A 529 plan is a type of college savings program. Basically, 529 plans are state-sponsored programs that permit people to put money in a special type of investment account and to use that money and any earnings to pay for qualified expenses for college or vocational school. A parent, aunt or uncle can open a 529 plan account for a child. Many investors are attracted to 529 plans because the investors do not have to pay federal income tax on the money earned in these accounts as long as the earnings are used for qualified education expenses. As with all investments, it is possible to lose money by investing in a 529 plan. And, in some states, the state and local tax treatment is as favorable as the federal income tax treatment. However, in other states, the state and local tax treatment differs from the federal tax treatment.

A once-a-year gathering of shareholders of a company. At the annual meeting, shareholders vote on important corporate issues, and the company management reports on how the company did during the previous year.

This document gives detailed information on a company's financial health for the past year. Along with detailed financial statements, a company's annual report will also include a description of the company's operations for the year. A company is required by law to mail an annual report to all of its shareholders.A mutual fund is also required to report on fund performance to its shareholders. However, mutual funds are required by laws to report to shareholders every six months. So, a mutual fund issues an annual report (covering a 12-month period) and a semiannual report (covering a six-month period). A mutual fund's reports also contain detailed financial statements, as well as a discussion of the fund's performance and the economic events that affected it during the period.

Anything owned by a company, individual or mutual fund that has either commercial or monetary value or can be exchanged for other items of value

These are accountants who are hired by a company to examine its financial statements and the documents that support those statements. This examination is called an "audit." An accountant is someone who keeps or examines the financial records of a company or individual. Auditors are not employees of the company that has hired them.

A financial statement that lists the total value of (a) everything a company owns (also called as assets), (b) the company's debts (which are called liabilities) and (c) the value of stockholders' stock on a specific date. It is called a balance sheet because assets must equal the sum of the company's liabilities plus the value of stockholders' stock.

This term usually refers to the stock market. It is a period during which stock prices are generally falling.

For a mutual fund, it is the index used to compare the fund's performance with the broader market. This index is an unmanaged group composed of either stocks or bonds, which tracks the performance of those securities (another name for a stock or bond is a "security"). Generally, a mutual fund will compare its performance with a broad-based index, which is an index composed of securities from a variety of industries. If a mutual fund is focused on a particular sector or industry, it may use an index focused on that sector as one of its benchmarks.A mutual fund can compare its performance to more than one index. A fund's benchmarks are listed in its prospectus. It is not possible to invest directly in an index.

Used as an adjective, it describes the stock of a large, well-known company that has a long record of profit growth, divided payment and a reputation for quality management, products and services.

A bond is like a loan. When a government or corporation wants to borrow money for a long period of time, it will usually issue multiple bonds for pre-set amounts. The sum of all of these bonds equals the amount of money the government or corporation wants to borrow. The amount of the bond is called the principal. When a person purchases a bond, and bonds can only be purchased in the amount of the principal, it's as if that person has loaned money to the government or corporation that issued the bond, also known as the bond issuer. The bond issuer agrees to pay the lender, or bond holder, a fixed rate of interest until the date that the issuer is supposed to pay back the principal. This rate of interest is called the bond's coupon rate.

A firm that buys and sells mutual fund shares and other securities to and from other investors.

This term usually refers to the stock market. It is a period during which stock prices are generally rising.

An increase in the price of a stock, bond or other asset.

The profit you make when you are able to sell an investment for more money than you paid for it.

The money you lose when you sell an investment for less money than you paid for it.

A special type of deposit account, generally at a bank, which offers a higher rate of interest than a regular savings account. With a CD, you agree to deposit a specified amount of money for a certain period of time with a fixed rate of interest. When that time is up, you can receive the money you invested plus the interest earned. However, you can't remove money from a CD before the time period is up without paying a penalty. CDs are insured up to $100,000 by the US government.

The type of account at a bank that lets you use money you have deposited in the account by writing checks. When you want to buy something, you write a check in the name of the company or individual, who in turns presents it to the bank. If there is money in your account to cover the check, the bank will either move your money into the other person's account or give that person cash. If there is not enough money in your account, the bank will not pay the check and will give the check back to the person marked "insufficient funds." This is also known as "bouncing a check." Many banks charge you a fee for bouncing a check. In addition, the person you wrote that check to might not accept a check from you again.

