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Glossary of Terms - S through Z

This glossary of investment and retirement related terms provides simple definitions of terms that you may need to know.

S s

Safe harbor 401k

A safe harbor 401k is similar to a traditional 401k plan, but the employer is required to make contributions for each employee. The safe harbor 401k eases administrative burdens on employers by eliminating some of the complex tax rules ordinarily applied to traditional 401k plans.

Salary Reduction Plan (Cash or Deferred Arrangement)

A CODA is a defined contribution plan that allows participants to have a portion of their compensation (otherwise payable in cash) contributed pre-tax to a retirement account on their behalf. They include 401k, 403b and 457 plans.

Savings or thrift plan

A defined contribution plan in which participants make contributions on a discretionary basis with limits and to which employers may also contribute, usually on the basis of fully or partially matching participants' contributions. Contributions are commonly made with after-tax earnings.

Secondary market

A market in which an investor purchases an asset from another investor rather than the issuing corporation. An example is the New York Stock Exchange.

Security analyst

One who studies various industries and companies and provides research reports and valuation reports.

Security Depository

A physical location or organization where securities certificates are deposited and transferred by bookkeeping entry.

Service provider

A company that provides some type of service to a 401k plan, including managing assets, recordkeeping, providing plan education, and plan administration.

Security lending

A practice where owners of securities, either directly or indirectly, lend their securities to (primarily) brokerage firms for a fee. The borrower pledges either cash, securities or a letter of credit to protect the lender. Securities are borrowed by cover fails of deliveries or short sales, provide proper denominations, and enable brokerage firms to engage in arbitrage trading activities.

Short sale

A market transaction in which an investor sells borrowed securities in anticipation of a price decline. If the seller can buy back that stock later at a lower price, a profit results. If the price rises, however, a loss results.

Sidecar IRA

See "Deemed IRA"

Sinking fund provision

A means of repaying funds advanced through a bond issue. The issuer makes periodic payments to the trustee, who retires part of the issue by purchasing the bonds in the open market.

Socially Responsible Investing

An investments strategy that only purchases securities of individual companies that espouse some form of social responsibility, e.g., "green" funds that target investments reflecting environmental awareness.

Soft dollars

The purchase of research materials from brokerage firms and paid for by commissions (or part of the commissions) generated by securities transactions of trust accounts. Covered by Section 28(e)(1) of the Securities Exchange Act of 1934. Opposed to this is the purchase of materials by "hard dollars", which is when payment is made by the trust department itself, typically by issuing a check.


Summary Plan Description for ERISA employee benefit plans. ERISA requires a Summary Plan Description (SPD) be distributed to each plan participant and to each beneficiary receiving benefits under the plan as follows: For existing plans, a new participant must receive a copy of the SPD within 90 days after becoming a participant, and a beneficiary must receive a copy within 90 days after first receiving benefits.

Standard & Poor's 500 index

An index of 500 major U.S. corporations. It is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The index tracks industrial, transportation, financial, and utility stocks. The composition of the 500 stocks is flexible and the number of issues in each sector vary

Stock dividend

A dividend paid in additional shares of stock rather than in cash.

Stock split

The division of a company's existing stock into more shares. In a 2-for-1 split, each stockholder would receive an additional share for each share formerly held and the price would be split in half.


An agent who for a commission handles the public's orders to buy and sell securities.

Stockholders' equity (book value)

An indication of how well the firm used reinvested earnings to generate additional earnings.

Stop-limit order

An order placed with a broker to buy or sell at a specified price or better after a given stop price has been reached or passed.

Stop-loss order

An order placed with a broker to buy or sell when a certain price is reached; designed to limit an investor's loss on a security position.

Summary Plan Description

See "SPD"

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Target benefit

A target benefit plan is a defined contribution plan that acts much more like a defined benefit plan. Contributions are set for each year, but are variable based on the age of the employee. This allows older employees to receive similarly sized pensions as younger employees despite having less time for investments to grow.

Target-date fund

A mutual fund type that automatically reduces the risk within its portfolio by resetting the asset mix between stocks, bonds and cash to be more conservative based on the number of years to a target date.

