| Acceleration clause |
Allows the Tender to require immediate repayment of the loan if the borrower misses a scheduled payment. |
| Adjustable rate loans |
Allows the Tender to require immediate repayment of the loan if the borrower misses a scheduled payment. |
| Administrator (administratrix) |
Home mortgages on which the interest rate is periodically adjusted over the term of the loan. |
| Aggressive growth fund |
A unit trust that invests primarily in the stocks of companies that plough all or most of their earnings back into the company, producing little current income but growth in the value of the company and the stock. |
| Annuity (product) |
A life insurance product that is frequently used as a retirement vehicle. The annuity distributes funds over the lifetime of the recipient based upon pre-established criteria. The annuity may pay over the lives of one or more persons, may have a specified ending date, and/or may pay a specified dollar amount. |
| Assets |
What is owned by a person. Assets include cash and cash equivalents, invested assets and use assets. Avoidance of risk. A risk management technique that involves eliminating a possible cause of loss entirely. For instance, a person is avoiding risk when he or she decides not to sky dive For instance, a person is avoiding risk when he or she decides nor to sky dive.
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| Balance sheet |
A financial statement listing a client's assets, liabilities and net worth as of a specific point in time. |
| Balanced unit trust |
A unit trust that invests in stocks, preferred stocks, and bonds. Investment objectives are security of principal, reasonable current income, and reasonable long-term capital appreciation. |
| Beneficiary. Insurance |
The person or entity who has remainder interest in policy proceeds.
Trusts: The person who the trust is to benefit.
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| Bequest |
The act of transferring property by a will. |
| Blue-chip stock |
Stock that is issued by major, well-established companies. Blue-chip stock has a long record of earnings growth and dividend payments in both good and poor economic conditions. |
| Bond |
A legal obligation of the issuer to pay principal and interest when due. |
| Bond unit trust |
A unit trust that invests in bonds. These funds may invest in short-term, intermediate-term or long-term maturity bonds. They may also specialise in bonds of a specific type of issuer, for example, they may invest only in corporate bonds, only in municipal bonds, or only in Treasury securities. |
| Broker. Insurance |
An individual who sells insurance but is not limited to the products of any single company.
Real Estate: An individual who represents the seller.
Securities: An individual who acts as a conduit between a buyer and seller.
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| Business cycle risk |
Fluctuations in an investment's return resulting from fluctuations in the business cycle. |
| Buy-and-hold strategy |
A method of portfolio management that does not attempt to trade securities over economic cycles. Buy-and-hold advocates stress on the importance of carefully constructing a well-diversified portfolio to begin with rather than continually changing one to improve performance. |
| Call option |
Purchase of a call option gives an individual the right to buy stock at a given price within a period of time.
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| Capital assets |
Assets held for personal pleasure or investment. |
| Capital gain |
An excess of the sale price of a capital asset such as a stock, a bond, a personal automobile or a home-over its basis (generally purchase price). |
| Capital loss |
An excess of the basis in a capital asset over its sale price. |
| Codicil |
A separate, supplementary written document that amends or revokes an existing will.
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| Compound rate |
The percentage of interest earned, expressed either as an annual rate or per compounding period. |
| Coupon rate |
The annual interest rate paid by a bond issuer. |
| Currency risk |
The risk of diminishing both principal and return on a foreign investment because of unforeseen changes in the relative values of Singaporean and foreign currencies. It is considered a type of nondiversifiable (systematic) risk. |
| Cyclical stocks |
Stocks that are highly responsive to changes in the business cycle. |
| Deductible |
A cost-sharing device frequently contained in insurance policies. When a covered loss occurs, the deductible amount it the amount that the insured must pay before the insurer's responsibility for payment begins. The deductible is a means of retaining small predictable amounts of risk. Typically the larger the deductible, the lower the policy premium because the insurer will be called upon only to indemnify larger losses. |
| Diversification |
An investment strategy that involves investing in many different securities to reduce risk, the opposite of concentration. |
| Dollar cost averaging |
An investment strategy that involves purchasing the same dollar amount of a security at regular intervals. When the security's price is low, more shares will be purchased. When it is high, fewer shares will be purchased. |
| Emergency fund |
A reserve of cash and/or cash equivalents (i.e. assets that could be quickly converted to cash without loss of principal) available to handle emergencies. Financial planners typically recommend an amount equal to three to six months' fixed and variable expenses. |
| Endowment life insurance |
Policy that provides insurance protection for a specified period of time, beyond which a surviving insured is paid the face value of the policy. In other words, the face amount of the policy is paid to the beneficiary if the insured dies during the policy period, or it is paid to the insured if he or she outlives the policy period. |
| Equity |
Ownership, in particular as pertains to having the right to share in future profits or appreciation in value, i.e. of property or stock. |
| Estate |
All the property interests a person owns, including property over which the person exercises decisive control. |
| Estate planning |
The process of acquiring, conserving and distributing a person's property interests in the most effective and efficient manner. |
| Expense ratio |
A fund's annual expenses divided by its average net asssets. |
| Family maintenance fund |
Funding for the ongoing support of dependent family members. |
| Financial leverage |
Use of borrowed funds to enhance gain on an investment. It also increases potential variability of return (investment risk). |
| Fixed-income security |
An investment that promises a stated amount of income, either in the form of periodic payments (such as interest) or a stated ending payout (such as with deep discount bonds). Because payouts are fixed, these securities tend to be subject to increase rate risk and purchasing power risk. |
| Fixed rate mortgages |
Home mortgages on which the interest rate and monthly payment remain constant over the life of the loan. |
| Foreclosure |
A legal process that terminates your rights to a mortgaged property and forces its sale. |
