Glossary | I
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Illiquid: Not readily convertible into cash.
Inactive Stock: Issue traded on an exchange or in the over-the-counter market in which there is a relatively low volume of transactions.
Income: In the context of mutual funds, typically refers to a monthly or quarterly dividend paid.
Income Stock: Income stocks appeal to investors seeking attractive dividend yields. Income stocks have a long and sustained record of paying higher than average dividends regularly (e.g., utilities).
Indemnity Bond: Insurance bond from a company allowing financial reimbursement in the case of a lost or stolen security. Also known as Surety Bond.
Indenture: Written agreement between the issuer of bonds and the bondholders stating conditions and repayment terms for the debt.
Independent Broker: New York Stock Exchange (NYSE) member that executes orders for other brokers or firms who are not members of the exchange.
Index: Statistical composite used to measure changes in the economy or financial markets.
Index Funds: Index Funds seek to mirror the performance of a market index (e.g., S&P 500 or S&P MidCap 400). While most growth funds seek to outperform major indexes by stock selection, an Index Fund essentially seeks to replicate the performance of an Index.
Index Option: Option to trade in a particular market or industry group rather than individual stocks.
Inheritance Tax Waiver: Document received from the tax bureau of certain states consenting to the transfer of securities registered in the name of a decedent.
Initial Public Offering (IPO): An IPO is when a corporation, generally through an underwriting syndicate, makes its first stock offering to the investing public.
Inside Information: Material information pertaining to a corporation's affairs that have not yet been made public. Executing securities trades while in possession of such information is unlawful.
Institutional Investor: Organization that trades large volume of securities such as pension funds, investment companies, and universities.
Intangibles Tax: Property tax on non-physical assets such as stocks, bonds and mutual fund shares (Florida, e.g.). Investors are taxed on the amount of income received during the year in addition to end-of-year account value.
Interest Earned: Price paid for the use of money, usually expressed as an annual percentage.
Interest-Rate Futures and Options on Interest-Rate Futures: Speculative investing techniques to establish positions on interest rates.
Interest-Rate Risk: Prices of bonds tend to move inversely with changes in interest rates. Typically, a rise in rates will adversely affect bond prices and, accordingly, a fund's share price. The longer the fund's effective duration, the more its share price is likely to react to interest rates.
International Funds: Funds that target investments from countries outside the United States.
Inverse Floaters: An inverse floater is a derivative product primarily used in the municipal market. A broker or other institution takes a bond and splits it into two pieces: a "floater" and an "inverse floater". The floater is a short-term instrument that matures usually every 28 days. The floater is then reissued at the new prevailing short-term interest rate. The inverse floater is a long-term security that receives whatever interest is left over from the original bond after the floater interest is paid.
Inverse Relationship: Correlation between bond price and interest rate movements.
Investment: Process where capital is committed in order to earn a financial return.
Investment Advisor: Firm or individual who provides financial advice for a fee.
Investment Advisers Act of 1940: This Act was passed to protect investors against potential abuses by investment advisors, who are persons that advise investors about security investments for compensation.
Investment Allocation Objective: One of three investment objectives stated by the client for purpose of Investment Allocation Service, as follows: 1. GROWTH - Primarily interested in Capital appreciation; 2. INCOME TO MEET CURRENT EXPENSES - Primarily interested in current income; and 3. GROWTH WITH SOME INCOME - Primarily interested in capital appreciation but also want to achieve some level of current income.
Investment Company: Organization that pools money of investors with common objectives to acquire and manage a portfolio securities.
Investment Company Act of 1940: Primary authority regulating investment company selling, distribution, promotion and reporting operations and empowers SEC to adopt regulations thereunder.
Investment-Grade Bonds: Bonds rated BBB or Baa or above by nationally recognized rating agencies.
Investment Objective: Strategy which an investor will pursue to reach a defined goal or common investment purpose pursued by a mutual fund.
Investor: Individual who commits money in the hopes of earning a profit.
IRA: Individual Retirement Account. Investment vehicle for individuals which can generate tax-deferred income during the term of the IRA investment, subject to taxation upon withdrawal and penalties upon early withdrawal.
IRA Rollover Account: A holding account or conduit for qualified distributions originally distributed from employer-sponsored retirement plans
Irrevocable Trust: Trust that cannot be changed or terminated by the one who created it without the agreement of the beneficiary.
Issue: Act of selling and distributing securities.
Issuer: Organization in which investors own equity interest through stock ownership.