Finacial Glossar: A

Accelerated death benefit: Allows the policyholder to receive all or part of the policy's proceeds prior to death under certain circumstances (life's too short to go into them all here, but one that's included is life expectancy of 12 months or less).

Accidental death benefit: A provision added to a life insurance policy for payment of an additional benefit if death is caused by an accident. This provision is often called "double indemnity." (Not to be confused with the movie starring Cary Grant or somebody like that.)

Accumulation phase: Has nothing to do with waistlines. The early-to-middle years of the investment cycle. Attempt to accumulate assets to satisfy both long-term and short-term needs.

Accumulation plan: A plan for the systematic accumulation of mutual fund shares through periodic investments and reinvestments of income dividends and capital gains distributions. Do this and you're really goin' for it.

Adjustable-rate mortgage: A mortgage with an interest rate that may change, usually in response to changes in the Treasury Bill rate or the prime rate; rarely if ever in response to the weather.

Adjusted gross income: Also known by its friendlier nickname, AGI. This is the income amount on which a working stiff computes deductions that are based on, or limited by, a percentage of his or her income in order to figure out federal taxable income. AGI is determined by subtracting from gross income any deductible business expenses and other allowable adjustments (some traditional Individual Retirement Account annual contributions, SEP and Keogh annual contributions, and alimony payments. Stuff like that).

Administrator: A person appointed by a probate court to handle the estate of a person who died intestate (without a will). They have the same duties as an executor.

Adult day services: A program of adult day health care that is state licensed, operates at least five days a week for a specific minimum length of time and does not provide any overnight care.
Advisor: See definitions for Financial Advisor and Investment Advisor.

After-tax retirement income: The amount of spending money needed, net after tax, to provide an investor with his or her desired lifestyle. Can be thought of as their annual budget in retirement or their total planned annual spending in retirement. (Tennis on the Riviera, anyone?)

Aggressive: An investment approach that takes higher risks in return for potentially higher rewards. (Also known as the "Go Big Or Go Home" mentality.)

Aggressive Growth Funds: Funds that invest in shares of companies with earnings and profits that are expected to grow rapidly to seek maximum capital gain (you gotta love 'em) and have more risk.

Alpha: That portion of an investment's historical return in excess of the risk-free interest rate that is estimated to be unrelated to market movements. (Hey, you asked!)

Alternate care: Alternate care is licensed personal care and custodial services provided to those who suffer cognitive impairment, not just require help with activities of daily living. (And we're talking serious cognitive impairment, not just the kind you get from financial planning.)

Alternative minimum tax: An IRS mechanism created to ensure that high-income individuals, corporations, trusts, and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions. (It seems only fair, doesn't it?) It operates by adding certain tax-preference items back into AGI (our friend adjusted gross income).

American Stock Exchange (AMEX): The second largest stock exchange in the U.S. after the New York Stock Exchange (NYSE). AMEX has a larger number of stocks and bonds issued by smaller companies than the NYSE, or the "Big Board" as it is affectionately called on Wall Street.

Amortization: It's the kind of word that makes you smile and nod when you hear it because you want people to believe you understand. (Keep reading and you really will understand.) It's the gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest.

Annuity: A contract that provides for a series of payments to be made or received at regular intervals. An annuity (say those two words 10 times fast) may be immediate, starting as soon as the premium has been paid, or deferred, starting at a designated later date. Annuities are commonly used to fund retirement. See fixed annuity or variable annuity.

Appreciating asset: An asset that is growing in worth. As opposed to growing in mold. See asset.
Asked price: The price asked for a security offered for sale. Quoted, bid, and asked prices are wholesale prices for interdealer trading and do not represent prices for the public. So don't get too excited about them. Not that you would.

Asset: Property and tangible resources, such as cash and investments. Examples include stocks, bonds, real estate, bank accounts, and jewelry. Assets considered marginal are velvet Elvis art, your good looks and that novel-in-progress in your drawer.

Asset allocation: Investment strategy whose purpose is to enhance total return and/or reduce risk by diversifying assets among different types of stocks, bonds and money market investments; i.e., variety is the spice of investment life.

Asset classes: No, these are not dreary investment seminars for narcoleptics. They're types of investments, such as stocks, bonds, real estate, and cash.

Assisted living: As it relates to long-term care insurance, a form of personal care such as help with bathing or dressing, and usually recreation and social services. Licensed by state departments of social services.

Attorney-in-fact: A person who holds power of attorney, and therefore is legally designated to transact business on behalf of another person. Perry Mason is an example of attorney-as-act, which is completely different and probably made up.

Automatic premium loan: A provision in a life insurance policy that any premium not paid by the end of the grace period will be paid automatically by a policy loan if there is sufficient cash value. And what if there isn't sufficient cash value? You don't even want to know...

Average annual total return: Represents the average annual change in value of an investment over time, including changes in share price and income (dividends or interest) expressed as a percentage. In other words, it's roughly how much you made (or lost).

Average maturity: Someone who's not really, really mature, or really, really immature. Actually, it's the average of the stated maturity dates of debt securities in a portfolio for a bond fund.

Averages: Various ways of measuring the trend of stocks listed on exchanges. Formulas, some very specific and devised by people with apparently too much time on their hands, have been created to take insert into account such stuff as stock splits and stock dividends. That gives continuity to the average. In the case of the Dow Jones industrial average (the Grand Poo-bah of averages), the prices of the 30 stocks used in the Dow are totaled and then divided by a figure that is intended to compensate for past stock splits and stock dividends. That gets changed from time to time. Some have suggested that the people who do all this ought to get a life. We'll refrain from any opinion on that matter.