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Asset allocation. The process of dividing investor funds among several classes of assets to limit risk and increase opportunities.
Bond. The debt instrument (or "IOU") of a corporation or government entity that promises to pay you a specified rate of interest for a specified time period, with principal to be repaid when the bond matures.
Charitable trust. A trust having a charitable organization as a beneficiary.
Common Stock. Securities that represent an ownership interest and give you voting rights in the issuing corporation.
Diversification. Investing in different companies in various industries or in several different types of investment vehicles to spread risk.
Durable power of attorney for health care. A legal document giving another person power to make health care decisions on your behalf.
Estate tax. The tax paid by the administrator or executor of a person's estate out of the estate's assets.
Financial planning. The development and implementation of total coordinated plans for the achievement of one's overall financial objectives.
Gift tax. Tax on gifts generally paid by the person making the gift rather than the recipient.
Gift-tax annual exclusion.The provision in the tax law that exempts the first $10,000 in present-interest gifts a person gives to each recipient during a year from federal gift taxes. 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 U.S. Department of Labor.
Investment return. The profit (or loss) you earn through investing.
Life insurance trust. A trust that has the proceeds of a person's life insurance policy as its principal.
Living will. A document expressing your wishes as to the kind and extent of medical care you want under described circumstances.
Money Market Fund. A mutual fund that invests in money-market instruments.
Mutual Fund. An investment company that enables its shareholders to pool their funds for professional management as a single investment account.
Net worth. The residual value of assets after liabilities have been subtracted.
Power of attorney. A legal document giving another person authority to make financial decisions on your behalf.
Principal. The capital sum you invest for retirement or other purposes, as distinguished from interest or profit.
Risk. The chance that the value of an investment could decline in the marketplace.
Trust. A legal relationship where property is transferred to and managed by another person or institution for the benefit of another person.
Will. A legally executed document which explains how and to whom a person would like his or her property distributed after death.
COPYRIGHT 1998, 1999 BY NPI.
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