Asset Allocation: The process of dividing investments among several classes of assets to limit risk and increase opportunity.

Balance Fund: A mutual fund that invests in a combination of securities (usually stocks and bonds).

Bond: The debt instrument (or "IOU) of a corporation or government entity that promises to pay a specified rate of interest for a specific time period, with principal to be repaid when the bond matures.

CD (Certificate of Deposit): Record of money deposited in a financial institution for a set period of time at a specified interest rate.

Common Stock: Securities that represent ownership interest and give the investor voting rights in the issuing corporation.

Compound Interest: Interest earned not only on an original investment, but on its accrued earnings as well.

Diversification: Investing in different types of investment to spread risk.

Dividend: Payments made by a corporation to its shareholders from past and current earnings.  The amount an investor receives is based on the number of shares owned.

Fixed-income Securities: Investments with specified payment dates and amounts, primarily bonds that pay interest.

Growth Stock: The stock of a firm whose earnings are generally growing faster than the economy or market norm.

Income Stock: A stock with a history of paying steady dividends.

Index Fund:  A mutual fund with an investment mix that mimics a specific stock or bond market index, such as the S&P 500 Stock Index or the Lehman Brothers' Government/Corporate Bond Index.

Inflation: The rate of change in the prices of consumer goods.  Usually, inflation is measured by the Consumer Price Index for All Urban Consumers, which is computed monthly by the US Department of Labor.

Inflation risk: The risk that an investment will not generate a higher rate of return than the rate of inflation, and that the investment will lose real purchasing power.

Money Market:  The investment market in which large amounts of short-term funds are loaned and borrowed.

Mutual Fund: An investment company that enables its shareholders to pool theirfunds to be professionally managed as a single investment account.

Principal: The capital sum invested, as distinguished from interest or profit.

Prospectus: Printed material offering a security for sale that fully discloses legally required information about the security.

Return: The profit or loss earned through investing.

S&P Stock Index: A composite index of 500 large company stocks compiled by Standard & Poor's Corporation.  The S&P 500 is used as a broad measure of stock market performance.

Total Return: The unrealized increase or decrease in an investment's value during a specific time period, plus any income gains generated by the investment during that period.

Treasury Bills:  Short-term US government debt securities with maturities of less than one year.  T-bills are sold at weekly auctions at a discount and are redeemed at face value.

Yield:Yield is usually stated as a percentage of the security's price.  Some investment advisors also include capital appreciation as part of the yield.