When a company or corporation wants to borrow money for a short period of time, it might issue commercial paper. Commercial paper is an unsecured promissory note stating that the money borrowed will be paid back by a certain date. Simply defined, a promissory note is like an "IOU"- a written promise to pay back money borrowed. Usually, the company agrees to pay the lender within nine months (approximately 270 days). Commercial paper is issued in denominations starting at $10,000. Commercial paper is one of the investments that may be found in the portfolios of money market funds.

The ratio of the current value of a basket of goods and services to the value of the same basket of goods and services in a previous year.

The possibility that the issuer of a bond will not be able to make interest payments or pay back the face value of a bond to bond holders.

Someone who maintains assets for the benefit of another person, usually a child who is not old enough to be considered legally an adult. In many states, 18 is the age at which you are considered an adult, and is also known as the "age of majority." Individuals who are younger than their state's age of majority are also called "minors." When an individual is considered a minor, a custodian protects, manages and maintains assets until the individual reaches the age of majority. Then the individual becomes responsible for those assets.

The strategy of investing in a number of different securities or assets (things like stocks, bonds, real estate, cash or art). While this strategy does not assure a profit, it is designed to reduce the effect of market ups and downs.

A payment in cash or security that a company makes to shareholders out of the company's earnings.

The strategy of investing a fixed sum at regular intervals, whether the stock market is moving up or down. Over time, this strategy reduces the average cost of a share because an investor will buy more shares when prices are down and fewer shares when prices are high. This strategy tends to spread investment risk over time, but does not assure a profit or protect against a loss in a down market.

Also known as the "Dow," this is the average of the stock prices of 30 large, well-known companies in the United States. The Dow is the best-known indicator of the stock market in the United States. Investors often watch the Dow to determine how well the US stock market is doing. When the Dow is up a lot, for example, that usually means the stock market is doing well. When it's down that often means the stock market is down.

Income - Expenses = Earned Income or Profit

This generally refers to companies. It is the sum of the money a company earned minus the money it has spent. Earned income is a positive number. If a company spends more money than it earned, then the sum is known as a "loss."

Another term for stocks or ownership interest in a corporation.

Also called an industry analyst. A person in a financial organization who studies a number of companies, generally in one industry, and makes recommendations about which stocks to buy or sell.

An accounting period consisting of any 12 consecutive months. A fiscal year can be the same as a calendar year (January through December) or different from a calendar year. For example, a fiscal year can begin in July 1st of one year and end on June 30th of the following year.

This is the name of a company's annual report that is sent to the US Securities and Exchange Commission (SEC). The SEC requires this report from all publicly held companies and makes these reports available to the general public on its website.

GAAP represents a set of agreed-upon standards for financial reporting.

A financial statement that summarizes the company's operating results for a specific period. This statement lists a company's revenues (also called income or money earned) and expenses and shows if a company made money (net income) or lost money (net loss) over the fiscal year.

An unmanaged group composed of either stocks or bonds set up for the purpose of tracking the performance of those securities. An index is often used as means of measuring market performance.

An index may be broad based, which means it's composed of securities from a variety of industries. For example, the S&P 500 Index is broad-based index for stocks and the Lehman Brothers Government/Credit Bond Index is one for bonds. An index can also be composed of securities in one particular sector, country or global region. For example, the Nasdaq Bank Index tracks the performance of bank stocks that are listed on the Nasdaq. It is not possible to invest directly in an index.

Generally calculated as a percentage, the sustained increase of prices over a period of time.

Expressed as a percentage, generally, this is a fee paid by a borrower of money to the lender.

A company or individual providing investment advice for a fee. A mutual fund will hire an investment advisor to manage the fund's assets. That investment advisor will assign specialists called portfolio managers to manage the fund's investments according to the fund's stated investment objective.

A firm that, for a fee, uses the money it raises by selling shares to invest in stocks, bonds or both.

The identified or stated goal - such as growth, capital appreciation or income - that an investor or mutual fund pursues. In the case of a mutual fund, the investment objective is explained in the prospectus.

The possibility of an investment losing money or not gaining as much in price as expected.

The company, municipality or government agency that issues a security, like a stock or a bond.

A letter from the company's top executive, which usually provides an overview of the company's performance over the past year and the mission of the company.

Anything that a company or individual is required to pay back, like a debt or loan.

Also called a sales charge. Some mutual fund distributors charge this fee to shareholders to compensate the salesperson and/or firm that sell shares of the fund. This fee is outlined in a fund's prospectus.

This term refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals.

The aim of money market funds is to keep the fund's net asset value (NAV) at $1.00 per share, though there is no assurance that they will do so. Money market funds generally invest in short-term securities like bank certificates of deposit, commercial paper and US government securities. (A security is another term for a stock or bond.) An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. It is possible to lose money when investing in a money market.

