GlossaryGuide

So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services. 12b-1 fees get their name from the SEC rule that authorizes a fund to charge them.  The rule permits a fund to… Continue reading DISTRIBUTION [AND/OR SERVICE] (12B-1) FEES

Fees paid out of fund assets to cover marketing and selling fund shares. These fees may cover advertising costs, compensating brokers and others who sell fund shares, payments for printing and mailing prospectuses to new investors, and providing sales literature to prospective investors. Distribution fees sometimes are referred to as “12b-1 fees.”

Short-term obligations issued at a discount from face value. Discount notes have no periodic interest payments; the investor receives the note’s face value at maturity. For example, a one-year, $1,000 face value discount note purchased at issue at a price of $950, would yield $50 or 5.26% ($50/$950).

A bond sold before it matures might not sell at full par value. If it sells below par, it is selling at discount.

Information about a company’s financial condition and business that it makes public. Investors can use this information to make informed investment decisions about the company’s securities. 

Financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value changes in relation to the price movement of the underlying stock.

A retirement savings plan, such as a 401(k) plan, that does not promise a specific payment upon retirement. In these plans, the employee or the employer (or both) contribute to the employee’s individual account. The employee bears the investment risks.

Defined benefit plans also are known as pension plans. Employers sponsor defined benefit plans and promise the plan’s investments will provide you with a specified monthly benefit at retirement. The employer bears the investment risks.

A sales charge, also known as a “Back-end Load,” investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.

With a deferred annuity, you make payments to an insurance company, which will be free from taxes until you reach a particular age or a date specified in your contact.