American depositary receipt (ADR): Security representing the ownership interest in a foreign company's common stock. ADRs allow foreign shares to be traded in the United States much like any other security.

annuity: A series of fixed-amount payments paid at regular intervals over the period of the annuity.

blue chip stock: Stock of large, well-known companies.

bond: A security that obligates the issuer to repay the principal amount upon maturity and to make specified interest payments over specified time intervals to the bond holder. The issuer can be a corporation or a governmental entitv. A bond is a debt obligation; the bondholder is a lender to the issuer and there is no ownership position.

cash investment: Very short-term (usually 90 days, maturity or less) obligation such as money market fund or very short-term CD that provides a return in the form of interest payments.

certificate of deposit (CD): Savings certificate that entitle the holder to the receipt of interest. CDs are issued by commercial banks and savings and loans (or other thrift institutions).

closed-end fund: A pooled investment fund that has a fixed capitalization after the initial issue. Fund shares are bought from or sold to other investors in the over-the-counter market or traded on an exchange (see open-end fund).

collateralized mortgage obligation (CMO): Specialized instrument designed to even-out the cash flow payments of mortgage-backed securities. CMOs are backed by pools of mortgages and are not riskless.

commodity futures: A contract to buy or sell a commodity in the future at a given price.

convertible security: A corporate bond or a share of preferred stock that can be converted into shares of common stock of the issuing corporation.

debenture: A long-term debt instrument that is not secured by a specific asset. In the event of default, the holder does not have a claim against any specific asset(s) of the issuing firm.

fixed-income security: An investment vehicle that provides a return in the form of fixed periodic payments and return of principal; examples are bonds and certificates of deposit.

government bond: A debt obligation issued by the U.S. government.

growth stock: The shares of a company whose earnings are expected to grow at an above-average rate.

income stock: Those stocks having a history of regular dividend payments that contribute the largest proportion of the stock's overall return.

initial public offering (IPO): The process of bringing private companies to the public market for the first time.

municipal bond: Tax-free debt instrument issued by a state or local government.

mutual fund: A pool of investors, money invested and managed by an investment adviser. Money can be invested in the fund or withdrawn at any time, with few restrictions, at net asset value (the per share market value of all securities held) minus any loads and/or fees.

open-end fund: A mutual fund that continuously sells shares to investors and redeems shares when investors wish to sell. Open-end funds have no limit to the number of shares they can issue.

preferred stock: A security representing prior claim to common stock on the firm's earnings and assets. Preferred stockholders normally forgo voting rights and receive a fixed dividend that takes precedence over payment of dividends to common stockholders.

unit investment trust: A company that purchases securities (usually fixed income) and sells shares representing proportional interest in the portfolio of those securities. The trust is liquidated when the securities mature.

unseasoned issue: An issue that has not been formerly traded in the public markets.

warrant: A long-term option that guarantees the right to purchase a stated number of shares of common stock in a company at a specified (exercise) price.

zero-coupon bond: A bond that generates no periodic interest payments and is issued at a discount from face value. All return is realized at maturity.