intermediate-term: typically refers to a holding period of one to 5 or 10 years.

Investments: cash or securities held for some designated purpose.

Investment objective: financial objective that an investor uses to determine which kind of investment is appropriate. For example, if the investor's objective is growth of capital, he may opt for growth-oriented mutual funds or individual stocks. If he/she is more interested in income, he/she might purchase income-oriented mutual funds or individual bonds instead. Consideration of investment objectives, combined with the risk tolerance of investors, helps an investor narrow his/her search to an investment vehicle designed for his/her needs at a particular time.

Investment portfolio: combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset by an individual or institutional investor. The purpose of a portfolio is to reduce the risk by diversification.


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Liquidity: ability to buy or sell an asset quickly and in large volume without substantially affecting the asset's price. Shares in large blue-chip stocks like General Motors or General Electric are liquid, because they are actively traded and therefore the stock price will not be dramatically moved by a few buy or sell orders. However, shares in small companies with few shares outstanding, or commodity markets with limited activity, generally are not considered liquid, because one or two big orders can move the price up or down sharply. A high level of liquidity is a key characteristic of a good market for a security or a commodity.

Liquidity also refers to the ability to convert to cash quickly. For example, a money market mutual fund provides instant liquidity since shareholders can write checks on the fund. Other examples of liquid accounts include checking accounts, bank money market deposit accounts, passbook accounts, and Treasury bills.

Long-term: typically refers to a holding period of at least 5 to 10 years.

Lump sum: large payment of money received at one time instead of in periodic payments. People retiring from or leaving a company may receive a lump-sum distribution of the value of their pension, salary reduction, or profit-sharing plan.


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Market: public place where products or services are bought and sold, directly or through intermediaries. Also called a marketplace.

Market Risk: that part of a security's risk that is common to all securities of the same general class (stocks and bonds) and thus cannot be eliminated by diversification.


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Price: the value of a security not including income.

Proxy: as used herein, typically refers to an Index having characteristics similar to a portfolio of securities.


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Return: in finance and investment, the profit on a securities or capital investment, usually expressed as an annual percentage rate.

Risk: typically refers to the short-term volatility or variability of an investment.


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Stakeholder: Time Horizoninstrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), or rights to ownership such as those represented by an option, subscription right, and subscription warrant.

Short-term: typically refers to a holding period of one year or less.

Short-term investment: investment with a maturity of one year or less. This includes bonds, although in differentiating between short-, medium-, and long-term bonds, short-term often is stretched to mean two years or less.

Stable Value Fund: an investment option in the Annuity Fund. Click here to learn more.

Stability of principal: a characteristic of investments in which the amount invested (the principal) is at little or no risk, although the earnings may fluctuate.

Standard of living: degree of prosperity in a nation, as measured by income levels, quality of housing and food, medical care, educational opportunities, transportation, communications, and other measures. The standard of living in different countries is frequently compared based on annual per capita income. On an individual level, the standard of living is a measure of the quality of life in such areas as housing, food, education, clothing, transportation, and employment opportunities.

Stocks: (1) ownership of a corporation represented by shares that are a claim on the corporation's earnings and assets. Common stock usually entitles the shareholder to vote in the election of directors and other matters taken up at shareholder meetings or by proxy. Preferred stock generally does not confer voting rights but it has a prior claim on assets and earnings - dividends must be paid on preferred stock before any can be paid on common stock. A corporation can authorize additional classes of stock, each with its own set of contractual rights. (2) inventories of accumulated goods in manufacturing and retailing businesses.

Strategy: in investments, the selection of a mix of investments in different asset classes in order to achieve specific investment objectives. Factors contributing to an investment strategy include time horizon and risk tolerance.


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Time Horizon: the time interval over which an investment program is to be completed. An investor's time horizon is very important in determining the types of investments that should be selected. For example, investments that would be appropriate for an individual's retirement in 30 years are seldom suitable for reaching a short-term goal.

Total return: annual return on an investment including change in value and dividends or interest. For bonds held to maturity, total return is yield to maturity. For stocks, future appreciation is projected using the current price/earnings ratio. In options trading, total return means dividends plus capital gains plus premium income.

Treasury Bill: commonly called bill or T-bill by money market people, a Treasury bill is a short-term (maturities up to a year), discounted government security sold through competitive bidding at weekly and monthly auctions in denominations from $10,000 to $1 million.


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Volatility: characteristic of a security, commodity, or market to rise or fall sharply in price within a short-term period. A measure of the relative volatility of a stock to the overall market is its beta


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