AMERICAN DEPOSITORY RECEIPT (ADR): A U.S. security that is a repackaged foreign security. A U.S. bank creates an ADR based on evidence of ownership of a specified number of shares in the foreign security, while the underlying shares are held in a depositary in the issuing company's home country. U.S. investors may buy shares in the foreign company in the form of an ADR. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities.
ANNUITY:A contract between an insurance company and an individual. It generally guarantees income over a specified period of time to the person on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company.
APPLICATION: A formal request for insurance coverage, containing information provided by the applicant that assists the insurance company in determining eligibility for insurance. The application is signed by the applicant and becomes part of the insurance contract if a policy is issued.
ASSIGNEE: In insurance, the person (corporation, partnership, or other organization) to whom a right or rights under a policy are transferred by means of an assignment.
BENEFICIARY: In insurance, the person to whom the proceeds of an insurance policy are payable. The various types of beneficiaries are; primary beneficiaries (those first entitled to proceeds), secondary beneficiaries (those entitled to proceeds if no primary beneficiaries are living); and tertiary beneficiaries (those entitled to proceeds if no primary or secondary beneficiaries are living)
BENEFIT: In insurance, the sum of money payable upon the happening of the conditions set out in the insurance policy. For example, the benefit is payable in a life insurance policy upon the death of the insured.
BLUE CHIP STOCKS: The issues of normally strong, well established companies that have demonstrated their ability to pay dividends in good times and bad times.
BOND FUND: A type of mutual fund whose investment policy is to provide stable income with a minimum of capital risks. It invests in both bonds and preferred stocks.
BOOK VALUE PER COMMON SHARE: A measure of the net worth of each share of common stock. It is calculated by subtracting the intangible assets from the total common stockholders' equity and then dividing that amount by the number of shares of common stock outstanding.
BREAKOUT: A phrase used in technical analysis to describe a stock that is either declining through a "support" level or rising through a "resistance" level.
BUY-SELL AGREEMENT: An agreement between owners of a business stipulating when and how the owner's interest will be sold to a pre-specified party under a pre-determined pricing formula.
CALLABLE PREFERRED STOCK: A type of preferred stock that carries the provision that the corporation retains the right to call in the stock at a certain price and retire it.
CALL PROVISION: The written agreement between an issuing corporation and its bondholders that gives the corporation the option to redeem the bonds at a specified price before their maturity date and also specifies the conditions of the redemption. Please see “Options”.
CAPITAL APPRECIATION: An investment objective that attempts to maximize return on an investment through long-term growth of capital. Investors seeking capital appreciation desire growth over a long time period through stock price gain, while anticipating little or no income throughout the duration of their investment. Capital appreciation is characterized by investments that often involve a moderate to high-level of volatility.
CAPITAL PRESERVATION: An investment objective that focuses on earning regular income, and protecting the funds originally invested. To achieve this end, your money is invested in investments or fixed income securities that tend to limit volatility (fluctuation) associated with your account. As a result, while interest income is expected, growth of principal is not an outcome associated with capital preservation.
CASH VALUE: In insurance, certain life insurance policies generate a cash value as you pay premiums. Cash value represents the equity amount or cash accumulation in a permanent life insurance policy. Current cash value represents the amount of cash in the policy. If the owner decided to surrender the policy, the owner will get all or a portion of the cash value.
CASH SURRENDER VALUE: In insurance, the amount of money redeemable to the owner of a permanent life insurance policy when the policy is surrendered to the company.
CONTRACT (INSURANCE CONCTRACT): An agreement, enforceable by law, whereby the insurance company binds itself to certain promises or deeds conditioned on the payment of premiums due.
CONVERSION OPTION: Allows the policyowner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage without showing evidence of insurability (i.e. without taking a medical exam).
CONVERTIBLE PREFERRED STOCK: A type of preferred stock that offers the holder the privilege of exchanging (converting) the preferred stock into common stock at specified price or rates. Dividends may be cumulative or non-cumulative.
CORPORATION: A form of business organization in which the total worth of the organization is divided into shares of stock, each share representing a unit of ownership. By law, it has certain rights and responsibilities. It is characterized by a continuous life span and the limited liability of the owners.
CREDIT BALANCE (CR): A credit balance represents monies owed to a customer by a broker/dealer, generally resulting from the customer's sale of securities
CREDIT LIFE INSURANCE: Usually written as term insurance on a relatively small installment loan that may reflect direct borrowing or a balance due for merchandise purchased. If the borrower dies, the balance due is paid.
