Mutual Fund

An open end investment company which would hold a portfolio of stocks and/or bonds. Provides diversification and professional management.

No-Load Mutual Fund

A mutual fund that does not charge either a front-end load or a back-end surrender charge.

Load Fund

A mutual fund that comes with a sales charge or commission.

Front-End Load

A commission or sales charge applied at the time of the initial purchase of a mutual fund. This is referred to as A shares of a fund.

Back-End Load

A fee (sales charge or load) that investors pay when redeeming shares within 5 or 6 years of share purchase. Referred to as B shares.

Breakpoint Selling

Class A share mutual funds have “breakpoints” on commission charged. It’s a violation of regulations for a broker to split up a customer’s investment dollars in such a way as to maximize the commission paid. For example, take an investor with 66k and fund co. with breakpoints at 25k and 50k. Instead of keeping all the 66k in that one fund co. the broker invests 22k in 3 different funds in 3 different fund companies.


In financial services, a broker-dealer is a natural person, a company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and derivatives trading process.

Although many broker-dealers are "independent" firms solely involved in broker-dealer services, many others are business units or subsidiaries of commercial banks, investment banks or investment companies. When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a dealer. Securities bought from clients or other firms in the capacity of dealer may be sold to clients or other firms acting again in the capacity of dealer, or they may become a part of the firm's holdings.

In addition to execution of securities transactions, broker-dealers are also the main sellers and distributors of mutual fund shares.[2]

Closed End Fund

A fund which has a finite number of shares. They are traded in the market. It may trade above or below NAV.

ETF ( Exchange Traded Fund )

Similar to a mutual fund but trades as a stock which provides for liquidity during the trading day.

Net Asset Value - NAV

A mutual fund's price per share or closed end fund’s value regardless of whether it’s trading above or below its actual value.

Expense Ratio

A measure of what it costs an investment company to operate a fund.

Financial Advisor

A catchall term used for anyone in the financial services industry. It is not a designation or degree of any kind. Mostly used by brokers the make themselves sound professional. If you see this on someone’s card, be wary.

Certified Financial Planner

A person who has met the education and experience requirements of the CFP Board


A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): such that there must be no conflict of duty between fiduciary and principal.

Immediate Annuity

An annuity with only a distribution phase is an immediate annuity, single premium immediate annuity (SPIA), payout annuity, or income annuity. Such a contract is purchased with a single payment and makes payments until the death of the annuitant(s) or for a specified time period.

Fixed Annuity

Annuities that make payments in fixed amounts or in amounts that increase by a fixed percentage are called fixed annuities.

Variable Annuity

Variable annuities, by contrast, credit gains or losses that vary according to the investment performance of a specified set of investments, typically bond and equity mutual funds. Variable annuities are used for many different objectives. One common objective is deferral of the recognition of taxable gains. Money deposited in a variable annuity grows on a tax-deferred basis, so that taxes on investment gains are not due until a withdrawal is made. Variable annuities offer a variety of funds ("subaccounts") from various money managers. This gives investors the ability to move between subaccounts without incurring additional fees or sales charges.

Variable annuities have been criticized for their high commissions, contingent deferred sale charges, tax deferred growth, high taxes on profits, and high annual costs. Sales abuses became so prevalent that in November 2007, the Securities and Exchange Commission approved FINRA Rule 2821 requiring brokers to determine specific suitability criteria when recommending the purchase or exchange (but not the surrender) of deferred variable annuities.

Fixed Indexed Annuity

Gains are credited based on the index chosen, e.g., the DOW, S&P 500, NASDAQ and others. Gains are usually capped at a certain percentage however losses are not charged against the account. So an investor shares in the upside but has no risk on the downside. These contracts can be complicated so thorough examination is prudent.

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