An investment company that invests in a group of securities, either stocks, bonds, or both, based on a stated investment objective. People can invest in a mutual fund by buying shares, which are units of ownership in the fund. A mutual fund will hire an investment advisor, which is a company that provides investment advice. In turn, that advisor will assign investment professionals known as portfolio managers to manage the fund's portfolio.Since all mutual funds have expenses, all mutual funds charge fees to their shareholders. Generally, fees are deducted from the fund's assets prior to the calculation of an investment return.

For a company, net assets are the sum of the total value of everything a company owns (assets) minus the total value of a company's debts (liabilities). In other words:

Assets - Liabilities = Net Assets

The market value of one share of a mutual fund. A fund's NAV is calculated by adding up the value of all of the fund's securities, subtracting expenses and dividing this sum by the total number of shares owned by the fund's shareholders. Mutual funds calculate their NAVs at least once a day, usually at the close of business.

A term used to describe mutual funds that have no sales charges. It's important to remember that even though a no-load mutual fund may not charge a sales charge, the fund will still charge management fees in order to cover its expenses. All fees are outlined in a fund's prospectus.

A group of stocks, bonds or other investments owned by a mutual fund or individual investor.

The person or group responsible for managing a pool of investments.

Income - Expenses = Profit (or Earned Income)

A sum of the money a company or individual earned minus the money spent. Profit is a positive number. If a company spends more money than it earned, then the sum is known as a "loss."

A legal document that offers a security for sale. For a mutual fund, a prospectus describes the fund's investment objective and policies, investment risks, services, expenses and investment advisor. It also explains how to buy and sell shares. By reading a prospectus carefully, a potential investor can determine if the mutual fund is an appropriate investment. A prospectus must be given to a mutual fund customer prior to or at the time of sale.A company will also issue a prospectus when it is offering stock. This prospectus will include describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision.

The document sent to shareholders containing detailed information on any important proposal that will be voted on during a shareholder's meeting. This can include electing candidates to the board of directors. After reading the proxy statement, shareholders then vote by "proxy," which means they send in their vote by mail or attend the meeting to vote their shares in person.

To sell mutual fund shares back to the fund for cash.

To use dividends and capital gains distributions used to purchase more shares.

A basic savings account is one that generally has a low minimum balance, and interest is paid on all amounts deposited. You can take the money out of your savings account any time you want.

A general term for stocks, bonds and other investments.

Also known as the SEC, this is the primary US government agency responsible for protecting investors and making sure that securities markets operate fairly and honestly. The SEC is also responsible for regulating the day-to-day operations and disclosure obligations of mutual funds and other securities.

A unit of ownership of a company or a mutual fund.

An investor who owns shares of a mutual fund or shares of stock in a company.

Many mutual funds offer different types of shares, each known as a "share class." A share class still represents ownership in the fund, but different share classes have different fee structures. By having a choice of share classes, investors can choose the fee structures that best suit their needs.

Also known as the S&P 500, this is an index of 500 widely held US stocks that investors generally use as a measure of the performance of the US stock market. Stocks in this index are chosen by the Standard & Poor's Corporation and represent a variety of industries.

A financial statement that shows how much money a company has coming in and going out.

A share of ownership in a corporation.

The marketplace in which shares of stock are traded, for example the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), Over-The-Counter (NASDAQ). There are also stock exchanges in Boston, Cincinnati, Philadelphia and in cities overseas.

A measure of investment performance over a period of time. It is usually expressed as a percentage. For a mutual fund, total return is made up of two things: the change in the fund's share price and the money the fund earns from dividends and capital gains.

The firm hired by a company or a mutual fund to keep the official record of its registered shareholders. This record includes a shareholder's name and address and the number of shares owned. The transfer agent also handles the administrative work involved with the purchase and sale of shares.

A type of risk associated with investing, particularly in stocks or the stock market in general. It refers to the fact that some security prices will rise and fall more rapidly over short periods of time.

This percentage is calculated by dividing the annual dividend by the latest available selling price of the security. For a bond, the yield is the relationship of a bond's coupon rate (the amount of interest a bond issuer is paying to bond holders) to its market value. If a bond increases in price, the yield will decrease. If a bond decreases in price, the yield will increase.

For a money market fund, yield is usually calculated for periods of seven days. A seven-day money market yield shows the investment return during by the fund during that period.

A fixed-income security that does not pay interest and is sold at a deep discount from it face value.