A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called.

Call Option

The right to purchase stock at a specified (exercise) price within a specified time period.

Capital

The amount that was originally invested. Also known as the principal investment.

Capital Appreciation

The growth of your principal. If you invest $100 in a stock mutual fund and its value increases to $120, that $20 increase is called capital appreciation.

Capital Gain

When you sell an investment for more than you paid, your profit is called a capital gain.

Cash Balance Pension Plan

A defined benefit plan that provides for specific annual employer contributions that accumulate at a guaranteed investment return.

Cash Balance Plan

A defined benefit plan in which each participant has an account that is credited with a dollar amount that resembles an employer contribution, generally determined as a percentage of pay. Each participant's account is credited with earned interest. The plan provides the benefits in the form of a lump-sum distribution or annuity.

Cash Investment

A very short-term loan to a borrower with a very high credit rating. Examples of cash investments are bank certificates of deposit (CDs), Treasury Bills (T-Bills), and money market funds. A cash investment typically offers investors great principal stability, but little long-term growth.

Cash or Deferred Arrangement (CODA)

An arrangement whereby a participating employee can choose between taking compensation in the form of cash or deferring a portion of it until the future.

Catch-up Provision

A provision found in both 403(b) and 457 plans that allows an eligible employee to make higher annual contributions in the years prior to retirement.

C Corporation

Synonymous with corporation. When a business incorporates, it does so as a C corporation unless a special tax election is made to become an S corporation.

CDSC

Contingent Deferred Sales Charge. The fee assessed by an investment company upon redemption of mutual fund shares.

Certificate and Designation Examination Programs

The administration and consulting programs of ASPA (American Society of Pension Actuaries) @ www.aspa.org consist of several courses and corresponding examinations leading to certificates of completion and professional designations. There are no specific education or background requirements for anyone wishing to pursue these programs.

Certificate of Deposit

A bank deposit that pays a specified rate of interest for a certain period of time.

Certified Employee Benefits Plan Specialist (CEBS)

Co-sponsored by the Wharton School of the University of Pennsylvania @ www.wharton.upenn.edu and the International Foundation of Employee Benefit Plan @ www.ifebp.org.

Certified Financial Consultant (CFC)

Offered through the Institute of Financial Consultants @ www.ifcusa.com. Graduates who maintain registered membership, are authorized to use the C.F.C. designation.

Certified Financial Management Analyst (CFMA)

American Academy of Financial Management Analyst offers this program for Bankers, Trust Officers, Money Managers, CFOs and CEOs. Candidates must meet experience and education requirements.

Certified Financial Manager (CFM)

This financial planning designation is offered by the Institute of Management Accountants www.imanet.org. Candidates must meet requirements that include IMA membership, testing, experience and ethics.

Certified Financial Planner® (CFP)

Offered through the College of Financial Planning @ www.fp.edu. In order to be licensed to use the CFP trademark, an individual must meet the following qualifications, as specified by the Certified Financial Planner Board of Standards, Inc.

Certified Funds Specialist (CFS)

This credential is awarded by the Institute of Business and Finance 800-848-2029. After enrolling in the program, participants complete a 60-hour self-study course and take a two-hour final exam. There are currently 5,000 people with this designation. The CFS criteria include completing educational, examination and experience requirements in the area of mutual funds. Continuing education is required.

Certified Investment Management Analyst (CIMA)

Offered by the Investment Management Consultants Association to investment consultants who complete educational, examination, and experience requirements. Continuing education is required. The Investment Management Consultants Association offers classes at the Wharton School of Business. This designation is targeted for fee-based advisors, financial managers, investment counsel, and trust officers. 303-770-3377

Certified Investment Management Consultant (CIMC)

The Institute for Investment Management Consultants awards this credential to financial advisors who pass two levels of NASD-administered exams. The exam is based on the IIMC's self-study course and covers Investment Theory and the Management/Elements of Investment Consulting.

Certified Pension Consultant (CPC)

Offered through ASPA @ www.aspa.org.

Chartered and Certified Financial Management Analyst (CFMA)

American Academy of Financial Management & Analysts International Institute grants this designation to qualified financial managers who meet education, ethics, testing, reference, and knowledge requirements.

Chartered Financial Analyst (CFA)

Offered through the Association for Investment Management and Research www.ifcusa.com to securities analysts, money managers, and investment advisors who complete a course and pass a three-level exam. Continuing education is encouraged, but not required.

Chartered Financial Consultant (ChFC)

Offered through the American College @ www.amercoll.edu. The ChFC program focuses on the comprehensive financial planning process as an organized way to collect and analyze information on a client's total financial situation; to identify and establish specific financial goals; and to formulate, implement and monitor a comprehensive plan to achieve those goals.