| Future value |
The value of a single sum or stream of payments after compounding has taken place. |
| Group life insurance |
Life insurance that is available to an individual by virtue of affiliation with a particular employer, association, or other group. |
| Growth unit trust |
An unit trust that invests primarily in stock that is expected to grow in value. The primary objective is capital appreciation. A growth fund distributes a minimal dividend, because the underlying companies tend to reinvest earnings rather than distribute them to shareholders. |
| Indemnification |
The restoration of the financial state that existed before you incurred a loss. |
| Inflation |
A general increase in the level of prices within the economy. |
| Insurable interest |
Pertains to insurance. The person applying for insurance coverage must be subject to personal financial loss if the event for which insurance is being obtained occurs. For example, a person cannot normally apply for homeowner's coverage on a neighbour's house because if damage occurred to the neighbour's house the person holding the policy would not suffer a financial loss. |
| Interest rate risk |
The risk that the price of a fixed return asset will decline if interest rates rise. |
| Intestate |
When a person dies without a valid will in place, he or she is said to have died "Intestate". Property is distributed according to state law. |
| Iron law of risk and return |
The strong positive correlation between higher investment return and greater risk. |
| Joint tenancy |
A form of ownership in which each co-owner has an undivided interest in the property and the property passes to the co-owner at death. |
| Liquidity |
The ability to convert an investment to cash quickly, without loss of capital. |
| Management risk |
Poor earnings performance of a firm associated with poor management. |
| Market risk |
Risk associated with unpredictable movements of the overall market; it cannot be reduced by a portfolio. |
| National Association of Securities Dealers Automated Quotations System (NASDAQ) |
Name of the communications system used in the OTC market. |
| New York Stock Exchange (NYSE) |
Largest organised exchanged in the world where securities are traded. |
| Nonparticipating life policy |
A life insurance policy in which excess premium payments ("dividends") are not distributed to policyholders. |
| Option |
A securities contract that allows the holder to buy or sell a security at set price within a set period. |
| Over-the-counter (OTC) market |
Securities trading via electronic communications. |
| Passive income |
Income from a business in which the taxpayer does not materially participate (eg. rental income). |
| Policy loan provision |
Included in cash value life insurance policies. It enables the policyowner to borrow an amount equal to a stated percentage of the policy cash value. Interest charged is stated in the policy and usually is quite low. Death proceeds are reduced by the borrowed amount outstanding at the time of the insured's death. |
| Porfolio income (also known investment income |
Income earned on intangible investments (stocks, bonds, savings accounts). |
| Present value |
Pertains to the time value of money. It is the current value of a future sum or a stream of payments, given a discount rate, or the value of an investment before any compounding takes place. |
| Probate |
The legal process of administering an estate. |
| Probate estate |
Property handled and distributed by a personal representative or administrator upon a person's death, property generally disposed off by will or according to the state's intestacy laws. |
| Prospectus |
The official booklet that describes a security and offers the sale of its shares. Its purpose is to provide full and fair disclosure of relevant investment information. |
| Put option |
An option to sell a particular stock for a stated price within a stated time frame. The purchaser of a put has the right to sell the underlying stock, whereas the seller of the put has the obligation to buy the stock if the right is exercised. |
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Real estate investment trust (REIT) |
Similar to a closed-end investment company, but organised to invest in real estate. |
| Real rate of return |
Inflation-adjusted nominal return. |
| Rider |
Provisions added to an insurance policy to supplement or modify it to meet the special needs of the insured. |
| Risk |
The possibility of loss, the possibility that the actual result will vary from the expected result. |
| Risk management |
The identification, analysis, and management of personal risks. Management involves utilising strategics to reduce the probability of loss and the financial impact of loss. |
| Risk tolerance |
The level of risk that an individual is willing to assume in investing, based upon his or her emotional temperament, investment experience and financial constraints. |
| Savings account |
Highly safe and liquid vehicle available through banks, credit unions, and savings and loan associations. Savings accounts feature low rates of interest compared with other vehicles. Sole proprietorship. A closely held business in which there is a single owner. The business is not considered a separate entity from the person for tax, liability or other purposes. |
| Tenancy-in-common |
A form of ownership in which each co-owner has an undivided interest in the property, but the property can be individually transferred. |
| Term life insurance |
Life insurance that provides protection for a stated period, which pays benefits only if the insured dies within the stated time period. It is frequently referred to as pure protection, since it does not have a savings feature. |
| Trust |
A legal arrangement in which property is held by one party for the benefit of another. |
| Trustee |
Person or organisation who holds legal title to the property held in trust. The trustee holds and manages the property on behalf of the beneficiary. |
| Underwriting |
The process of determining whether is risk is acceptable and at what price. |
| Unit trust |
A company that pools the money of many investors, hires an investment adviser to manage the pool, and invests to achieve one or more financial objectives. |
| Whole life insurance |
Furnishes life insurance protection at a level premium amount for the insured's whole life. It includes a savings element on which a minimum rate of return is guaranteed. |
| Will |
A legal document that specifies how a person wishes to distribute property (and provides other instructions) in the event of death. |
| Yield |
A measure of yield that considers both current income generated and any change in a bond's value from purchase to sale or redemption. It assumes reinvestment of income streams received at the same rate of return. |
| Yield to maturity |
A measure of yield that considers both current income generated and any change in a bond's value from purchase to sale or redemption. It assumes reinvestment of income streams received at the same rate of return. |
| Zero-coupon bond |
An original issue discount bond that is sold without any stated coupon. Thus, no interest is paid. |
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