CREDIT REPORT: A summary of an applicant's credit history for insurance, loans, credit, etc., made by an independent organization that has investigated the applicants credit standing.
CUMULATIVE PREFERRED STOCK: A type of preferred stock that offers the holder any unpaid dividends in arrears. These dividends accumulate and must be paid to the holder of cumulative preferred stock before any dividends can be paid to the common stockholders.
CURRENT VALUE OF RETIREMENT PLANS: Represents the accumulation of deposits, losses, and earnings in the account. This figure is available on the statements received regarding these investments.
DEFENSIVE INDUSTRY: Issues of established companies in industries relatively unaffected by business cycles, such as the food industry or the utility industry.
DEFERRED ANNUITY: An annuity contract that guarantees principal and future income, installment payments, or a lump-sum payment to be made or begun at some agreed-upon time in the future.
DIVIDEND PAYOUT RATIO: A ratio used to analyze a company's policy of paying out cash dividends. It is calculated by dividing the dividends paid on common stock by the net income available for common stock.
DIVIDEND YIELD: The annual percentage of return that an investor receives on either common or preferred stock. The yield is based on the amount of the dividend by the market price.
DOLLAR COST AVERAGING: With reference to mutual funds, a system of buying fixed dollar amounts of securities at regular fixed intervals, regardless of the price of shares. The method of purchasing shares gives the investor assurance of an average cost that is generally lower than the average price of all prices at which the securities were purchased.
DURABLE POWER OF ATTORNEY: A power of attorney that continues to remain in effect after you become disabled, or that comes into existence when you become disabled.
ESTATE SETTLEMENT COSTS: Probate costs, liabilities, inheritance taxes, and estate taxes. Estate taxes vary depending on the value of property transferred at death and may include federal and state estate taxes. Probate costs include court filing fees and fees paid to the executor of the estate and the attorney who administers the probate.
EVIDENCE OF INSURABILITY: Any statement or proof of a person's physical condition, occupation, etc., affecting acceptance of the applicant for insurance.
EXECUTOR: Someone authorized to manage a brokerage account for an estate. An executor's authority is established by the last will and testament of the decedent.
FACE AMOUNT: In insurance, the amount of benefit an insurance policy will pay in the absence of loans against the policy. Also known as the principal sum, or benefit amount.
FEDERAL RESERVE SYSTEM: A federal government institution created by Congress to administer the nation's credit and monetary policies. Among other things, the Board of Governors of the Federal Reserve System sets the initial amount of credit that broker/dealers (as well as other lenders) may extend to customers to purchase securities.
FINAL EXPENSES: Expenses incurred due to death. Insurance may be purchased to cover these expenses associated with loss of life. Examples include medical bills, funeral expenses, outstanding debts, federal estate taxes, state estate taxes, as well as probate and administration costs. "Meeting final expenses:" In the "How much life insurance do I need?" tool this number estimates an aggregate of some of these costs based upon the information you provide.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA): The Financial Industry Regulatory Authority, known as FINRA, is the largest non-governmental regulator for all securities firms doing business with the United States public—more than 5,000 firms employing more than 660,000 registered representatives. FINRA was created in 2007 through the consolidation of NASD and NYSE Member Regulation.
FIXED ANNUITY: An annuity contract in which the insurance company makes fixed (or guaranteed) dollar payments to the annuitant for the term of the contract (usually until he or she dies).
FLEXIBLE DEATH BENEFIT: A flexible death benefit may be changed by altering the amount you choose to pay in premiums on a universal or universal variable life insurance policy.
FLEXIBLE PREMIUM: In insurance, a flexible premium allows the policyowner to vary how much he/she pays in premiums. If a policyholder pays less than the required premium, they may be required to pay higher premiums in the future to maintain coverage.
FREE-LOOK: In insurance, a provision required in most states whereby policyowners have a specific number of days to examine their new policies at no obligation. Typical free-look periods are from 10 to 60 days depending on the product sold.
FULLY UNDERWRITTEN INSURANCE: Insurance coverage that requires a full underwriting process. Underwriting determines the premium you must pay for a given amount of insurance coverage. A full underwriting process generally requires a medical examination.
FUNDAMENTAL ANALYSIS: A method of securities analyses that involves an attempt to evaluate the intrinsic value of a particular stock. It is a study of the overall economy, industry conditions, and the financial condition and management of a particular company.
