Nasdaq Stock Market
The second largest stock market in the United States. Launched in 1971, the National Association of Securities Dealers Automated Quotation (Nasdaq) market is the nation's first electronic stock market, linking buyers and sellers via a computer network. Brokers and dealers make a market in individual stocks by maintaining an inventory in their own accounts. They buy or sell when they receive orders from investors. Start-up companies issuing stock in initial public offerings frequently list on the Nasdaq. It is also known as a home to many major technology stocks, including Microsoft and Intel. The National Association of Securities Dealers, Nasdaq's parent, merged with the American Stock Exchange in 1998. But Nasdaq still operates separately under the newly formed Nasdaq-Amex Market Group, a NASD subsidiary.

Needs
The income you will need to cover your expenses in retirement. Your expenses may drop in retirement if you stop commuting, pay off your mortgage, or reduce your entertaining. Not everyone sees their expenses drop, however. You may decide to travel more widely and your health costs may rise. On average, you can expect to get by on 70-80% of your pre-retirement income.

Net earnings per share (Net EPS)
A company's latest yearly earnings divided by the number of shares outstanding at that time.

New York Stock Exchange (NYSE)
The largest stock exchange in the world and one of the oldest. The NYSE traces its beginnings to 1792 when brokers and merchants on Wall Street signed the Buttonwood Agreement, detailing how they would trade securities. As a central auction market, the NYSE conducts business on a trading floor where traders buy and sell securities from specialists, or market makers in a specific stock. It has the most rigorous listing requirements of any U.S. market, looking at a company's financial strength, its position in its industry, and the direction of the industry. Qualifying companies must pay a fee to list their stocks and an annual fee to keep the listing current

Nonprofit corporation
A business entity formed for civil, social, or charitable purposes for which the generation of profit is not part of its function. Nonprofit corporations are taxed differently and are incorporated differently than for-profit business organizations.

Outstanding shares
Shares of stock that are owned by investors.

Over-the-counter (OTC)
A stock that is not listed on the Nasdaq Stock Market or any other national stock exchange. OTC stocks are often from young, untested companies that are unable to meet Nasdaq or exchange listing requirements. While investing in them is considered risky, the shares are usually cheap. Price quotes can be found on the OTC Bulletin Board or in the Pink Sheets, a publication of the National Quotation Bureau.

Partnership
A business enterprise comprised of two or more individuals. Liability is shared between partners. Income and expenses related to the partnership must be reported on each partners' individual personal income tax.

Pension plan
A retirement plan offered by some employers that pays a set amount each year during retirement.

Personal unsecured loans
These are loans, often obtained from a bank, savings and loan, or credit union that requires no collateral and are not "secured" by any real assets.

Points
The percentage of a loan amount that mortgage lenders charge as a fee. One point equals 1%.

Policy
A policy is a contract that sets forth the rights and obligations of both a policyholder and an insurance company. The policyholder pays a premium and in exchange, the insurance company promises to pay for losses covered in the policy. Like all contracts, an insurance policy is valid only if both parties are competent to sign it - - you're not legally competent if you're a minor, for example - - and it doesn't cover anything that's illegal; you can't insure a shipment of narcotics.

Premium
The fee you pay for insurance, usually a recurring expense paid at fixed intervals.

Prime rate
The interest rate that banks use in pricing loans to their most creditworthy customers.

Principal
The amount of money you put into an investment.

Principal account
The liability or asset account associated with a loan. If you're borrowing money, the principal account is a liability account. If you're lending money, the principal account is an asset account.

Profit sharing
An employer-sponsored tax-deferred retirement plan that allows employees to share in company profits. The employer makes contributions in profitable years to individual employee accounts. The account grows tax-deferred until the employee retires or leaves the company.

Prospectus
A document that must be filed with the Securities and Exchange Commission. when a company issues stocks or bonds to the public. In addition to telling how the deal is structured, the prospectus provides information on the company's management and operations. Traditionally the prospectus has been full of legalese, but recently some companies are issuing the document in plain language in hopes of attracting more individual investors. A mutual fund prospectus provides information about a specific fund and includes information on investments and redemption policies. When an investor requests an application for a mutual fund investment, the prospectus must be sent out as well.

