Glossary of Financial Terms



Relationship between two parties, one an agent and the other a principal. The agent represents the principal in transactions with a third party.

All or None

A buy or sell order marked to signify that no partial transaction is to be executed. The order is not automatically cancelled, but, if a complete transaction is not executed; to accomplish that, the order must be marked FOK, which means fill or kill.

Asset Allocation

Breakdown of investment choices among categories of assets, such as Cash, Equities, Fixed-Income, Real Estate investments. This also applies to subcategories such as government, corporate and municipal bonds, and industry groupings of common stock. Asset allocation affects both risk and return and is an important concept in financial planning.


Person who acts as an intermediary between the buyer and the seller. A commission is usually charged. A broker must be registered with the exchange where the securities are traded if that broker specializes in stocks, bonds, commodities or options. A broker may also be called a registered representative, account executive, dealer, discount broker.

Certificate of Deposit

A CD is a debt instrument that pays interest and is issued by a bank. Institutional CD's are issued in amounts of $100,000 or more, while individual CD's may start as low as $100. Maturities may range from a few weeks out to several years. Interest rates are set by competitive forces in the marketplace.


The price of the final trade of a security at the end of a trading day.


The fee paid to a broker for executing a particular trade based on the number of shares traded or the dollar amount of the trade.

Composite Price

A security price that includes all transactions in a security on any of the exchanges on which it trades. The intent of a composite price is to provide a more complete picture of a securities' price.

Corporate Bond

A debt instrument issued by a private corporation. Corporate bonds are usually taxable, they have a par value of $1000, they come due all at once and are paid for out of a sinking fund accumulated for that purpose. These bonds are traded on major exchanges.

Capital Gain

The difference between an asset's purchase price and selling price, only when the difference is a positive amount.


Distribution of earnings to shareholders and usually paid in the form of money or stock. The dividend amount is decided by the board of directors and is usually paid on a quarterly basis. Dividends must be declared as income in the year they are received.

Dow Jones Industrial Average (DJIA)

The price weighted average of 30 actively traded blue chip stocks, consisting of primarily industrial stocks. This average is the oldest and most widely quoted of all stock indicators. The DJIA is calculated by adding the closing prices of the component stocks and using a divisor of the market value of an issue as well as for substitutions and mergers. The average is quoted in points, not dollars.


In reference to mutual funds, this is the payout of realized capital gains on securities in the portfolio of the fund.


Ownership interest possessed by shareholders in a corporation.


Carrying out of a trade. A broker who buys or sells shares of a security is said to have executed an order.

Fill or Kill

An order to buy or sell a particular security which is cancelled if not executed immediately. Often when a client wants to buy a large quantity of shares a fill or kill order is placed to purchase a particular stock at a particular price.

Fixed Income

A security that pays a fixed rate of return. This refers to government, corporate, or municipal bonds, which pay a fixed rate of interest until the bond matures. A preferred stock is also a fixed income security and pay a fixed dividend. Fixed income securities are advantageous in a time of low inflation.

Good till Cancelled Order (GTC)

An order to buy or sell a security at a particular price that remains in effect until executed or canceled. If a GTC order remains unfilled for a long period of time, the broker will periodically confirm with the client to be sure they still want the transaction executed.


Stocks that have hit new high price in daily trading for the current 52 week period. Technical analysts consider the ratio between new highs and new lows in the stock market to be significant for pointing out stock market trends.

Individual Retirement Account (IRA)

A personal, tax-deferred retirement account that can be initialized with a limited deposit of $2000 a year. One can begin withdrawing from his/her IRA's after age 59 1/2. If you withdraw prior to this age, you are generally subject to a 10% penalty tax.

Immediate or Cancel Order

An order requiring that all or part of the trade be executed as soon as the registered representative enters a bid or offer. The portion of the trade that is not executed is canceled automatically. This may happen with unusually large orders.

Letter of Intent

In the case of mutual funds, it is a promise by a mutual fund shareholder to invest a specified amount of money monthly for approximately 1 year. In return, the shareholder may be entitled to a lower sales charge.


Forced sale of a brokerage client's securities after being unable to meet a margin call.

Listed Security

Security that has been accepted for trading by one of the registered securities exchanges in the United States. These exchanges list some 6000 issues of securities of some 3500 corporations. The advantages of being listed provide an orderly marketplace, liquidity, a fair price, accurate reporting on sales and quotations, information on listed companies, and strict regulations that must be followed. Listed securities include stocks, preferred stocks, bonds, convertible bonds, warrants, rights and options. Securities that are unlisted are traded in the over-the counter market (OTC).

