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actuaries: Professionals who work for insurance companies and evaluate your application and medical records to project how long you will live.

advance directive:  A document that expresses your general wishes about critical care but does not authorize anyone to act on your behalf or make decisions the way a durable power of attorney for health care does.

annuity: A series of fixed-amount payments paid at regular intervals over the specified period of the annuity.

arbitration:  An informal hearing held regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no appeal process with arbitration. The process is faster and less costly than going to court.

asset:  A resource that has economic value to its owner. Examples are cash, accounts receivable, inventory, real estate, securities.

asset allocation:  Dividing your investment portfolio among the major asset categories.

blue chip stock: A term used for the stock of a large, well-known company.

bonds: Investments that are considered debt investments - for example, you are loaning money to an entity that needs funds for a defined period of time at a specified interest rate. In exchange for your money, the entity will issue you a certificate, or bond, that states the interest rate you are to be paid and when your funds are to be returned to you, or the maturity date of the bond. Interest on bonds is paid every six months.

corporate bond:  A bond issued by a corporation. (See bonds)

municipal bond: A bond issued by a municipality and that generally is tax-free - you pay no taxes on the interest you earn. Because it is tax-free, the interest rate is usually lower than for a taxable bond.

Treasury bond: A bond issued by the U.S. government. These are considered safe investments because they are backed by the taxing authority of the U.S. government. The interest on Treasury bonds is not subject to state income tax. Such a bond is usually held for seven or more years.

Treasury note: The only difference is that a Treasury note is issued for a shorter time (e.g., two to five years) than a Treasury bond (q.v.).

Treasury bill: This is held for a shorter time (e.g., three, six, or nine months to two years) than either a Treasury bond (q.v.) or a Treasury note (q.v.). Interest on T-bills rare paid at the time the bill matures, and the bills are priced accordingly.

zero coupon bonds:  A bond that generates no periodic interest payments and is issued at a discount from face value. The Return is realized at maturity.

cash investment:   Short-term obligation, usually ninety days or less, that provides a return in the form of interest payments. Examples are money-market funds and short-term CD's.

certificate of deposit (CD):  A savings certificate entitling the bearer to receive interest. CDs are generally issued by commercial banks and savings and loans.

certified financial planner:  A person who is certified to give financial advice. One must study and take extensive exams in the following areas to become certified: financial planning, taxes, insurance, estate planning, and retirement. Continuing education credits are required each year to maintain the certification status.

COBRA:  Consolidated Omnibus Budget Reconciliation Act of 1985. If your company is covered by a COBRA plan and you leave your job for whatever reason and were an eactive participant in the company's health plan prior to your departure date, you have the right, if you wish, to continue the health insurance coverage you and your family received, for at least eighteen months. You will have to pay for this coverage out of your own pocket, but it cannot be more than 102 percent of the normal cost of coverage. COBRA is meant to protect you while you look for another policy.

commission:   Broker's fee for buying or selling securities.

conservatorship:  A circumstance in which the court declares an individual unable to take care of legal matters and appoints another individual, known as a conservator, to do so.

custodial care:   Refers to a particular level of care an individual may need. Help in eating, toileting, bathing, dressing, etc. - any activities that usually do not require a professional such as a nurse or a therapist.

defined benefit pension plan:   A retirement plan based on a formula that indicates the exact benefit that one can expect upon retiring. There are restrictions as to when and how you can withdraw these funds without penalties.

defined contribution plan:   A retirement plan wherein a certain amount or percentage of money is set aside each year for the benefit of the employee. There is no way to know how much that will ultimately give the employee upon retiring. There are restrictions as to when and how you can withdraw these funds without penalties.

discount broker:  A stockbroker who charges a reduced commission and provides no investment advice.

dividend:  A cash payment, financed by profits, that is designated by the company's board of directors to distribute among stockholders.