Tax free rollover

Provision whereby an individual receiving a lump sum distribution from a qualified pension or profit sharing plan can preserve the tax deferred status of these funds by a "rollover" into an IRA or another qualified plan if rolled over within sixty days of receipt.

Technical analysis

An analysis of price and volume data as well as other related market indicators to determine past trends that are believed to be predictable into the future. Charts and graphs are often utilized.

Third-party administrator

A party hired by a plan or its fiduciaries to aid in performing management and/or recordkeeping functions on behalf of the plan.

Total debt to total assets

Short-term and long-term debt divided by total assets of the firm. A measure of a company's financial risk that indicates how much of the assets of the firm have been financed by debt.

Trading range

The spread of prices that a stock normally sells within.

Transaction costs

Costs incurred buying or selling securities. These include brokers' commissions and dealers' spreads (the difference between the price the dealer paid for a security and for which he can sell it).

Treasury bill

Short-term debt security issued by the federal government for periods of one year or less.

Treasury bond

Longer-term debt security issued by the federal government for a period of seven years or longer.

Treasury note

Longer-term debt security issued by the federal government for a period of one to seven years.

12(b)1 Fees

A plan that permits a fund to pay some or all of the costs of distributing its shares to the public. Some of these plans provide for payment of specific expenses, such as advertising, sales literature and dealer incentives. Others are simply intended to protect the fund against possible claims that certain operating expenses, such as administrative or advisory costs, constitute indirect forms of distribution expenses. Both load and no-load funds may adopt 12(b)1 plans. They are not hidden charges, but are clearly explained in the fund's prospectus and in its semi-annual and annual reports. Many funds have 12(b)1 plans that have not been activated. The majority of such plans have maximum annual charges of 0.25% (one quarter of 1%). 12(b)1 charges are included in the total expense ratio figures which are provided in a fund's literature. Some fund's expense ratios, including management fee and 12(b)1 charges, may be lower than the ratios of funds that do not have 12(b)1 plans.


A fiduciary relationship in which one person (the trustee) is the holder of the legal title to property (the trust property) subject to an equitable obligation (an obligation enforceable in a court of equity) to keep or use the property for the benefit of another person (the beneficiary).

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Unfunded vested pension liability

In a defined benefit pension plan, the difference between the actuarially-determined value of the vested (non-forfeitable) benefits under the plan, and the market value of the plan's assets.

Unfunded prior service pension liability

In a defined benefit pension plan, the difference between the actuarially-determined value of the projected future benefit costs (both vested and manifested) and administrative expenses, as well as the unamortized portion of prior benefit costs, under the plan, and the market value of the plan's assets.

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The process of determining the current worth of an asset.

Value Line index

The index represents 1,700 companies from the New York and American Stock Exchanges and the over-the-counter market. It is an equal-weighted index, which means each of the 1,700 stocks, regardless of market price or total market value, are weighted equally.


The possible different outcomes of an event. As an example, an investment with many different levels of return would have great variability.


The period of time an employee must work at a firm before gaining access to employer-contributed pension income. For 401k plans, employee contributions are immediately vested, but employer contributions may be vested over a period of several years.

Volume submitter plan

A type of individually-designed retirement plan that has been pre-approved by the IRS.

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Wilshire 5000 equity index

A stock market measure comprising 5,000+ equity securities. It is the broadest US stock market index and includes all New York Stock Exchange and American Stock Exchange issues and the Nasdaq Stock Market. It is a capitalization-weighted index.

Wrap Account

A special type of brokerage arrangement where the investors place their funds and pays an annual fee for investment management services. All costs are "wrapped" into this one fee including all administrative fees, commission costs, management fees, etc.

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Yield curve

A curve that shows interest rates at a specific point for all bonds having equal risk but different maturity dates. Usually, government bonds are used to construct such curves.

Yield to maturity

The rate of return anticipated on a bond if it is held until the maturity date.


The amount of interest paid on a bond divided by the price. A measure of the income generated by a bond. A yield is not a total return measure because it does not include capital gains or losses.

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Zero coupon

A bond bought at a discount to its face value that does not pay interest, but pays face value on maturity. The longer the time between when you purchase the bond and it matures, the deeper the discount. Your earnings on this type of bond is the difference between your purchase price (the discount) and the face value at maturity.

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