Accelerated Depreciation
Accounting method that allows a company to write off an asset's cost at a faster rate than the traditional method.

Accidental-death-and-dismemberment insurance
Type of insurance that pays upon the event of death or maiming in an accident but provides no benefit in the event of illness or illness-related death.

Accrual Basis
Accounting method in which income and expenses are accounted for as they are earned or incurred, although they may not have been received or paid yet.

Adjusted Gross Income (AGI)
A measure used to calculate how much income is taxable by the government. AGI is calculated with gross income from taxable sources minus certain items, such as payments to a Keogh plan or a deductible Individual Retirement Account. AGI minus deductions and personal exemptions is taxable income.

ADR
American Depository Receipt - U.S. traded securities representing stock in foreign companies.

Alpha
A measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4 %. -0.6 means a fund's monthly return was 0.6 % less than would have been predicted from the change in the market alone.

Alpha Equation
The alpha of a fund is determined as follows: [ (sum of y) - ((b)(sum of x)) ] / n where: n =number of observations (36 mos) b = beta of the fund x = rate of return for the S&P 500 y = rate of return for the fund

American Depository Receipt
U.S. traded securities representing stock in foreign companies.

AMEX
American Stock Exchange

Amortization
Accounting procedure that companies use to write off intangible rights or assets -- such as goodwill, patents or copyrights -- over the period of their existence.

Annual Effective Yield
Measure of the actual annual return on an account after interest is compounded.

Annual Report
A yearly report that details performance for the year and must be issued to shareholders.

Annuity
An annuity is a form of insurance which provides income for a defined period, usually starting at retirement. A fixed annuity guarantees a certain payment amount. A variable annuity is a security product that offers variable returns based on the returns of an underlying investment, but does have the potential for greater returns. An early withdrawal penalty often applies. Capital in an annuity grows tax-deferred.

Antitrust Law
Any law that encourages competition by limiting unfair business practices and curbing monopolies' power.

Appreciation
An increase in dollar value of an asset over time.

Arbitrage
The simultaneous buying and selling of a security or commodity in two different markets. The object is to profit from price variation on different exchanges.

Asked Price
Price that someone is willing to accept for a security or an asset. In the stock market, the ask portion of a stock quote is the lowest price anyone is willing to accept for a security or an asset at that time.

Asset
Any item of value. Assets are usually income producing and appear on the left side of the balance sheet.

Asset Allocation Model
Investment model used to help realize investment objectives. If one uses the model, a change in one's investment goals leads to an alteration in the distribution of money held in various asset classes.

Asset Class
Category of investment assets with shared characteristics. It is possible to create descriptions for any number and variety of asset classes but an accepted method recognizes three fundamental classes: stocks, fixed income investments and cash or cash instruments.

Asset-backed Securities
Securities backed by loans or accounts receivable. For example, an asset-backed bond is created when a securities firm bundles some type of debt, like car loans, and sells investors the right to receive the payments that consumers make on those loans.

Average Annual Yield
Measure of the return on investments of more than one year. It is calculated by adding each year's return on investment and dividing that number by the number of years invested.