Qualified retirement plans
Plans approved by the IRS for favorable tax treatment, such as tax deductions for contributions and tax-deferred earnings. The list of plans includes 401(k)s, SEPs, IRAs, Keoghs, SIMPLEs, and defined benefit pension plans. Each plan has different contribution limits and other rules.

Replacement Value
How much it would cost you today to replace an item that was stolen or destroyed. Any item has three basic values: original cost, actual cash value, and replacement value. When you buy a homeowners or renters policy, you want your possessions to be covered for replacement value. Maybe you originally paid $400 for your living room couch, for example, but its actual cash value -- what you'd get if you sold it today -- is $175. If the couch is destroyed in a fire, replacing it will cost you $800. Therefore the replacement value is $800.

Resident
A resident isn't necessarily limited to the people currently living in your house. A son or daughter away at school or in the military may still be considered a resident of the household, if he or she intends to return and considers it home.

Return
The profit earned on an investment, usually expressed as an annual percentage rate.

Return on assets (ROA)
The amount of profits earned (before interest and taxes), expressed as a percentage of total assets. This is a widely followed measure of profitability, thus the higher the number the better. As long as a company's ROA exceeds its interest rate on borrowing, it's said to have positive financial leverage.

Return on equity (ROE)
A percentage that indicates how well common stockholders' invested money is being used. The percentage is the result of dividing net earnings by common stockholders' equity. The ROE is used for measuring growth and profitability. You can compare a company's ROE to the ROE of its industry to determine how a company is doing compared to its competition.

Return on investment (ROI)
Also known as return on invested capital (ROIC). A measure of how well a company's management is performing. ROI is calculated by dividing earnings by total assets. It is a broader measure than return on equity (ROE) because assets include debt as well as equity. Companies sometimes define terms differently, but in general they use earnings before taxes and the book value of assets at the end of the year. Some investors think that ROI is the most important financial indicator because it shows how well management has used the company's resources. Companies with the same sales and earnings may look as if they performed the same. But a company that needed less investment capital to achieve the same result would actually be the better-run company. It is useful to compare a company's ROI with others in the same industry.

Total revenue
The dollar amount of annual sales, net of allowances (discounts, returned merchandise). It is the "top line" figure from which costs are subtracted to determine net income. In evaluating stocks, revenue growth is often an indication of a healthy company. However, acquisitions and divestitures will skew revenue growth figures. For all but the most successful companies, the growth rates change quarterly, so these values should be checked often.

Revenue Growth
A useful measure of how fast a company's business is expanding. This figure shows the annualized rate of increase (or decrease) in a company's revenue or sales growth.

Risk
From your point of view, risk is the chance of injury, damage or loss. But insurance companies sometimes refer to their policyholders as risks - - as in, "Because of her good driving record, she's a good risk."

Rollover
Transfer of funds from one tax-deferred retirement savings plan to another. Once a year you are allowed to take your money out of one IRA tax-free and put it into another. You have 60 days to complete the rollover, which means you cantap your nest egg for a short-term loan. But be sure to put the money into a new fund on time or you will be liable for income taxes -- and a 10% penalty if you are under 59?. You can usually roll over funds tax-free from your 401(k) or other employer-sponsored plan when you change jobs. You must put it into another qualified retirement plan such as your new company's plan or an IRA. Make sure the check is made out to the new plan custodian. Otherwise, your previous employer is required to withhold 20% for pre-payment of federal income taxes. You may also have to pay a 10% penalty. You can avoid the taxes and penalty if the funds are transferred directly to the new plan. Before leaving your company, ask for instructions on how to handle a rollover (even if you do not yet have a new employer) in a way that will not trigger automatic withholding. If your 401(k) balance is greater than $5,000, you also can leave your money to grow tax-free in your account.

