From the category archives:

Financial Terms & Definitions

1035 Exchange

by TheProAdvisor on September 25, 2009

1035 Exchange – Refers to the provision of the US tax code which allows investors to transfer accumulated funds in one life insurance or annuity policy to another without incurring any current taxes.  Certain guidelines must be met to take advantage of the 1035 exchange provision.

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401k

by TheProAdvisor on August 28, 2009

401k – A type of qualified retirement plan offered by a business to its employees, which allows employees to set aside pre-tax income for retirement purposes.  In some cases the employer will make a matching contribution on the employees behalf.  The name 401(k) comes from the IRS section describing the program.

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403b

August 28, 2009

403b – A retirement plan similar to a 401(k) plan, but one which is offered by non-profit organizations, such as universities and some charitable organizations, rather than through a business.

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Annuity

September 24, 2009

Annuity – A policy sold by an insurance company designed to be a low risk investment option.  Annuities can provide a guaranteed income in the form of payments to the holder at specified intervals, usually after retirement.  All annuities grow tax-deferred.  Fixed and Indexed annuities guarantee a certain interest rate, while variable annuities do not.

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Asset

September 4, 2009

Asset – Any item of economic or monetary value owned by an individual or business, especially things that can be easily converted to cash.  Examples are cash, stocks, bonds, CD’s, real estate, a car, and other investments.

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Beneficiary

September 24, 2009

Beneficiary – The recipient(s) of the proceeds from an insurance or annuity policy.

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Bond

August 31, 2009

Bond – An investment issued for a defined period with the purpose of raising money for a business or government entity.  Generally, a bond is a promise to repay the principal along with interest on a specified date.  Some bonds are tax-free, and these are typically issued by municipal, county or state governments, whose interest […]

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Call Option

August 3, 2009

Call Option – The buyer of a call option wants the price of the underlying instrument to rise in the future; the seller either expects that it will not, or is willing to give up some of the upside (profit) from a price rise in return for the premium (paid immediately) and retaining the opportunity […]

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Cap Rate

August 3, 2009

Cap Rate – Normally relating to Indexed investments, it is the maximum percentage of growth in a particular stock or Index that the owner of the investment can benefit from.  An example of this would be an investment with a 8% cap rate on the S&P 500 Index.  If the Index were to grow by […]

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Capital Gains

September 4, 2009

Capital Gain – The positive difference between what you paid for an investment and what received when you sold that investment.  Normally treated as your earnings and taxed at the applicable federal and state capital gains tax rates.  Capital Gains can be either short-term (had the investment less than one year) or long-term (had investment […]

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