Chartered Life Underwriter (CLU)

Offered through the American College @ www.amercoll.edu. The CLU designation is the undisputed professional credential for persons involved in the protection, accumulation, preservation and distribution of the economic values of human life. Since the first examinations were held in 1928, more than 85,000 men and women have met the educational, experience and ethics mandates needed to earn the CLU designation.

Chartered Mutual Fund Counselor (CMFC)

CMFC is one of the many certifications from the College for Financial Planning 303-220-4800. Successful candidates must complete a nine-module program and pass an examination. A code of ethics must be followed. Taking this course will normally qualify for Continuing education requirements as well as continuing education.

Chartered Retirement Planning Counselor (CRPC)

Offered through the College of Financial Planning @ www.fp.edu. The Chartered Retirement Plans Specialist and the Chartered Retirement Planning Counselor designations recognize financial planning professionals who have demonstrated advanced knowledge of retirement planning for individuals or businesses.

Chartered Retirement Plans Specialist (CRPS)

Offered through the College for Financial Planning @ www.fp.edu. The Chartered Retirement Plans Specialist (CRPS) Program is specifically targeted for professionals who work with designing, installing and maintaining retirement plans for the business community.

Churning

The unethical and excessive trading of a client account in order to generate commissions for a broker, but which may not be in the best interests of the client. Not only does the client pay high commissions, they also get stuck with high tax bills due to the short-term holding of assets.

Collective Trust Fund

Works and acts much like a mutual fund. Collective trust (also known as a common trust fund) offer investors many of the same benefits as mutual funds, such as portfolio diversification, professional management and investment flexibility. But since collective funds do not impose the same administrative fees and do not have some of the regulatory requirements that mutual funds do, they generally have lower operating expenses.

Combined Control Group

Three or more corporations, each is a member of a parent-subsidiary group or a brother-sister group, and one of the corporations is both a parent-subsidiary group and a member of a brother-sister group.

Commercial Paper

Very short-term IOUs of highly rated corporate borrowers. The maturity of these loans range from overnight to 90 days. Money market funds are a big buyer of commercial paper.

Commission

Broker's fee for buying or selling securities.

Commodities

Raw materials like wheat, gold, silver, oil, pork bellies, oranges, and cocoa. Commodities are an extremely volatile investment -- their value can soar or plummet overnight.

Common Stock

An investment representing ownership interest in a corporation.

Common Trust A trust, often sponsored by a bank trust department or trust company, that receives plan contributions, invests them, and pays out benefits when due.

Compliance Testing

Testing required by the IRS to make sure that the 401(k) plan is fair to both highly compensated and ordinary employees.

Compounding

The ability of an asset to generate earnings that are then reinvested and generate their own earnings (earnings on earnings).

Compound Interest

Interest paid on both the principal invested and the interest previously earned.

Conduit IRA

An unofficial term for an IRA used to "park" a distribution from one qualified plan until it can be rolled over into another qualified plan. With a conduit IRA, the forward-averaging potential of the distribution can be preserved.

Contract Expense

The ongoing annual fee associated with insurance contracts. Expressed as a percentage, this charge is deducted automatically from assets, which directly affects investment returns.

Controlled Group

Controlled groups include parent-subsidiary controlled groups; brother-sister controlled groups and combined groups.

Conversion Premium

The amount, expressed as a dollar value or as a percentage, by which the price of the convertible security exceeds the current market value of the common stock into which it may be converted.

Conversion Rate

The fee charged for the accounting and record-keeping necessary when a Plan Sponsor changes providers.

Corporation

An entity of indeterminate life owned by one or more parties. Ownership is evidenced by shares of stock, each representing a fractional interest in the entity.

Correction

A relatively short-lived drop in market prices. (It's called a correction because professionals consider it a return to appropriate values.

Cross-Tested Profit Sharing Plan

A type of qualified retirement plan that allocates proportionately larger employer contributions to highly compensated participants that to other plan participants.

Current Ratio

Current assets, including cash, accounts receivable and inventory, divided by current liabilities, including all short-term debt. A rough measure of financial risk: the smaller the current assets relative to current liabilities, the greater the risk of credit failure.

Current Yield

Annual income (interest or dividends) divided by current price of the security. For stocks, this is the same as the dividend yield.

Custodian

The bank or trust company that maintains a retirement plan's assets, including its portfolio of securities or record of them.
Provides safekeeping of securities, but has role in portfolio management.

Cyclical Industry

An industry, such as automobiles, whose performance is closely tied to the condition of general economy. The company (and their stock) does well during good economic times, and not as well during poor economic times.