Limit Price (limit order)

An order to buy or sell a security at a specific price or better. The registered representative will only execute the trade within the price restriction. For example, if a client puts in a limit order to buy AAA Co. at 10 when the stock is selling at 12. Even if the stock reached 10 1/8 the broker will not execute the trade. If a client puts in a limit order to sell AAA Co. at 12 when the price is 10, the trade will not be executed until that price hits 12.

Load Fund

A mutual fund that is sold for a sales charge by a broker or sales representative. The advantage of a load fund is that the sales representative will explain the fund to you and advise you when it is appropriate to sell the fund, or purchase more.


Bottom price paid for a security over the year or since trading in the particular security began. This may also be called historic low.

Mutual Fund

A fund operated by an investment company that raises money from shareholders and then invests in stocks, bonds, options, commodities, or money markets. Funds offer investors the advantages of diversification and professional management. A management fee of approximately 1% or less of assets is usually charged. Mutual funds may invest conservatively or aggressively. One should assess their own tolerance for risk before deciding which fund is appropriate for his/her needs.

Market Order

An order to buy or sell a security at the best available price. The majority of orders executed on the exchanges are market orders.


An amount that is added to the purchase price when a customer purchases securities from a dealer in the Over the Counter market.


Amount substracted from the selling price when a client sells securities to a dealer in the over-the-counter market.

Money Market Fund

A fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposits, and other liquid assets that pay money market rates of interest. The net asset value of a money market fund remains at $1 per share, with only the interest rate going up and down.

Municipal Bond

A debt obligation of a state or local government entity. The funds may support special projects or general governmental needs. Issuance must be approved by a referendum or an electoral body.


National Association of Securities Dealers Automated Quotations System. This is owned by the National Association of Securities Dealers (NASD). It is a computerized system that provides price quotations for securities traded over-the-counter as well as many listed securities. Most of these quotes are published in the financial pages of newspapers.

No Load Mutual Fund

A mutual fund offered by an open-end investment company that imposes no sales charge to its shareholders. Shares may be purchased directly from the fund company, rather than going through a broker.


Instruction to a broker or dealer to buy or sell securities or commodities. There are four basic categories for securities orders: market order, limit order, time order, and stop order.

Open Order

A buy or sell order for securities that has yet to be executed or canceled, also referred to as a good-till-canceled order.

Over the Counter

Security that is not traded or listed on an organized exchange. Over the counter stocks are traditionally smaller companies that do not meet the listing requirements of the New York Stock Exchange or the American Stock Exchange.


A formal written proposal to sell securities that sets forth the plan for a suggested business enterprise or the facts concerning an existing one that an investor needs to make an informed decision.


An investor's requirements in a particular security or market.

  • Long Position= the number of shares owned
  • Short Position= the number of shares owned by a dealer or an individual


    An individual investor's combined holding of more than one stock,bond,comodity,real estate investment, or other asset.


    Main party to a transaction, acting as either a buyer or seller. This person buys and sells for his/her own account and risk.


    The highest bid or lowest offer price currently available on a security.


    Right of a shareholder to reinvest dividends in order to buy more more shares of a mutual fund or company. There is usually no additional sales charge to do this.


    A stock certificate(names the company and shareowner) that represents equity ownership in a corporation.

    Stop Price

    Instruction to a security broker to buy or sell at a specified price or better, but only after a stop price has been reached or exceeded.

    Stock Price

    The amount of money needed to purchase one share of a security excluding charges to process the trade.


    A federal agency that was created in 1934 by the Securities Exchange Act. The agency's responsibility is to promote full public disclosure and protect the investing public against malpractice in the securities markets.


    An agreement between a buyer and a seller to have agreed on a price. The obligation of the seller is to provide the security and the buyer is obligated to accept it.

    Ticker Symbol

    Letters that distinguish a security for trading purposes on the consolidated tape.

    Treasury Auction

    Auction like system in which the price of a treasury is lowered until it is sold at a responsive bid.

    Treasury Bonds

    Long term debt agents with maturities of 10 years or longer, the minimum denomination issued is $1000.


    The total number of bonds,commodities,futures, and stock shares that is traded in a particular period.