Investment Glossary
Baby Bond
A bond with a face value smaller than $1,000.
Back-End Load
A special percentage charge assessed when mutual fund shares are redeemed.
Balance Sheet
An accounting statement reflecting the firm's financial condition in terms of assets, liabilities, and net worth (ownership). The sum of the left side (assets) must be equal to that of the right (liabilities + shareholders equity), balancing both sides of the statement.
Balanced Funds
Mutual funds that invest in both stocks and bonds in an attempt to provide investors with growth and income.
Banker's Acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market, and are popular among money market funds.
Bankruptcy
The financial state of being unable to pay debts. Federal bankruptcy laws provide for either the reorganization or liquidation of corporate business and assets to pay some creditors.
Basis
The total cost an investor pays to acquire a security or asset. It is used to determine capital gains or losses when the asset is sold.
Basis Point
One hundredth of one percent, or 0.01%.
Bear
A pessimistic investor who believes a stock or the overall market will decline.
Bear Market
A market in which prices of securities are generally declining.
Bear Raid
A situation where traders sell short a security, attempting to drive the price lower.
Bearer Securities
Securities for which no register of ownership is kept by the issuer. Dividends or interest payments are not received automatically but must be claimed by clipping and returning the coupons attached to the certificate.
Benchmark Index
Indicators used to compare and evaluating a fund's performance. The most common benchmark for equity-oriented funds is the S&P 500 Index. For fixed-income funds it is the Barclays Capital Aggregate Bond Index.
Beneficial Owner
The owner of a security who is entitled to all the benefits associated with ownership. Clients' securities are often registered in the name of the brokerage firm rather than in the name of the client, but the client remains the real or beneficial owner.
Best 3-Month Return
The fund's highest three-month return measured in rolling three-month periods over the past five years.
Beta
Beta measures the volatility of a stock's returns relative to the S&P 500. It is based on a 36-month historical regression of the return on the security compared to the return on the S&P 500. For example, a beta of 1.5 indicates that a stock tends to move 50% more than the S&P 500 in the same direction. So if the S&P rises 10%, the stock will move higher by 15%; but if the S&P falls 10%, the stock will fall 15%. Generally speaking, a higher beta represents a riskier investment.
Bid
The highest price buyers have declared that they are willing to pay for a security.
Bid/Ask Size
The number of shares buyers are willing to purchase at the quoted bid price and the number of shares offered for sale at the quoted ask price.
Block
A large number of shares of a security, usually more than 10,000, traded in a single transaction. This is usually done by institutional investors.
Blow-Off Top
A steep and rapid increase in price followed by a steep and rapid drop in price. This is an indicator seen in charts and used in technical analysis of stock price and market trends.
Blue-Chip
A term used to describe the common stocks of corporations with the strongest reputation for generating earnings and paying dividends.
Bond
- A debt instrument; a security that represents the debt of a corporation, a municipality of the federal government, or any other entity. A bond is usually long-term in nature (10 to 30 years), to be repaid to investors on a specified date. 2) An investment in a government or corporation which is structured like a loan, the difference being payments are made to individual bondholders rather than to a lending institution. Most bonds offer a regular, scheduled income with relatively low risk, making them attractive to retirees and others living off their investments.
Bond Fund
A type of mutual fund that invests in bond and preferred stocks, providing a stable income with low risk.
Book Entry
An electronic record of ownership of Treasury or other securities.
Book Value
A value computed by subtracting the total liabilities from the value of assets on the balance sheet, then dividing by the number of common shares.
Board of Directors
Individuals elected by a corporation's shareholders to oversee the management of the corporation. The members of a Board of Directors are paid in cash and/or stock, and meet several times each year. Some directors serve on the board of more than one company.
Breadth of the Market
A measurement of the number of share that advance or decline on a trading day.
Breakout
A rise in a security's price above a resistance level (commonly its previous high price) or drop below a support level (commonly the former lowest price.) A breakout is believed to indicate a continued movement in the same direction.
Breakpoint
A purchase of shares in an open-end mutual fund that is large enough to entitle the buyer to lower sales charges. Various breakpoints are established by the fund, at each of which the charge is reduced.
Bull
An optimistic investor who believes the market or the price of a security will rise.
Bull Market
A market in which prices of securities are generally rising.
Bullish
A term used to describe rising security prices.
Buy-In
When the seller of a security fails to deliver security for settlement, the broker will purchase the security that was to be delivered on the open market and charge the seller's account for losses incurred.
Buy/Write
An advanced option order that combines the purchase a security and the sale of the corresponding call options.
Buyer's Option (Contract)
A settlement that calls for delivery and payment according to the number of days specified by the buyer.
Buying Power
In a margin account, the maximum dollar amount of marginable securities that the client can purchase or sell short without having to deposit additional funds.
Buyout
The purchase of a controlling interest (or percent of shares) in a company's stock.