- Investment Company
- A company whose primary business is investing and reinvesting in securities on behalf of its shareholders, pooling their money to buy a diversified portfolio. The three main types are open-end funds (mutual funds), closed-end funds, and unit investment trusts.
- Open-End Fund (Mutual Fund)
- An investment company that continuously issues new redeemable shares and stands ready to buy them back at net asset value. Its share count is not fixed and grows or shrinks as investors buy or redeem shares.
- Net Asset Value (NAV)
- The per-share value of a fund, calculated as total assets minus total liabilities divided by the number of shares outstanding. Mutual fund NAV is computed at least once per business day after the market closes.
- Variable Annuity
- An insurance contract whose value fluctuates with the performance of underlying investment subaccounts rather than paying a fixed return. Because it carries investment risk, it is regulated as both an insurance product and a security.
- Separate Account
- An account an insurance company uses to hold variable annuity and variable life assets separately from its general account, keeping investment risk with the contract owner. The subaccounts within it function much like mutual funds.
- Prospectus
- The formal disclosure document that must be delivered to investors before or at the time they purchase fund or variable-product shares, detailing objectives, risks, fees, and management. It is required under the Securities Act of 1933.
- Sales Charge (Load)
- A fee an investor pays to buy or sell mutual fund shares, compensating the distributor and selling representatives. A front-end load is paid at purchase, while a back-end load (contingent deferred sales charge) is paid at redemption.
- Breakpoint
- A discounted sales charge available to investors whose purchase reaches a specified dollar threshold, rewarding larger investments with a lower load percentage. Encouraging a client to invest just below a breakpoint is a prohibited practice called a breakpoint sale.
- 12b-1 Fee
- An annual fee deducted from a mutual fund's assets to pay for distribution and marketing costs and sometimes shareholder services. It is named after the SEC rule that permits it and is disclosed in the fund's expense ratio.
- Contractual Plan / Dollar-Cost Averaging
- Dollar-cost averaging is investing a fixed dollar amount at regular intervals so that more shares are bought when prices are low and fewer when high. Over time this can lower the average cost per share compared to buying a fixed number of shares.
- Investment Company Act of 1940
- The federal law that defines and regulates investment companies, classifying them and setting rules for their organization, operations, and disclosures. It is the primary statute governing mutual funds and variable products.
- Series 6 Exam
- The FINRA qualification exam for the Investment Company and Variable Contracts Products Representative registration, consisting of 50 scored questions to be completed in 90 minutes. Candidates must score at least 70 percent to pass, and the exam fee is $100.