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Glossary

Stocks

Bonds

International Funds

Small-Cap Funds

Mid-Cap Funds

Large-Cap Funds

Balanced Funds

Bond Funds

Asset Allocation Funds: Age-Based

Asset Allocation Funds: Risk-Based

Money Market Funds

Stocks are also referred to as equity securities because they represent ownership, or equity, in a company.


Bonds
are also referred to as debt securities. They represent a loan to a government agency or private corporation that is obligated to repay the principal of the loan plus interest at a specified future date.


International Funds primarily invest in equity securities of companies based outside the United States, including companies based in Asia, Europe and emerging markets.

International investments may be most appropriate for someone looking for greater potential returns and who is willing to accept a higher degree of risk. International investments may provide diversification for a domestic portfolio. Foreign investments involve special risks, including currency fluctuations and political developments. International securities may also be subject to somewhat higher taxation, as well as less liquidity compared to domestic investments. Equity securities of companies located in emerging markets involve greater risks than investing in more established markets, including currency fluctuations, political developments and share illiquidity.


Small-Cap Funds primarily invest in equity securities of public companies located in the United States that have market capitalizations less than $2 billion. Market capitalization is a measure of a company's size and is calculated by multiplying the number of outstanding shares by the current market price.

Small-cap investments may be most appropriate for someone with a longer investment horizon, seeking long-term capital growth, and who is willing to accept larger market fluctuations. Equity securities of small-sized companies may be more volatile than securities of larger, more established companies.


Mid-Cap Funds primarily invest in equity securities of public companies located in the United States that have market capitalizations of less than $10 billion but greater than $2 billion. Market capitalization is a measure of a company's size and is calculated by multiplying the number of outstanding shares by the current market price.

Mid-cap investments may be most appropriate for someone seeking higher potential returns over time and who is willing to weather market downturns. Mid-cap stocks may be more volatile than large-cap stocks but with potentially higher return. Equity securities of medium-sized companies may be more volatile than securities of larger, more established companies.


Large-Cap Funds primarily invest in equity securities of public companies located in the United States that have market capitalizations greater than $10 billion. Market capitalization is a measure of a company's size and is calculated by multiplying the number of outstanding shares by the current market price.

Large-cap investments may be most appropriate for someone willing to accept market fluctuations in return for long-term capital growth. Stock investments tend to be more volatile than bond or money market investments.


Balanced Funds use both stocks and bonds to moderate market fluctuations in the equity markets.

Balanced investments may be most appropriate for someone seeking a balance between income from bond investments and capital growth from equity investments in one option. The investor is willing to accept higher risk for greater potential returns, rather than investing in bonds alone.

Bond Funds primarily invest in debt securities of government agencies and private companies. They provide income based on the interest or yield of the underlying bonds. Changes in interest rates and the stability of the issuer can affect the value of the underlying bonds. Unlike money market and fixed funds, bond funds can result in loss of principal.

Bond investments may be most appropriate for someone seeking higher potential income than with a money market fund or stable value investment. The investor may desire to balance more aggressive investments, with one providing potentially steady income. A bond fund's yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news, and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa.


Asset Allocation Funds: Age-Based funds are sometimes referred to as target date funds. They are designed to help meet a date-specific future financial goal, such as retirement, by shifting the weighting of asset classes toward the more conservative and away from the more aggressive as the specified date nears. The principal value of the funds is not guaranteed at any time, including the target date. These funds typically are diversified across multiple asset classes and are often offered in several target date options.


Asset Allocation Funds: Risk-Based funds are diversified across multiple asset classes. These funds are often available in conservative, moderate or aggressive allocations.


Money Market Funds invest in short-term debt securities that earn interest and strive to maintain principal. Money market investments may be most appropriate for someone wanting to safeguard principal value or to balance out a more aggressive portfolio. This investor may be nearing retirement and may require more stability and asset liquidity. An investment in a money market investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC), or any other government agency.

 

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