FUTURE OBLIGATIONS: Refers to major future financial obligations such as expected income and the payment of debt and/or major and daily expenses-such as, housing, transportation, education, funeral costs and many other financial needs. Life insurance may be purchased to cover the payment of existing debts, day-to-day family expenses, funeral costs, and many other future expenses. (Please see, "Meeting future obligations:") For the purposes of the simple estimate in "How much life insurance do I need?" tool, we chose to evaluate debt repayment, final expenses, and income replacement separately. The estimate of future obligations focuses specifically on two common future obligations - to send your children to college and leave something for your preferred charitable organization.
GENERAL OBLIGATION BOND: A type of municipal bond that is backed by the full faith, credit, and taxing power of the issuer for payment of interest and principal.
GOVERNMENT BOND: An obligation of the US government, backed by the full faith and credit of the government, and regarded as the highest-grade, safest issue in existence.
GROUP INSURANCE: Insurance that provides coverage for a group of individuals, usually employees of a company, under one master contract. This life insurance usually does not require a medical examination.
GROWTH FUND: A type of diversified common stock fund that has capital appreciation as its primary goal. It invests in companies that reinvest most of their earnings for expansion, research or development. The term also refers to growth income funds that invest in common stocks for both current income and long-term growth of both capital and income.
GUARDIAN OF MINOR OR INCOMPETENT: One who manages a gift of securities to a minor under the Uniform Gifts to Minors Act (“UGMA”). Also, this is someone who takes charge of an incompetent's affairs.
HOUSE REQUIREMENT: The minimum amount of equity that a client must maintain in a margin account according to an individual firm's rules. Most firms have a higher maintenance requirement than that set by the NYSE.
IRA ROLLOVER: The reinvestment of assets an individual receives as a lump-sum distribution from a qualified tax-deferred retirement plan. The individual may reinvest either the entire lump-sum or a portion of that sum.
INCIDENTS OF OWNERSHIP: In insurance, if a person retains the right to designate a beneficiary, transfer ownership of an insurance policy (assign), choose how dividends or policy proceeds will be paid out, borrow money from the accumulated cash value of the policy, or perform any other functions that are rights of ownership, then that person has incidents of ownership in the policy.
INCOME FUND: A type of mutual fund that seeks to provide as stable a current income from investments as possible by investing in securities that pay a higher-than-average return on investments.
INCOME REPLACEMENT: In insurance, regards the potential need to replace the income of a deceased person. Intended for use by survivors to cover future financial obligations including day to day expenses such as housing, transportation, and food. In the "How much life insurance do I need?" tool, we consider factors such as the insured person’s age, family size, and current income to calculate a number that may represent income replacement needs.
INDIVIDUAL LIFE INSURANCE: Insurance coverage that provides a death benefit (cash) at the unexpected death of the insured. The death benefit is provided to the policyholder and/or his or her family, or business; sometimes called personal insurance as distinct from group or blanket insurance.
INITIAL MARGIN REQUIREMENT, NYSE AND NASD: The amount of equity a customer must deposit when making a new purchase in a margin account. The NYSE and NASD initial requirement is an equity of $2000 but not more than 100% of the purchase cost.
INITIAL MARGIN REQUIREMENT, REGULATION T: The amount of equity a customer must deposit when making a new purchase in a margin account according to Regulation T of the Federal Reserve Board. This requirement is subject to change.
INITIAL PUBLIC OFFERING: A company's first sale of stock to the public. Companies making an IPO are seeking outside equity capital and a public market for their stock.
INSIDER: Anyone who has nonpublic knowledge (material information) about a corporation. Insiders include directors, officers, and stockholders who own more than 10% of any class of equity security of a corporation.
INSURABLE INTEREST: Requires that, to be eligible to be named as a beneficiary on an insurance policy, a person must be in a position to sustain economic loss upon the death of the insured sufficient to warrant compensation.
INTEREST RATE RISK: Risk that involves the competitive cost of money. This term is generally associated with bond prices, but it applies to all investments. In bonds, the price carries an interest rate risk because if bond prices rise, outstanding bonds will not remain competitive unless their yields and prices are adjusted to reflect the current market.
IN-THE-MONEY: Refers to an option that has intrinsic value: for example, a call option in which the stock is selling above the exercise price or a put option in which the stock is selling below the exercise price.
INTRINSIC VALUE: The tangible or mathematical value of an option. For example, a call option is said to have intrinsic value when the stock is trading above the exercise price.
INVESTMENT RISK: Uncertainty about the return you will earn on an investment. When you buy a stock, the price of the stock may fluctuate. The return on a stock is not guaranteed, so investing in stock has investment risk. In contrast, when you put money into a bank account, you earn a predetermined rate of interest on all funds deposited; there is no risk.