Roth IRA
A tax-deferred retirement account. Unlike a traditional IRA, contributions to a Roth IRA aren't tax-deductible, but there is no tax on withdrawals as long as the taxpayer is age 59? and the account has been open for five years. Financial planners recommend contributing to a Roth IRA if all fully deductible tax-deferred plans, such as a 401(k), have been funded and the taxpayer will be in a higher tax bracket after retirement. The maximum yearly contribution for 2005 is $4,000 per person with a $500 catch-up amount for those age 50 and older; 2006-2007 is $4,000 per person with a $1,000 catch-up amount for those age 50 and older.  To qualify for a full contribution, a married couple filing jointly must have an adjusted gross income (AGI) of $150,000-$160,000, and an individual must have $95,000-$110,000. Partial contributions are still allowed for a married couple filing jointly earning between $150,000 and $160,000 and for an individual earning between $95,000 and $110,000. First-time home buyers may withdraw $10,000 from a Roth IRA free of taxes or penalties.

You may also avoid the 10% early withdrawal penalty if you use the money for educational expenses for yourself or family members or if you are paying for medical expenses that exceed 7.5% of your AGI. Unlike many other retirement vehicles, Roth IRAs let you continue contributing after age 70 ? if you are still working. There are no minimum distribution requirements. When you die, any money left in your Roth IRA will pass to your heirs income-tax free.

Russell 2000
A market index considered to represent the market of small cap stocks. If you invest in small cap stocks, you can compare the performance of your stocks to the Russell 2000 index.

S&P 500
An index of 500 large capitalization domestic stocks that represents the overall stock market. Also known as the Standard & Poor's 500, the index is market-value weighted, which means that stock prices are multiplied by the number of shares outstanding. A Standard & Poor's Corp. committee chooses stocks from leading companies in leading industries to reflect the U.S. stock market. The S&P 500 is the most widely followed benchmark for portfolio performance.

When investors refer to their portfolio or mutual fund beating the S&P, they mean that their investments are earning a better return than the S&P 500 index. The U.S. component of the S&P Global Index, the S&P 500 is divided into four industry groups: Industrials, Financial, Transportation, and Utilities.

Standard & Poor's tracks all four industry groups in separate indexes. By far the largest group is the Industrials with 376 companies in the S&P 500. Next is Financials with 72 banks, brokerages, and other financial services companies. Utilities has 41 companies, and Transportation has 11 airlines and other companies. Standard & Poor's does not mandate the number of companies in each group, but all together they must add up to 500.

S&P Index
The Standard & Poor's Corp. calculates a number of indexes designed to track daily changes in the entire market or a segment of it. S&P indexes are market-value weighted, which means that stock prices of the companies within an index are multiplied by the number of shares outstanding to calculate the index. Consequently, the largest companies have the greatest influence on an index's movement. A Standard & Poor's Corp. committee determines the actual companies that make up the S&P indexes. The best known Standard & Poor's index is the S&P 500, a large-cap index of 500 widely held domestic stocks, designed to emulate the market as a whole. It is a popular benchmark for measuring portfolio performance and a model for a growing number of index mutual funds. The S&P 500 is divided into four industry groups: Industrials, Financial, Transportation, and Utilities. Standard & Poor's tracks all four industry groups in separate indexes.

By far the largest group is the Industrials with 376 companies in the S&P 500. Next is Financials with 72 banks, brokerages, and other financial services companies. Utilities has 41 companies, and Transportation has 11 airlines and other companies. Standard & Poor's does not mandate the number of companies in each group, but all together they must add up to 500. Other S&P indexes include the MidCap 400, an index of 400 domestic companies with an average market capitalization of $2 billion, and the SmallCap 600, an index of 600 widely held companies with an average market capitalization of just over $500 million.

SEP-IRA
A tax-deferred retirement plan for small businesses with fewer than 25 employees and the self-employed. Employers may contribute 15% of an employee's compensation to an IRA, and a self-employed person may contribute 13.04% of income. The IRS says the maximum contribution is $30,000 in 1999, but since the earnings cap is $160,000, effective contribution limits are $24,000 for employers and $20,870 for the self-employed. Other than the higher contribution limits, SEPs generally follow the rules for IRAs.

Simple IRA
A tax-deferred retirement plan for businesses with fewer than 100 employees and the self-employed. In a SIMPLE IRA, or Savings Incentive Match Plan for Employees, plan participants may defer up to $6,000 a year in salary to go into their IRAs. Employers must match up to 3% of pay for participants or 2% for all employees even if they all do not contribute. Employees are immediately vested. The ceiling on annual contributions from employers and employees is $12,000.

