Laddering
Investment and diversification technique which involves purchasing a series (a ladder) of bonds with different maturities.

Laissez-Faire
Doctrine that interference of government in business and economic affairs should be minimal. Adam Smith's The Wealth of Nations (1776) described laissez-faire economics in terms of an "invisible hand" that would provide for the maximum good for all, if businessmen were free to pursue profitable opportunities as they saw them.

Leading Economic Indicators
A composite of 11 economic measurements developed to help forecast likely changes in the economy as a whole. It is compiled by the Conference Board. The components are: average work week, unemployment claims, orders for consumer goods, slower deliveries, plant and equipment orders; building permits, durable order backlog, materials prices, stock prices, M2 money supply and consumer expectations.

Letter of Credit
A bank's promise that a shipment of goods will be paid for on arrival. It's used mostly in foreign trade but also is used domestically to guarantee payment of securities.

Leverage
The use of borrowed assets by a business to enhance the return to the owner's equity. The expectation is that the interest rate charged will be lower than the earnings made on the money. In securities markets, leverage refers to money borrowed to cover part of the cost of a purchase.

Leveraged Buyout
The purchase of a company by a small group of investors financed largely by debt, often in the form of junk bonds.

Life Insurance Trust
A trust set up to buy life insurance coverage or to become the owner of an existing policy. When a policy is owned by a trust, the death benefit is not counted as part of the insured person's estate for estate-tax purposes.

Limit Order
An order to buy or sell a security, if it is possible to do so, at a specified price.

Liquidation
The process of converting stock or other assets into cash. When a company is liquidated, the cash obtained is first used to pay debts and obligations to holders of bonds and preferred stock. Whatever cash remains is distributed on a per-share basis to the holders of common stock.

Liquidity
How easy an investment can be converted to cash.

Liquidity Risk
Risk, especially with corporate and municipal bonds, that there will be substantial costs associated with trying to trade a fixed income instrument in the secondary market. Risk, especially with corporate and municipal bonds, that there will be substantial costs associated with trying to trade a fixed income instrument in the secondary market.

Listed Stocks
Listed stocks are approved for trading on one or more exchanges.

Living Trust
A revocable trust formed while you are alive. It is often used to avoid probate or to provide for the orderly management of assets if you should become disabled or incompetent.

Living Will
A document indicating the type of care and degree of medical intervention you would want in the event of a life-threatening medical condition.

Load
Sales charge paid by investors when purchasing shares of a load mutual fund or units of an annuity--sometimes called "front-end load". This contrasts with a back-end load which charges a fee when the investor redeems their investment. A mutual fund that does not charge a fee is called a "no-load" fund.

Load Funds
Mutual funds that charge a sales commission, as opposed to no-load funds, which do not levy a fee when you buy or sell. Some fund groups that sell directly to the public offer low-load funds, which charge an upfront fee of 2% or 3%, but most load funds are sold by brokers. To compensate brokers, load funds usually charge either a front-end sales commission when you buy the fund or a back-end sales commission when you sell. In addition, many broker-sold funds charge an annual 12b-1 fee, which is also used to compensate brokers. The 12b-1 fee is included in the fund's expense ratio.

Long Bond
Slang for a 30-year bond issued by the U.S. Treasury. It is considered a key indicator, or benchmark, of trends in long-term interest rates.

Long-term Bonds
Bonds with maturities of more than 10 years.

Long-term Debt
Debt that must be paid in a year or more.