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Glossary of Investment Terms

401(k): A retirement savings plan sponsored by an employer. It allows a worker to save for retirement with tax benefits. Some employers even match a portion of your contributions or offer Roth 401(k)s.

403(b): A retirement savings plan sponsored by a nonprofit employer. It allows a worker to save for retirement with tax benefits. Some employers even match a portion of your contributions or offer Roth 403(b)s

529 College Savings Plan: A tax-advantaged investment vehicle to encourage saving for the future higher education expenses of a designated beneficiary. You may even receive a state tax benefit for making a contribution depending on where you live.

Annuity: A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream to individuals at a later point in time. Annuities are long-term investment vehicles for individuals during their retirement years.

Asset Allocation: The diversification of investments among several asset classes, such as stocks, bonds, short-term investments, and other less correlated assets. Proper asset allocation may limit risk and provide potential growth opportunities. Asset Allocation does not ensure a profit or protect against a loss. 

Bear Market: A market condition in which the prices of securities are falling. Generally recognized when prices have fallen by 20% or more.

Beneficiary: A person or legal entity who receives money or other benefits from a benefactor. Typically used on retirement plans, life insurance, and annuities.

Bull Market: A market condition in which the prices of securities are generally rising.

Bond: The debt instrument of a corporation or government entity that promises to pay the investor a specified amount of interest for a specified time period, with principal to be repaid when the bond matures. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Correction: A market condition in which the prices of securities are falling. Generally recognized when prices have fallen by 10% to 20%.

Correlated Asset: If one asset acts similar to another asset most of the time it is considered correlated.

Dip: A market condition in which the prices of securities are falling. Generally recognized when prices have fallen by 5% to 10%.

Diversification: The practice of spreading money among different investments to reduce risk, such as investing in different companies in various industries or in several different types of investments. Diversification does not ensure a profit or protect against loss in a declining market.  

Dow Jones Industrial Average (Dow): A widely followed price-weighted index of 30 of the largest, most widely held U.S. stocks.

Estate Planning: The managing of a person’s assets that will protect their heirs in the event of death or incapacitation.

Inversely Correlated Asset: If one asset acts the opposite of another asset most of the time it is considered inversely correlated.

Investment Emotion Cycle©: IAG’s exclusive way of illustrating the emotional cycles you face when investing.

Large Cap: A reference to either a large company stock or an investment vehicle that invests in the stock of large companies.

Market Mood Meter®: IAG’s pseudoscientific graphing of the stock market’s mood over the last 12 months.

Maturity: The date on which a loan or bond comes due and is to be paid off. 

NASDAQ: The term “Nasdaq” is an acronym for National Association of Securities Dealers Automated Quotation. Nasdaq is a computerized system that facilitates trading and provides price quotes on more than 5,000 of the more actively traded over the counter stocks.

New York Stock Exchange (NYSE): The oldest and largest stock exchange in the United States, founded in 1792. 

Noncorrelated Asset: If one asset does not act similar to or the opposite of another asset most of the time it is considered noncorrelated.

Portfolio GPSIAG’s tool for monitoring your personal goals, investment objective and the investment risk in your custom portfolio.

Portfolio Segmentation: IAG’s disciplined process for planning the interaction between your cash flow needs and your investment risk.

Retirement Planning: The act of determining how much money is needed for life after paid work ends and the decisions on how to get there.

Risk (Inflation): The possibility that rising prices will outpace your income. An acceptable degree of risk must be determined by the individual, with the understanding that assuming lower inflation creates a great risk factor.

Risk (Investment): The possibility that an investment will not perform as anticipated. An acceptable degree of risk must be determined by the individual, with the understanding that the higher the expected return, the greater the risk factor.

Risk (Longevity): The possibility that you will outlive your assets. An acceptable degree of risk must be determined by the individual, with the understanding that assuming a shorter life expectancy creates a greater risk factor.

Roth IRA (Individual Retirement Account): Individual retirement account that allows you to direct post-tax income, up to specific annual limits, towards investments that can grow tax-free. Roth IRAs are an investing tool you may use to save and earn money for retirement. Generally, amounts in your Roth IRA (including earnings and gains) are not taxed upon distribution in retirement.

S&P 500: A widely followed capitalization-weighted index of 500 of the largest, most widely held U.S. stocks.

Securities: Assets, such as stocks, bonds, etc., that allow you to participate in earnings, distribution of property, or other assets of the corporation issuing the security.

Securities and Exchange Commission (SEC): Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors.

Small Caps: A reference to either a small company stock or an investment vehicle that invests in the stocks of small companies.

Stock: Represent a share of ownership. Stock investing involves risk, including possible loss of principle.

Traditional IRA (individual Retirement Accounts): Individual retirement account that allows you to direct pretax income, up to specific annual limits, towards investments that can grow tax-deferred. IRAs are an investing tool you may use to save and earn money for retirement. Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distribution.

Trust: A relationship in which one party, known as a grantor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. 

WealthVisionSM: IAG’s personal financial homepage for our clients. It allows you to monitor your overall financial well-being using one web site.

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Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Investors Advisory Group, a registered investment advisor and separate entity from LPL Financial.

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