Investment Glossary

Immediate-or-Cancel (IOC)

An order instructing for execution at the stated price for as many shares as can be filled immediately, the unfilled remaining amount will be canceled.

Income

The portion of investment return from interest or dividend payments, taxable at an individual's ordinary income tax rate.

Income Bonds

Bonds issued by a corporation in poor financial condition, interest is paid only if earned by the issuer. These bonds are speculative instruments that pay high rates of interest for its high risks.

Income Funds

Funds that focus on a variety of securities that earn high interests or dividends.

Income Stock

Common stock that unusually pays a high dividend.

Income Stream

A strategy arranging bonds so that they produce a consistent series of payments.

Indenture

The terms and agreement of a corporate bond, usually on the face of the bond certificate.

Index Fund

A mutual fund whose portfolio matches that of an index, such as the S&P 500 or Dow Jones Industrial Average. This allows the fund to reflect the performance of the overall market.

Indicated Dividend

An estimate of the dividends per share that would be paid over the next 12 months if each dividend were the same amount as the most recent dividend.

Indicated Yield

The yield based on the annualized value of the most recent dividend, calculated by dividing the annual dividend by the price of the stock.

Industrial Revenue Bond

A type of municipal bond whose issuer's ability to pay interest and principal is based on the revenue generated from the industrial complex which the bond financed.

Industry

A category describing a company's primary business activity. This usually is determined by the corporation's largest source of revenue.

Inflation

The rate at which the general level of prices for goods and services is rising, usually measured by the Consumer Price Index or Producer Price Index.

Inflation Risk

The risk that the yield of an investment will be diminished by rising inflation rates.

Inflation-indexed Bonds

These Treasuries are designed to keep pace with inflation. The principal is adjusted to match changes in the consumer price index, while the interest rate remains fixed. In this way, inflation can not erode the value of your principal. New in 1997, they are officially known as Treasury Inflation Protection Securities or TIPS.

Initial Investment

The amount required to make the first investment in a mutual fund.

Initial Public Offering (IPO)

A company's first sale of stock to the public, usually by a young company to capitalize for further expansion and growth.

Inside Information

Relevant information about a company that has not yet been made public. It is illegal to execute make trades based on this information.

Insider

A person with nonpublic information on a corporation. Directors and officers who have access to nonpublic information before the public are usually considered insiders.

Insider Trading

The illegal purchase or sale of shares by someone who possesses inside information about the company. For example, an executive who purchases shares with knowledge of a new invention soon to be announced by his company would be performing illegal insider trading.

Institutional Investor

Entities with large amounts of funds to invest, such as investment companies, mutual funds, brokerages, insurance companies, and endowment funds. Institutional Investors account for the majority of overall market volume.

Interest

The rate charged by the lending for borrowing money over a specified amount of time.

Interest Coverage

The ratio measuring a firm's ability to pay interest on its debt, calculated by dividing net earnings before interest and taxes by the interest expense on bonds and other long-term debt. Higher ratio means a lower possibility of default.

Interest Expense

The interest paid out by a corporation for loans and debt securities issued.

Interest Rate

The rate charged by a lender for borrowing money. Interest rates are generally fixed at a certain level for the entire length of a loan, though they can also vary over time.

Interest Rate Risk

The risk that prevailing interest rates will rise above the rate on the fixed income securities you are holding, resulting in a decline of the security's price. The longer the life of the bond, the greater the interest rate risks.

Interim Dividend

A dividend declared and distributed part way through a company's financial year, before annual earnings have been calculated, authorized solely by the directors.

Intermediate-Term Bonds

Bonds with maturities of four to 10 years.

International Funds

Mutual Funds that invest in foreign companies.

In-the-Money

An option is in-the-money when holder would profit from exercising the contract. For example, a call option is in-the-money if the exercise price is less than the market price of the underlying security, and a put option is in-the-money if the strike price is greater than the market price of the underlying security.

Inventory

The monetary value of a company's raw materials, work in process, supplies used in operations and finished goods. Excess inventory on the balance sheet can represent slow downs in sales or overproduction. Inventory is considered liquid assets, since they can be easily converted into cash.

Investment Act of 1940

The primary set of laws governing the mutual fund industry.

Investment Advisor

The individual or firm responsible for managing a portfolio or mutual fund.

Investment Trust

A closed-end fund regulated by the Investment Company Act of 1940 to create value through investment. Share of the investment trust can be bought or sold on an exchange.

IOC

See Immediate-or-Cancel.

IPO

See Initial Public Offering.

Issue

A security offered for sale by a government or corporation.

Issue Date

The date when a security was initially issued.

Issued Stock

Stock sold to the public.