A financial tool to accumulate assets (money) with a promise to pay a steady income in the future. Your Utah Retirement Systems defined benefit pension plan is such an annuity. Personal annuities are also sold by insurance companies.
Anything having commercial or exchange value that is owned by an institution or individual. Investment assets can include stocks, bonds, cash, commodities, currencies, fixed income contracts, mutual funds, precious metals, real estate, and many others.
In buying a bond, an investor is lending money to a corporation or government in expectation of repayment at a fixed rate of interest over a set number of years.
Large cap, mid cap, and small cap refer to the financial size (capitalization) of the companies included in the investment.
The increase in an asset's value. Gains before sale of an asset are often called "paper profits." An increase (or loss) is realized only when the asset is sold.
When interest earned on an investment remains in the account, further interest can be earned on both the initial investment and upon the added interest. This also applies to dividends from stocks or mutual funds that are reinvested.
Defined Benefit Plan (e.g. URS Pension Plan)
A retirement plan organized to receive contributions and pay a lifetime monthly benefit when the participant retires. The amount of this benefit is defined by a formula of service and salary and will not end or be reduced as long as the participant lives.
Defined Contribution Plan (e.g. URS 401(k) / 457 Plans)
A retirement plan organized to receive contributions in amounts defined by the participant who also decides how they are invested. Upon withdrawal, the participant decides the amount and frequency of payout. It's possible for funds to run out while the participant survives.
Spreading assets among several types of investments including stocks, bonds, mutual funds, or others to reduce risk.
Payout, usually quarterly, of some of a corporation's earnings to owners of its stock. Some stocks are more desirable for their high dividends than for capital appreciation. Mutual funds may pay out dividends or reinvest them into a portfolio.
A strategy for building assets by investing a predetermined sum at regular intervals. A dollar thus buys more shares/units when the price is low and fewer when the price is high.
The term used to express ownership in a company. (See "Stock")
A security that pays a fixed rate of return over a set term. Usually refers to bonds, guaranteed investment contracts, or certificates of deposit.
Guaranteed Investment Contract (GIC)
A contract between an insurance company and an investor that includes a specific rate of return on the investment over the life of the contract. GICs are a conservative investment with stable returns.
Prices rise when too much money in the economy tries to buy too few goods. Higher prices mean that a dollar buys less each year. Stocks react negatively to rising inflation.
Interest, dividends, rents, etc. from bonds, stocks, real estate, and other investments.
A handy benchmark to measure how well investment is performing. The Dow Jones Industrial Average and the Standard & Poor's 500 Index are two widely used stock indexes.
Money paid by a borrower as compensation for the use of borrowed money. This amount is generally expressed as an annual percentage of the principal or invested amount.
Bonds rated AAA to Baa by Moody's Investors Service, Inc. or BBB and higher by Standard & Poor's Corp. are deemed to be "investment grade".
The stated purpose of an investment. Capital growth, current income, tax-deferment, risk reduction, etc. are typical. Personal objectives my be college savings, retirement, or other goals.
A plan to fulfill an objective by selecting investments that produce appropriate returns at acceptable risk, and identifying alternative investments in anticipation of market changes.
Ease with which an asset can be converted to cash. Real estate is less liquid than a bank account.
Allows investors to pool money to invest in stocks, bonds, gold, and other securities. Rather than buying individual stocks or bonds, investors buy "units" of the fund itself. Diversification and professional investment management are among a mutual fund's strengths. Each fund will vary according to its holdings, objectives, and performance.
The total investment holdings of an individual or a fund.
The amount you invested.
Because investment options have different rates of return, the dollar balance of each grows differently. Some investors want to keep the dollar balance in each investment option at a fairly constant proportion of the total portfolio. This is done by rebalancing. Rebalancing is the process of buying or selling some of each investment option to bring it back in line with its target percentage of the total portfolio. The Horizon Funds (which are made up of several URS investment options) are automatically rebalanced quarterly, when target ranges are exceeded.
An asset (usually intangible) such as a share of stock, a bond, or life insurance.
Investments usually held for under five years, although long-term and short-term have no firm boundaries. May include Treasury notes, CDs, money market accounts, etc.
A security that represents an ownership share in a corporation. Stockholders participate in the company's financial direction for better or worse; also known as "equities."
Postponing payment of income taxes on pretax retirement contributions and any earnings on them until the money is withdrawn.
The sum of all dividends, interest, and capital gains, from point to point in time. Usually expressed as a percent, but also as the growth of, say, $1000 over 10 years.
The height and depth between which an investment's value may fluctuate and how frequently. Volatility is a chief element of risk. Investments with greater potential returns are usually more volatile and therefore more risky.
Yield
The annualized rate at which your investment earns income. Usually refers to fixed income. Not the same as total return. A bond may continue to yield 8% even as its value drops.