Glossary F to J Wenco Financial Planning Certified Senior Advisor

face amount
The amount that will be paid upon death, or policy maturity. The face amount of a permanent insurance policy may change with time as the cash value in the policy increases.

fair market value
The price that a buyer and seller can establish in an arms-length transaction where neither one is compelled to buy or to sell.

family trust
An inter vivos trust established with family members as beneficiaries.

federal housing administration (FHA)
The government agency that sets standards for underwriting residential mortgage loans made by private lenders and insures such transactions.

federal national mortgage association
(FNMA or Fannie Mae)
A private corporation that acts as a secondary market investor in buying and selling mortgage loans.

fiduciary
An individual or institution occupying a position of trust. An executor, administrator or trustee.

financial planner
A person who helps you plan and carry out your financial future.

fixed income
Income from investments such as CDs, Social Security benefits, pension benefits, some annuities, or most bonds that is the same every month.

fixed investment
Any investment paying a fixed interest rate such as a money market account, a certificate of deposit, a bond, a note, or a preferred stock. A fixed investment is the opposite of a variable investment.

fixed rate mortgage
A mortgage where the interest rate will remain the same for the entire term of the loan. Although the rate will begin slightly higher than a comparable adjustable rate mortgage (ARM), the interest rate you pay can never go up for as long as you have the mortgage.

fluctuation
A variation in the market price of a security.

foreclosure
A foreclosure is the legal process by which a borrower losses their ownership interest in a collateralized property due to default on the attached loan.

fund manager
A person who manages the assets of a mutual fund.

fundamental analysis
A technique of estimating a stock's future value based on the in-depth study of the stock's underlying financial statements. Fundamental analysis is the opposite of technical analysis.

future value
The future worth of a payment, or stream of payments, projected at a given interest rate for a given period of time.

futures market
A market in which contracts for future delivery of a commodity are bought and sold.

generally accepted accounting principals (GAAP)
Conventions, rules and procedures that define accepted accounting practices in the U.S.

gift taxes
A federal tax levied on the transfer of property as a gift. This tax is paid by the donor. The first $11,000 a year from a donor to each recipient is exempt from tax. Most states also impose a gift tax. The gift tax exemption is indexed annually for inflation.

grace period
A period (usually 31 days) following each premium due date, other than the first due date, during which an overdue premium may be paid, and during which time all policy provisions remain in force and effect.

group insurance
A form of insurance designed to insure classes of persons rather than specific individuals.

growth stock
The common equity of a company that consistently grows significantly faster than the economy.

guaranteed investment certificate (GIC)
A type of debt security sold to individuals by banks and trust companies. They usually cannot be cashed before the specified redemption date, and pay interest at a fixed rate.

guarantor
A third party who agrees to repay any outstanding balance on a loan if you fail to do so. A guarantor is responsible for the debt only if the principal debtor defaults on the loan.

guardian
A person or persons named to care for minor children until they reach the age of majority. A will is the best way to ensure that the person or persons whom you wish to have care for your minor children are legally empowered to do so in the event of your death.

hazard insurance
Protects the insured from losses arising due to physical property damage associated with catastrophic hazards such as flood, fire, earthquake, tornado, etc. It will often be required by a lender to protect their collateral from such risks.

holographic will
A will entirely in the handwriting of the testator. Without witnesses, holographic wills are valid and enforceable only in some states.

home equity line of credit (HELOC)
Allows a homeowner to borrow against the equity in their home with specific limits and terms. This is an open end loan which allows the borrower to borrow and repay funds as needed.

home equity loan
A collateralized mortgage, usually in a subordinate position, entered into by the property owner under specific terms of repayment.

illiquid
The description of a security for which it is difficult to find a buyer or seller. An illiquid investment is an investment that may be difficult to sell quickly at a price close to its market value. Examples include stock in private unlisted companies, commercial real estate and limited partnerships.

illustration
An illustration, or ledger, is a reference tool used to illustrate how a given life insurance policy underwritten by a specific insurer is expected to perform over a period of years. The insurance illustration assumes that conditions remain unchanged over the period of time that the policy is held.

income averaging
Allows individuals who were age 50 before January 1, 1986 to pay tax on a lump sum distribution as though it had been received over a five or ten year period, rather than all at once. By using income averaging individuals may be able to pay income tax at a more favorable rate.

income statement
A financial statement that shows the components of profit, such as sales, expenses, taxes and net profit.

income stocks
Stocks that have a consistent, stable, above-average dividend yield.

index
A calculation that uses a selection of stocks or bonds to gauge a certain market. The Dow Jones Industrial Average, for example, is an index of 30 large industrial companies on the New York Stock Exchange.

individual retirement account (IRA)
A personal savings plan that offers tax advantages to those who set aside money for retirement. Depending on the individual's circumstances, contributions to the IRA may be deductible in whole or in part. Generally, amounts in an IRA, including earnings and gains, are not taxed until distributed to the individual.

inflation
A term used to describe the economic environment of rising prices and declining purchasing power. The government's main measure of inflation is the Consumer Price Index.

in-force policy
An valid life insurance policy is simply an in-force policy. Generally speaking, a life insurance policy will remain in-force as long as sufficient premiums are paid, and for approximately 31 days thereafter.

insurability
The assessment of the applicant's health and is used to gauge the level of risk the insurer would potentially take by underwriting a policy, and therefore the premium it must charge.

insured
A life insurance policy covers the life of one or more insured individuals.

interest rate
The simple interest rate attached to the terms of a mortgage or other loan. This rate is applied to the outstanding principal owed in determining the portion of a payment attributable to interest and to principal in any given payment.

interest rate risk
Is the uncertainty in the direction of interest rates. Changes in interest rates could lead to capital loss, or a yield less than that available to other investors, Putting at risk the earnings capacity of capital.

intestate
A term describing the legal status of a person who dies without a will. State law then determines who inherits the property or serves as guardian for any minor children.

investment banker
A firm that engages in the origination, underwriting, and distribution of new issues.

investment category
A broad class of assets with similar characteristics. The five investment categories include cash equivalents, fixed principal, equity, debt, and tangibles.

investment company
A corporation or trust whose primary purpose is to invest the funds of its shareholders.

investment considerations
Choosing which investments are right for you will depend on a number of factors, including; your primary objectives, your time horizon and your risk tolerance.

investment portfolio
A term used to describe your total investment holdings.

investment risk
The chance that the actual returns realized on an investment will differ from the expected return.

investment strategy
The method used to select which assets to include in a portfolio and to decide when to buy and when to sell those assets.

ira rollover
An individual may withdraw, tax-free, all or part of the assets from one IRA, and reinvest them within 60 days in another IRA. A rollover of this type can occur only once in any one-year period. The one-year rule applies separately to each IRA the individual owns. An individual must roll over into another IRA the same property he/she received from the old IRA.

irrevocable trust
A trust that may not be modified or terminated by the trustor after its creation.

joint and survivor annuity
Most pension plans must offer this form of pension plan payout that pays over the life of the retiree and his or her spouse after the retiree dies. The retiree and his or her spouse must specifically choose not to accept this payment form.

joint tenancy
Co-ownership of property by two or more people in which the survivor(s) automatically assumes ownership of a decedent's interest.

jointly held property
Property owned by two or more persons under joint tenancy, tenancy in common, or, in some states, community property.

jumbo loan
A loan that is larger than the limits set for conventional loans by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corportation (FHLMC). This limit is currently set at $300,700.

junk bonds
A bond that pays an unusually higher rate of return to compensate for a low credit rating.

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