Dow Jones Industrial Average (DJIA):   The price average of thirty actively traded blue chip stocks.

equity:   Another word for stock or similar ownership securities.

estate:  An estate consists of those things you own of value, such as real estate, art collections, collectibles, antiques, jewelry, investments, and life insurance.

estate tax:  A tax levied on your estate or valuables on any amount currently over $600,000. This tax does not apply between spouses, who can leave any amount to one another upon death - known as the unlimited marital deduction. It is upon the death of the surviving spouse that the estate taxes may be owed.

financial planner:  An investment professional who helps individuals delineate financial plans with specific objectives and helps coordinate various financial activities.

fixed-income security:  An investment that provides a return in the form of fixed periodic payments and return of principle. Examples are bonds and CDs.

401K:  A voluntary retirement plan offered to employees of a company that allows up to a certain percentage of their pretax pay to be set aside and invested within the retirement plan. The percentage varies from company to company and can increase each year. The employer can also contribute to the employees' plan if they wish. The funds and the growth are not taxed until the funds are withdrawn. There are restrictions as to when and how you can withdraw these funds without penalties.

gatekeeper:  This term can be alternately used with qualifiers. For a long-term-care policy to begin paying benefits, you must qualify for these benefits. To qualify, you must meet certain standards, gatekeepers.

growth stock:   Shares of a company whose total earnings are expected to grow at an above-average rate.

income stock:   Stocks having a history of regular dividend payments that contribute to the largest portion of the stock's overall return.

investment advisor:   A person who manages assets, making portfolio composition and individual security selection decisions for a fee, usually a percentage of assets invested.

IRA (Individual Retirement Account):   A retirement account set up at a bank, credit union, brokerage firm, insurance company, or mutual fund company that allows a yearly contribution, not to exceed $2,000, for the individual working person. Married couples, where one spouse works and the other does not, may contribute a maximum, combined contribution of $4,000. The contributions are tax-deductible if you are not currently covered by a 401K or pension plan at your place of employment. If you are covered by a pension plan, how much income you earn will determine the tax-deductibility of the IRA. Check with a tax advisor. There are restrictions as to when and how you can withdraw these funds without penalties.

IRA rollover:  An account used to transfer retirement funds currently being held in a company retirement plan where taxes continue to be deferred. Simply stated, the funds are "rolled" from their current plan into an IRA rollover account. There are restrictions as to when and how you can withdraw or transfer these funds without penalties or taxes.

Keogh/HR10:   A retirement plan set up by self-employed individuals who are not incorporated. The self-employed individual is allowed to make a tax-deductible contribution up to a certain percentage of his or her income. The funds grow without taxation until they are withdrawn. This type of retirement plan is eligible for forward-averaging taxation. There are restrictions as to when and how you can withdraw these funds without penalties.

liquidity:  The degree of ease and certainty of value with which a security can be converted to cash.

living will:   See advance directive.

long-term care:  Any type of health or medical support or care needed over an extended period.

Medicaid:   A federal- and state-government-funded program that pays for long-term care, medical bills, and some health care services for extremely-low-income individuals. Considered a form of welfare.

Medicare:   A federally instituted medical care program that provides medical and hospital insurance for those who are sixty-five or older or for those who are disabled.

Medigap insurance:   An insurance policy individually purchased to cover gaps in Medicare, such as copayments and deductibles.

mutual fund:   A professionally managed pool of monies to by stocks, bonds, etc. Each mutual fund is sold under a legal document called a prospectus, which explains the objective of the fund, all fees and expenses involved, and guidelines the fund must abide by when investing your money. Always read the prospectus before investing.

class A shares of a mutual fund:   See loaded mutual fund.

class B shares of a mutual fund:  A mutual fund that does not charge an up-front purchase fee, but does have a redemption fee upon leaving the fund or family of funds before a certain length of time. The fee amount generally starts at 5 percent and declines to 1 percent as time goes on. This is not to be confused with a no-load fund.

loaded mutual fund:   A mutual fund that has a fee to purchase it. The fee could be 4 1/2 percent or more.

no-load mutual fund:   A mutual fund that has no fee to buy or sell it.

National Association of Securities Dealers Automated Quotations system (NASDAQ): Computerized system that provides up-to-the-minute price quotations on some 5,000 of the more actively traded over-the-counter stocks.

