Baby Bond
Bond with a face value of less than $1,000.

Back End Load
One of three possible sales charge schedules imposed by funds that charge fees. A back end load, or "deferred sales charge," is a fee charged when fund's shares are sold. The amount of the fee usually varies depending on how long the investment is held--generally the longer the time period, the smaller the fee. Funds sold under several sales charge options usually refer to the shares sold with a back end load as class B shares.

Backdating
Backdating is used in relation to funds that offer declining proportional sales charges of larger purchases. This permits investors to count previous purchases of the fund's shares in qualifying for reduced loads or sales charges on subsequent purchases.

Balance Sheet
An accounting statement reflecting the firm's financial condition in terms of assets, liabilities, and net worth (ownership). In a balance sheet, Assets = Liabilities + Net Worth

Balanced Fund
A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. This broader diversification across asset classes tends to further reduce risk.

Balanced Mutual Fund
A mutual fund that has a primary investment objective of purchasing a combination of stocks and bonds. Such funds tend to be less volatile than stock-only funds.

Balanced Target Maturity Funds
A fund that invests to provide a guaranteed return of investment at maturity (targeted periods). In order to achieve its investment objective, a balanced target maturity fund invests a portion of its assets in zero coupon U.S. Treasury securities while the remainder is invested in stocks that the manager believes will provide long-term growth of capital and income.

Bank Account
Normally a cheque account with a clearing bank that allows the account holder to write cheques against cash held in his or her account. Proof of identity is required for individuals (see: money laundering regulations) and a certificate of incorporation for a company. Cash can only be withdrawn equivalent to the cash on the account unless an overdraft has been agreed in writing.

Barbell
A bond management strategy where the portfolio is invested primarily in short-term and long-term bonds, but in few bonds with intermediate maturities. In theory, this approach allows one portion of the portfolio to take advantage of high yields, while the other portion tempers risk.

Base Period
The time used as the reference point in calculating comparative index values. Normally, the base period is allocated the number 100 (as in: 1992 = 100), and all other periods' values are measured with reference to the values at that time.

Basis Point (bp)
The smallest measure used in quoting yields on fixed income securities. One basis point equals one percent of one percent, or 0.01%.

Basis Price
A method of pricing municipal bonds, T bills, and certain other instruments. It is an expression of yield to maturity.

Bear Market
A market in which prices are generally declining.

Bearer Stocks/Shares
Securities for which no register of ownership is kept by the company. A bearer certificate has an intrinsic value. Dividends are not received automatically from the company but must be claimed by removing and returning "coupons" attached to the certificate.

Benchmark Index
Indicators used to provide a point of reference for evaluating a fund's performance. The most common benchmark for equity-oriented funds is the S&P 500 Index. For fixed-income funds it is the Lehman Brothers Aggregate Bond Index.

Beneficial Owner
The owner of a security who is entitled to all the benefits associated with ownership. Customers' securities are often registered not in the name of the customer but rather in the name of the brokerage firm or central depository. Even so, the customer remains the real or beneficial owner.

Beneficiary
The person designated to receive the proceeds from a life insurance policy or the person designated to receive annuity benefits in case of the owner's or annuitant's death; also, the person who is to receive the benefits of a trust or estate. A beneficiary can be an individual, a company, or an organization.

Beta
A measure of a fund's risk, or volatility, compared to the market which is represented as 1.0. A fund with a beta of 1.20 is 20% more volatile than the market, while a fund with a beta of 0.80 would be 20% less volatile than the market.

Bid / Bid Price
The highest price anyone has declared that they want to pay for a security at a given time. Also known as the "sell" price, the bid price is the price at which a fund's shares are bought back by the fund.

Blue Chip
A term used to describe the common stocks of a nationally known company that has increased its earnings and paid dividends over a long period and developed a reputation for high-quality management, products and services. (In poker, the blue chip is usually assigned the highest money value.)

Blue Sky Laws
A body of state laws governing registration and distribution of mutual fund shares. For example, Blue Sky Laws require sellers of mutual funds to register the funds, and provide financial details so that investors can base their judgment on relevant data. All 50 states and the District of Columbia regulate mutual funds.

Bond
An evidence of debt on which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. This security represents the debt of a corporation, a municipality of the federal government, or any other entity. A bond is usually long-term in nature (10 to 30 years) and is usually issued in multiples of $1,000.

Bond Fund
A fund that invests primarily in bonds, whether they are issued by corporations, municipalities, or the U.S. government and related agencies. Bond funds generally emphasize income over growth, and are based around the idea of providing a stable income with a minimum of risk.

Book Entry
Electronic record of ownership of Treasury and agency securities as opposed to receipt of a security's certificate.

Book Value
A value computed by subtracting the total liabilities from the value of all assets on the balance sheet, then dividing by the number of common shares. This is an accounting term that has no relation to the securities market value.

Bottom-Up
An investment strategy that first seeks individual companies with attractive investment potential, then proceeds to consider the larger economic and industry trends affecting those companies.

Breadth of the Market
A measurement of the number of issues that advance or decline on a particular trading day.

Breakpoint
A purchase of shares in an open-end investment company mutual fund that is large enough to entitle the buyer to a lower sales charge. A series of breakpoints is established by the fund, at each of which the charge is reduced. The purchases may either be made in a lump sum or by accumulating shares.

Broker
(1) An individual who buys or sells securities for customers (a stockbroker). (2) On an exchange, one who executes public orders on an agency basis (a floor broker or commission house broker). (3) As a slang term, a firm that executes orders for others (a brokerage firm).

Brokerage Firm
A partnership or corporation that is in business to provide security services for a general marketplace.

Bull Market
A market in which prices are generally rising.

Bullish
Term used to describe an environment of rising security prices.

Business Day
A day on which the exchanges are open for business.

Buy-In
When the seller of a security fails to deliver the security, the buyer purchases the security on the open market and charges any loss to the seller's account.

Buy/Write
An advanced option order that combines the purchase of an equity and the sale of a call option on the same underlying security.

Buyer's Option (Contract)
A settlement that calls for delivery and payment according to the number of days specified by the buyer.

Buying Power
In a margin account, the maximum dollar amount of securities that the client can purchase or sell short without having to deposit additional funds.

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