In general, SIMPLE IRAs follow the rules for traditional IRAs. But there is an important exception. If you withdraw funds within two years of starting to participate and you are under 59?, you face a 25% penalty. After that early withdrawals are hit with a 10% penalty. Employers must not have any other retirement plan to establish a SIMPLE IRA, which replaced the SARSEP for new plans established after 1996.

Section 125 Plan
Also known as a flexible benefits plan. A plan that allows employees to contribute pre-tax income to a flexible spending account. They can then use the money in the account to pay for tax-deductible expenses, such as medical expenses and childcare, even if they don't itemize deductions on their tax returns.

Securities
A general term for publicly traded stocks, bonds, and other financial instruments.

Securities and Exchange Commission (SEC)
A federal agency that regulates federal securities laws, including the trading of public company securities, the firms that handle these transactions, and most professionals who provide investment advice.

Simplified Employee Pensions (SEP)
A tax-deferred retirement plan for small businesses with fewer than 25 employees and the self-employed. Employers may contribute 15% of an employee's compensation to an IRA, and a self-employed person may contribute 13.04% of income. The IRS says the maximum contribution is $30,000 in 1999, but since the earnings cap is $160,000, effective contribution limits are $24,000 for employers and $20,870 for the self-employed. Other than the higher contribution limits, SEPs generally follow the rules for IRAs. Also known as a SEP-IRA.

Small Business Administration (SBA)
A federal agency charged with creating and administering financing, educational, and advocacy programs for small businesses.

Social Security
The U.S. federal government's retirement safety net. If you are employed, you probably contribute to the Social Security system through payroll taxes. Normally, your first chance to get a Social Security retirement check is at age 62. Starting this early, however, will reduce your benefits by 20% to 30% for the rest of your life. The current age for full retirement benefits -- as well as Medicare health care insurance -- is 65. The retirement age is gradually going up, however, for people born in 1938 and later. Anyone born after 1959 will have to work another two years until age 67. The good news is that there will be even bigger incentives to wait until 70 to retire. Right now people get a 3.5% increase in their full retirement benefits for each year they delay filing. That bonus gradually increases from 6% for people born in 1935 to 8% for people born in 1943 or later. In addition to retirement income, Social Security also provides disability and survivors' benefits. It's difficult to qualify for Social Security disability. You must be unable to do any kind of substantial work, and your disability must be expected to last at least a year or result in death. Once you qualify, however, payments will continue for as long as you are disabled. Most employed people will qualify for Social Security survivors' benefits, a type of life insurance. If you die, your spouse and your dependents may be eligible to receive a monthly check from the government. This program is particularly important if you die prematurely and leave a spouse with school-age children.

Spousal IRA
A tax-deferred retirement account for spouses who do not work for pay. The IRS allows you to contribute $2,000 a year on behalf of your stay-at-home spouse if you are employed and file a joint return. You may also contribute $2,000 a year to a traditional IRA for yourself. Your contribution to a Spousal IRA, which follows traditional IRA rules, is fully deductible if you did not participate in a company-sponsored retirement plan or if your income falls below $31,000 in 1999 for single filers and $51,000 for married couples. The deduction phases out at $41,000 for singles and $61,000 for married couples. Those limits gradually rise to $50,000 to $60,000 for single taxpayers in 2005 and $80,000 to $100,000 in 2007 for married couples.

Survivors Benefits
Benefits available to pay surviving family members for a portion of income they would have received from the deceased wage earner. Read your insurance policy to learn the specifics about what survivors benefits coverage includes and what it doesn't include.

Tax deferred
An investment with earnings and sometimes contributions that are taxed at a later date. For example, you pay no taxes on your IRA's accumulated earnings until you take them out, at which time they are subject to income tax. Tax deferral gives investors a big boost because earnings compound at a faster rate than with investments that are taxed every year. Tax deferral also can cost you less if you anticipate being in a lower tax bracket when you withdraw your money, such as during retirement.