IRREVOCABLE BENEFICIARY: Beneficiary whose interests cannot be revoked without his or her written consent, usually because the policyowner has made the beneficiary designation without retaining the right to revoke or change it.
JOINT ACCOUNT: An account in which two or more individuals act as co-tenants or co-owners of the account. The account may be joint tenants in common or joint tenants with rights of survivorship.
JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP (JROS): A form of ownership that requires that a deceased tenant's fractional interest in the account is retained by the surviving tenant(s). It is used almost exclusively by husbands and wives.
KEY-EMPLOYEE INSURANCE: Protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also known as "Executive Insurance".
LEVEL DEATH BENEFIT: The death benefit is fixed at the time the policy is purchased and cannot be changed during the term of the contract. If the policyowner is unable to pay the full premium amount for an extended period of time, the policy will lapse. The policy cannot be kept in force with a reduced amount of coverage if premium payments are not made, as it can with a universal life policy that has a flexible death benefit.
LIFE INSURANCE: Insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary.
LIMIT ORDER: An order to buy or sell a security at a customer-specified price; a customer order to buy or sell a specified number of shares of a security at a specific price.
LIMITED PARTNERSHIP: A form of business organization in which one or more of the partners is liable only to the extent of the amount of dollars each has invested. Limited partners are not involved in management decisions, but do enjoy direct flow-through of income and expenses.
LIQUID ASSETS: Assets that are readily available. Whether deposit balances or investments, liquid assets are assets, which do not change in value substantially over time and are readily available. In deposit accounts-liquid accounts are those from which you can withdraw without significant concern for loss of value and are readily available.
LONG-TERM DISABILITY INCOME INSURANCE (LTD): An insurance plan or policy that helps replace lost income when the insured is unable to work because of a covered disability
MARGIN ACCOUNT: An account in which a customer purchases securities on credit extended by a broker/dealer. Rules of the Federal Reserve Board and NASD govern margin accounts.
MEDICARE: A federally sponsored program of health insurance and medical care for persons 65 years of age and over. Administered under provisions of the Social Security Act.
MEDICAL REPORT: A document completed by a physician or another approved examiner and submitted to an insurer to supply medical evidence of insurability or in relation to a claim.
MUNICIPAL BONDS: Bonds issued by states, cities, counties, and towns to fund public capital projects like roads, schools, sanitation facilities, and bridges, as well as operating budgets. These bonds are exempt from federal taxation and from state and local taxes for the investors who reside in the state where the bond is issued.
MUNICIPAL BOND FUND: A type of mutual fund that invests in municipal bonds either operating as a unit investment trust (units of interest in an existing portfolio of tax exempt bonds) or as an open-end fund.
MUTUAL FUND: A type of investment company that offers for sale or has outstanding securities that it has issued which are redeemable on demand by the fund at current net asset value. All owners in the fund share in the gains or losses of the fund.
NASD: NASD, originally known as the National Association of Securities Dealers, was established in 1939 under the Securities and Exchange Act of 1934. Until 2007, when it consolidated with NYSE Member Regulation to create FINRA ( FINRA), the Financial Industry Regulatory Authority, NASD was the largest self-regulatory organization for the U.S. securities industry, and the world’s leading private-sector provider of financial regulatory services.
NET ASSET VALUE (NAV): The value of a mutual fund share determined by deducting the fund's liabilities from the total assets of the portfolio and dividing this amount by the number of shares outstanding. This is calculated once a day, based on the closing market price for each security in the fund's portfolio.
NON-FORFEITURE VALUES: That value, usually cash value, in a life insurance policy that the policyowner does not forfeit (lose), even if he/she terminates the policy.
OPEN MARKET OPERATIONS: The buying and selling of government securities by the Federal Open Market Committee (FOMC) for the purpose of increasing or decreasing the money supply.
OPTION: An instrument that gives the owner the right to buy or sell a specified number of shares of a specified stock at a specified price within a specified period of time. A call option allows the buyer to purchase the underlying stock at any time up to the expiration date of the contract. A put option allows the buyer to sell the underlying stock at any time up to the expiration date of the contract.
OUT-OF-THE-MONEY: Refers to an option that has no intrinsic value. For example, a put option in which the stock is selling above the exercise price or a call option in which the stock is selling below the exercise price.
