Income Bond – A debt security that promises to pay interest only when earned by the issuer; failure to pay interest does not result in default. This type of bond is usually issued by a corporation trying to reorganize its capitalization in order to avoid bankruptcy.
Index Fund – A mutual fund that invests in a group of securities chosen to match the composition and weighting of a particular stock market index such as the Standard and Poor’s 500 Index (S&P 500). These funds track the performance of an index.
Individual Investor – A person who buys or sells securities for his/her own account and is also called a retail investor.
Individual Retirement
Account (IRA) – A personal retirement plan that allows individuals with earned income to deposit an annual amount of money for the purpose of using the funds during retirement. The earnings on the account accrue on a tax-deferred basis.
Inflation – A rise in the prices of goods and services that results when customer demand increases relative to the supply of goods or services available. It is most likely to happen when the economy is in a period of rapid expansion.
Inflation Risk – The risk that inflation will erode the value of the money earned from investments. This is also known as purchasing power risk. Long-term bonds have the greatest inflation risk.
Initial Public Offering (IPO) – The first time a company issues or sells stocks to the public. IPOs must comply with the provisions of the Securities Act of 1933.
Inside Information – Non-public information of material nature that can affect the market value of the issuer’s securities when the news is announced.
Institutional Network (INSTINET) – The electronic system that permits direct trades between institutions.
Institutional Investor – Investment companies, mutual funds, brokerages, insurance companies, pension funds, investment banks, and endowment funds that trade securities in large volumes as they have large amounts to invest. Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves.
Insurance Policy – A contract where a premium is paid to an insurance company in return for a specific death or annuity amount to the purchaser of the policy.
Interest Rate Risk – The risk that results from rising interest rates and is the possibility of a reduction in the value of a security, especially a bond, due to the rise of interest rates. It is also know as market risk.
Internal Rate of Return – In a Direct Participation Program (DPP) offering , the discount rate often used that makes the net present value of all cash flows from a particular project equal to zero.
Investment Advisor (IA) – The financial professional who manages investment portfolios for investment companies and individual investors charging a management fee for the services rendered. Investment Advisors must be registered with the Securities and Exchange Commission (SEC) or with the state(s) in which they operate. Also called a portfolio manager.
Investment Advisor Representative (IAR) – An individual who provides investment advice to clients and who is properly licensed to do so.
Investment Company – The generic name for one of the companies formed under the Investment Company Act of 1940 whose primary business is investing and reinvesting in securities. These companies include mutual funds, closed-end funds, variable annuities, unit investment trusts, etc.
Investment Grade Bond – Any bond rated in the top four (4) grades by Standard and Poor’s or rated Aaa to Bbb in the Moody’s. The ratings indicate high quality bonds and low risk of default.
Investment Policy Statement – A summary of the chosen investments and asset allocation percentages that have been decided upon taking risk tolerance and investment time horizon in order to help meet the investor’s financial goals and objectives.
Investor – A person who trades securities for his/her own account or for the account of others.
Irrevocable Trust – A trust which cannot be changed or cancelled once it is set up without the consent of the beneficiary(ies) which allows a person to give money and assets even before death. The assets are typically excluded from the person’s estate and taxed at the rates scheduled for trusts.
Issuer – A corporation, trust, partnership, governmental unit, or other legal entity that issues securities.
The team at Schechter Benefits Advisors has a real grasp on any issues affecting our business. They know the insurance industry inside and out. They have been a wonderful partner, personally and professionally, throughout the growth of our organization.