Investing 101: Updated and Expanded

glossary

ADRs.

American Depositary Receipts, which are securities traded on U.S. stock exchanges that represent the shares in a foreign concern. Generally, these are similar to owning shares in a foreign company; however, they bear less currency risk. (See Chapter 11.)

ADV.

A financial adviser form required by the Securities and Exchange Commission, the chief regulator in the securities industry. The form discloses a financial adviser's training, background, and employment arrangements, including whether the adviser has been disciplined by regulators and how the adviser is paid.

Call date.

The point when the issuer of a bond can redeem (or pay off) outstanding bonds prior to the bond's maturity date.

Calls.

Or call options, securities that give the holder the right to buy a particular security at a set price by a specific date in the future.

Capital gain.

A profit earned on a capital asset, such as stock or real estate. The term is also used to describe the favorable tax rate you pay when earning a profit on capital assets. (Where ordinary income is taxed at a 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, or 35 percent federal rate, capital gains are taxed at either 5 percent or 15 percent, depending on your ordinary income tax bracket.)

Certificate of Deposit.

A contract with a bank, whereby you agree to deposit a set amount for a set period of time. In turn, the bank agrees to pay you a set rate of interest. CDs, like other bank deposits, are insured by the federal government ...