OUTSTANDING DEBTS: The total amount left to be paid on loans (including mortgages), lines of credit, car loans, or credit card balances so that the balances equal zero (See "Meeting outstanding debts:"). In our "How much life insurance I need?" tool, we calculate the responsibility associated with meeting outstanding debts.
PARTIAL DISABILITY: A partial disability characterized by loss of the ability to perform one or more critical tasks, usually related to performing one's job duties, but retaining the ability to perform most other tasks. In order to receive benefits for a partial disability under a disability income contract, you must meet the definition of partial disability as it is set forth in your contract.
PARTICIPATING POLICY: Policy in which the policyowner receives shares (commonly called dividends) of the divisible surplus of the company. At the beginning of each year, the insurance company does not know how many claims they will get that year. The insurance company must collect enough in premiums to cover claims, even in very bad years. Sometimes the amount of money collected exceeds what is required to cover expenses and pay claims, this is the divisible surplus.
PERMANENT LIFE INSURANCE: Insurance that does not expire after a pre-specified term. Usually the duration of a permanent insurance policy is for the insured's "whole life"; until death, or age 100, whichever comes first (permanent insurance includes: whole life, universal life, and variable life).
PREFERRED STOCK: A security that usually pays a fixed dividend and that gives the holder a claim on corporate earnings and assets that is superior to that of holders of common stock.
PREMIUM: In Investments, a bond that sells above par (above 100% of $1,000). That is, the purchase price of the bond is greater than the par value (face value on maturity, or what you will receive at maturity). Also, the selling price of an option. In Insurance, the payment, or one of the regular periodic payments, that is made to purchase an insurance policy.
PRICE-EARNINGS RATIO (P/E): The price of a share of a stock divided by earnings per share, usually calculated using the latest year's earnings. The p/e ratio is also called the multiple.
PRINCIPAL: In investments, the amount invested. In insurance, the amount you have put into an insurance policy, sometimes known as the cash value of the policy.
PRINCIPAL FLUCTUATION: The changes in value of your investment and represents the risk that you could lose some or the entire amount you originally invested (your principal). This constant fluctuation, also referred to as "volatility," varies from investment to investment, with some investments being much more volatile than others. It is important to remember that all investments involve risk; if you purchase an investment product there is no guarantee that you will get all of your money back. But when you invest, you also have the opportunity to earn more money than when you save.
PUT: A bondholder's right to redeem a bond before maturity; a contract that grants the right to sell at a specified price a specified number of shares by a certain date.
REAL ESTATE INVESTMENT TRUST (REIT): An investment trust that operates through the pooled capital of many investors who buy its shares. Investments are either in direct ownership of income property or mortgage loans.
REFUNDING: A method of retiring an outstanding bond issue using the money from the sale of a new offering. This may occur prior to maturity or at maturity.
RENEWAL OPTION: An option that allows the policyholder to renew a term policy before its termination date without having to provide evidence of insurability.
REPURCHASE AGREEMENT: A money-market instrument with which the Federal Reserve purchases short-term securities from non-bank dealers who simultaneously agree to repurchase the securities from the Federal Reserve at a stated price and date (from 1 to 15 days) and at a specific rate of interest.
RESERVES: The money that a bank has on deposit with the Federal Reserve. A bank is required to maintain a certain percentage of reserves for every $100 of deposits.
REVENUE BOND: A type of municipal bond that is income-producing. Its interest and principal are payable only from the specific earnings of an income-(revenue-) producing enterprise.
RIDER (POLICY RIDER): A rider adds something to the policy. The term is loosely used to refer to any supplemental agreement attached to and made a part of the policy, whether the conditions of the policy are expanded, additional coverage's added or a coverage of condition waived.
RIGHTS OFFERING: An offering that gives each shareholder an opportunity to maintain a proportionate ownership in the company before the shares are offered to the public.
Investment and Insurance Products: • Are NOT Deposits • Are NOT FDIC-Insured • Are NOT Insured By Any Federal Government Agency • Have NO Bank Guarantee • May Go Down In Value
M&T Investment GroupSM is a service mark of M&T Bank Corporation and consists of M&T Securities, Inc., the investment-related areas of M&T Bank and investment advisory firms MTB Investment Advisors, Inc., and Zirkin-Cutler Investments, Inc.
Brokerage services and insurance products are offered by M&T Securities, Inc. (member FINRA/SIPC), not by M&T Bank. M&T Securities, Inc. is licensed as an insurance agent and acts as agent for insurers. Insurance policies are obligations of the insurers that issue the policies. Insurance products may not be available in all states.