New York Stock Exchange index:   A market value-weighted measure of stock market changes for all stocks listed on the NYSE.

open-end fund:   A mutual fund that continues to sell shares to investors and will buy back shares when investors wish to sell. Open-end funds have no limit to the number of shares they can issue.

option:   A privilege sold by one party to another that offers the buyer the right to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date. Buying options are speculative and risky.

over-the-counter market:   A communications network through which trades of bonds, non-listed stocks, and other securities take place. The trading is overseen by the National Association of Securities Dealers (NASD).

pension plan:   A retirement plan wherein the employer makes contributions for the employee. Many are being replaced by the 401K. There are restrictions as to when and how you can withdraw these funds without penalties.

points:   When refinancing, the amount you pay the lender at the closing of the loan. Each point is equal to 1 percent of the mortgage loan.

pop-up option:   A joint and survivor option that allows you to be reinstated to the basic pension amount if the spouse predeceases the retieree. More and more companies are utilizing this option for an additional charge. Generally, this pop-up option is limited to married couples.

profit-sharing plan:  A plan wherein the employees get a share in the profits of the company. The company decides what portion of the profit will be shared. Each employee then receives, into an account, a percentage of those profits based on their earnings. There are restrictions as to when and how you can withdraw these funds without penalties.

prospectus:   See mutual fund.

registered investment advisor (RIA):   An advisor who usually manages money for a fee or commissions. This individual is registered with the Department of Corporations in the state in which he or she practices as well as with the Securities and Exchange Commission for a federal registration.

SEP/IRA (simplified employee plan/individual retirement account):    A retirement plan for employers with few or no employees. It works like an IRA in that the employee will have ownership to this account but the employer funds it. There are restrictions as to when and how you can withdraw these funds without penalties.

severance:   When a company lets an employee go, it may offer compensation for being severed. Severance usually is handled as a normal paycheck with all the standard taxes withheld.

skilled care:   Skilled care is medical care that can be performed only by or under the supervision of licensed nursing personnel under instructions of a physician.

Standard & Poor's 500 index (S&P 500):  A market value-weighted index of 500 major U.S. corporations that includes 400 industrial firms, 20 transportation firms, 40 utilities, and 40 financial firms.

stockbroker:   A person who buys or sells stocks, bonds, or other investments for another individual. Most stockbrokers work on a commission or fee basis. They are licensed by one or more government agencies, which monitor and regulate their activities.

stocks:   Stocks are considered an equity investment; in other words, you own shares, or stock, in a company. The value of these shares can go up or down.

common stock:  A security representing ownership issued by a corporation.

preferred stock:  A security which represents a claim prior to common stock on the firm's earnings and assets. Preferred stockholders generally forego voting rights and receive a fixed dividend that takes precedence over payment of dividends to common stockholders.

stock dividend:   A dividend paid in additional shares of stock rather than in cash.

stock split:   The division of a company's existing stock into more shares. In a two-for-one split, each stockholder would receive an additional share for each share already held.

suitability:   A determination of whether a trading strategy is in line with an investor's financial means and investment objectives.

tax-sheltered annuity (TSA):   A retirement account for certain workers such as teachers and hospital employees. A voluntary percentage, up to a maximum amount, is taken from pretax dollars and set aside for the employee. TSAs usually are held with insurance companies, where the money is placed in fixed accounts to earn interest. There are restrictions as to when and how you can withdraw these funds without penalties.

term life insurance:   Insurance that is good for a specific amount of time is referred to as term insurance. It may be good for a year, five years, ten years, or whatever, and is considerably less expensive when purchased during those years when insurance companies statistically don't expect you to die. When the term on the insurance runs out, the policy ir repriced according to your age. The older you are, the greater the cost becomes.

unlimited marital deduction:   A deceased husband or wife can pass assets to the other without any estate tax owed.

whole life insurance:   An insurance policy that will cover you for your whole life, no matter how long it happens to be. Because this is maximum coverage, it is also more expensive than term life insurance.

Wilshire 5000 equity index:  A stock market measure of some 5,000 equity securities, including all New York Stock Exchange and American Stock Exchange issues and the most active over-the-counter issues. The index represents the total dollar value of all 5,000 stocks.

Source: You've Earned It, Don't Lose It (Suze Orman)