Investing glossary of terms

4. Alpha  -- A measure of a fund's performance relative to its index, adjusted for risk. Beta measures a fund's risk compared to the market. Alpha tells you how the fund is doing relative to its beta.

5. Asset allocation  -- An investing strategy that strives to minimize risk and maximize returns by dividing money into different investment instruments such as stocks, bonds and cash. The allocation decisions are based on the investor's goals, risk tolerance and time horizon.

6. Balanced fund  -- A hybrid fund made up of stocks and bonds. Can be either weighted more toward stocks or bonds, but such an asset mix achieves a more moderate or conservative strategy.

7. Beta  -- A measure of the volatility of a stock or fund compared to the market in general. The market has a beta of one. The higher the beta, the greater the volatility and deviation from the market. The lower the beta, the lower the volatility.

8. Blend fund  -- An equity mutual fund composed of value and growth stocks.

9. Bond fund  -- A mutual fund that invests in bonds.

10. Bond  -- A debt instrument issued by an entity, a corporation, a government or a municipality to borrow money for a fixed amount of time and at a set interest rate.

11. Broker  -- A company or individual who buys or sells stocks on another's behalf. A full-service broker advises clients on investing strategies and trading.

12. Capital gain  -- An increase in the price of a share of stock (or any kind of asset) over and above what you paid for it. Capital gains receive more favorable tax treatment than regular income.

13. Commodity  -- A physical substance, such as food, grains and metals, which investors purchase, usually through what are called futures contracts.

14. Convertible bond  -- A corporate bond that can be exchanged, at the option of the stock owner, for a specific number of shares of the company's stock.

15. Convertible preferred stock  -- Preferred stock that can be converted into a specified amount of common stock at the stock owner's option.

16. Core holding -- An investment held for a very long time in a portfolio or fund. Such holdings usually have a high quality security with a proven track record.


17. Correlation -- How two securities move in relation to one another.

18. Dividend -- The portion of a company's earnings and profits that are paid to stockholders of the company. These payments may be ordinary dividends, capital gain distributions or nontaxable distributions. You usually receive dividends in cash, but you may receive them in the form of more stock, stock rights, property or services. Companies or brokerage firms report dividend income to you on Form 1099-DIV.

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