Taxes, Social Security
Payroll taxes that fund the federal government's Social Security retirement program. Employees and employers each pay 6.2% of the first $72,600 of income in 1999. (The income ceiling rises each year.) Self-employed people are responsible for the entire 12.4% but can deduct half of the tax as a business expense on their income tax return. Remember, you'll continue to pay Social Security taxes after you retire if you work part-time for a wage or own a business. Benefits are tax-free to most recipients, but affluent retirees may be taxed on up to 85% of their Social Security income. A complicated formula that includes your income, interest on tax-free investments, and 50% of your Social Security income determines how much of your benefits are subject to income tax.

Term life insurance
Usually the least expensive form of life insurance, term life insurance covers you for a fixed period (term) of time that you select. People you name as beneficiaries collect a death benefit if you die while covered. Unlike whole, universal, and variable life insurance, there is no savings component in a term policy. In this rTotal AssetsAll the property owned by a corporation. Total assets include current assets; fixed assets such as buildings and equipment, and other assets such as licenses and good will. Since many are depreciated or carried on the books at the purchase price rather than market value, asset values can be understated on balance sheets.

Total Debt
Everything a company owes. Total debt includes long-term debt and current liabilities. Investors can find it listed on the balance sheet in a company's annual report. A company's total debt is an important component in the total debt-equity ratio, an indicator of a company's debt level. Debt can be a good tool for a corporation. It can help the company invest in new plants and equipment that will increase profitability. Too much debt, however, is risky. It locks the company into regular interest payments whether earnings are up or down. If a company stumbles, it may have trouble recovering under a heavy debt load.

Total net worth
Your total net worth is the total of all of your assets (stocks, bonds, bank accounts, home equity, real estate, personal property, business receivables, notes receivable, etc.) minus the total of your liabilities (outstanding loans owed, credit card balances, taxes payable, bills payable, etc.)

Trademark
A word or symbol owned by a business used to distinguish its identity, products, or services. Infringement upon a company's trademark is an illegal act.

Treasury bills (T-bills)
A short-term government security, sold through the Federal Reserve Bank by competitive bidding at weekly and monthly auctions, in denominations from $10,000 to $1 million. T-bills are the most widely used of all government debt securities and are a primary instrument of Federal Reserve monetary policy. U.S. Treasury securities, including Treasury Notes and Treasury Bonds, are considered conservative investments. Treasury bills are backed by the full faith and credit of the U.S. government.

Universal life insurance
Like whole life insurance, this policy type provides coverage and builds up savings over time. People you name as beneficiaries collect a death benefit if you die while covered. Unlike whole life, you can use the interest from your accumulated savings to help pay your premiums, which are flexible.

Valuation
Estimating or appraising the value of a business.

Variable life insurance
Like whole life insurance, this policy type provides coverage for your entire life and builds up savings over time. People you name as beneficiaries collect a death benefit if you die while covered. Unlike whole and universal life insurance, you can invest your savings in one of several mutual funds, which often are Very basic coverageIn the context of health insurance, very basic coverage would provides for major medical expenses (hospitalization and physicians' charges), but typically has very high deductibles, low lifetime limits, high co-insurance, and few extras such as dental or vision care.

Vested
You are vested if you are entitled to receive benefits from a current or former employer. Some companies grant full benefits after you work for them a predefined number of years. Other companies gradually increase the benefits ("percentage of vesting") you can expect to receive as you work more and more years for them.

W-2
The statement that employers issue to employees and the Social Security Administration, which reports the employees' taxable wages and the taxes withheld by the employer.

W-4
A form issued by the IRS that allows an employer to determine how much federal income tax to withhold from an employee's wages. An employee fills out Form W-4 when he or she is hired.

Whole life insurance
As its name implies, this policy type provides coverage for your entire life. People you name as beneficiaries collect a death benefit if you die while covered. Unlike term insurance, whole life insurance uses part of your premium payments to build up savings over time.

Will
A legal document that specifies how assets in your name only will be distributed after your death and outlines guardianship of minor children. Without one, the state in which you live will determine how the assets will be distributed. This is known as dying intestate. A will is absolutely critical for someone with children.

Withholding
Money deducted from the wages or salary of employees to pay state and federal taxes and insurance.

Yield
The interest earned on a bond, or the dividend paid on a stock or mutual fund. Total return is the combination of yield plus any change in the underlying value of a security.

Zoning
Government classification and regulation of local land use.