Investor Education

An amount charged to purchase shares in many mutual funds. The maximum charge is 8.5 percent of the initial investment. The charge is added to the net asset value per share in the determination of the offering price. This charge must always be stated as a percentage of the offering price.

The aftermarket; the resale of outstanding securities. This is what occurs every day on the exchanges and in the OTC market. (See "Primary Distribution").

Section 403(b) of the Internal Revenue Code permits employees of certain charitable organizations and public school systems to establish tax-sheltered retirement programs that may be funded with annuities and mutual fund shares.

Any note, stock, bond, evidence of debt, interest or participation in a profit-sharing agreement, investment contract, voting trust certificate, fractional undivided interest in oil, gas, or other mineral rights, or any warrant, pre-emptive right or option to subscribe to, or purchase, any of the foregoing. Also includes variable annuities and various other products.

A nonprofit membership corporation created by an act of Congress to protect clients of a brokerage firms that are forced into bankruptcy. Membership is composed of all brokers and dealers registered under the Securities Exchange Act of 1934, all members of national securities exchanges and most NASD members. SIPC provides customers of these firms up to $500,000 coverage for cash and securities held by firms (although cash is limited to $100,000).

Non-marketable federal savings bonds of various denominations offered at a price below face value and redeemed at face value.

Non-marketable federal savings bonds of various denominations offered and redeemed at face value, bearing interest every six months during its lifetime.

The day on which certificates involved in a transaction are due at the purchaser's office. At that time, the purchaser is obligated to make payment. Regular Way delivery requires that members settle their trades on the third business day after the trade.

Annualized fee paid by a mutual fund to institutions that provide shareholder support services to their customers.

A risk adjusted measure developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine the reward per unit of risk. The higher the Sharpe Ratio, the better the fund's historical risk-adjusted performance.

Equity securities of the smallest U.S. companies typically identified as companies with market capitalizations under $2 billion.

Years ago, the term "special" was removed from Regulation T, but many in the industry still use it. It refers to an account in which the customer is required to make full payment no later than two business days after the settlement date.

• The difference in value between the bid and offering prices.
• The difference between the public offering price and the amount received by the issuer.
• Spread can also denote the difference in price or yield between two securities.

A statistical measurement of the dispersion about an average, which, for a mutual fund, depicts how widely the returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given fund. When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility.

A document that contains more detailed disclosure on features and policies of mutual funds and is filed with the Securities Exchange Commission.