GLOSSARY

Exchange Traded Fund

A collection of securities that are traded on a stock exchange. They are constructed similar to that of mutual funds, but can be bought /sold like stocks, throughout the trading day.

Fed Rate

The interest rate that banks charge each other for overnight loans. AKA Federal Funds Rate

Gross Domestic Product

A cumulative market value of the goods/services produced within a nations borders, while backing out the value of the goods/services used in their production. A major indicator used to dictate monetary policy.

Inflation

A broad indicator for the rate at which increase and impact a nations cost of living.

Index Fund

Used as a vehicle to track a market index (ex: S&P 500, Russell 2000 or Wilshire 5000) They are designed in a way similar to that of mutual funds or ETF's and often use derivatives in order to achieve their investment objective.

Interest Rate

The percentage, charged by a lender, on the principal amount being loaned. "The cost of borrowing money"

Fixed Rate (interest)

The rate is locked in at the time of the closing and allows the monthly payment to remain the same for the life of the loan.

Prime Rate

Based on the Federal Funds Rate, it is a benchmark used by the banking institution to determine the rates charged for loans and various financial products.

Variable Rate

The rate is adjustable for the term of the loan. Tracks the Prime Rate.

Individual Retirement Account

A tax advantaged account that can be set up for "tax free" growth or on a "tax deferred" basis. The primary difference is subject to when the funds are allocated (pre-tax or after tax). Contributions do not have an annual limit.

Simple IRA (Individual Retirement Acct)

A retirement savings plan, set up by employers, for their employees on a "pre-tax" basis. Taxes are deferred and will be due upon withdrawal at retirement.

ROTH IRA (Individual Retirement ACCT)

A retirement plan where contributions are made with "after tax" dollars and are not tax deductible. These accounts are capped at a certain level. If over the age of 50, a person can benefit from catch-up contributions. (check with your financial advisor or CPA, as the limit fluctuates year to year). The advantage is, having paid the taxes at the onset, your withdrawals are "tax free". (There is an early withdrawal penalty of 10%, if before 59 1/2 years of age and if the account is open less than 5 years)