The following list is meant to help you better understand many of the terms and phrases used in regards to the Retirement Savings Plan, the investment menu, and more.

Questions about other financial terms? Visit or call 800-682-9139.


active portfolio management A method of choosing individual securities with the goal of outperforming the general markets and/or indexes. Active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell. This management style may have higher operating costs (expense ratio) than passive management due to active trading.
advisor A company or individual (usually called a financial advisor) who manages someone else's investments.
aggressive An investment approach that accepts above-average risks in return for potentially above-average investment returns.
annuity A contract by which an insurance company agrees to make regular payments to someone for life or for a fixed period. See fixed annuity and variable annuity.
asset Anything with commercial value that is owned and adds to your net worth.
asset classes Major categories of financial securities. The major asset classes are cash investments (also called cash reserves or money market instruments), stocks, bonds, guaranteed, and real estate.


basis point One one-hundredth (1/100 or 0.01) of one percent. For example: 30 basis points equal 0.30%. Yield differences among fixed-income securities are stated in basis points. The smallest measure used in quoting yields on mortgages, bonds, stock, notes, etc.
benchmark An unmanaged group of securities (hence, no expenses) whose overall performance is used as a standard to measure investment performance of other funds or the overall market. Examples of indices used as benchmarks are S&P 500 Index, Russell 3000 Index, MS-World Index, and the Lehman Brothers Aggregate Bond Index.
bond fund A fund that holds mainly municipal, corporate, and/or government bonds.
brokerage account A plan feature that permits participants to purchase investments that are not included among the plan's general menu of investment options.


capital Assets that are invested in a venture; or the net assets of a legal entity, like a corporation or partnership, plus all gains and profits.
capital appreciation fund An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise.
conservative An investment approach that accepts lower rewards in return for potentially lower risks.
contract A binding agreement between two or more parties.
contribution Money placed in an employer-sponsored retirement plan, an Individual Retirement Account (IRA), or other retirement plan for a particular tax year. Contributions may be deductible or nondeductible, depending on the type of account.
contributory plan A retirement or benefit plan under which employee contributions are required for participation.


deferred compensation plan - 457(b) plan An arrangement in which part of an employee's income is deferred to a future date to avoid taxation in the current year.
defined contribution plan - 401(a)/403(b) plans A retirement plan that specifies a rate of employer and/or employee contributions usually defined as a percentage of salary. How much income a participant receives in retirement will depend on several factors, including salary level, duration of contributions, investment earnings, and age at retirement.
distributions For tax purposes, a mutual fund generally passes along dividends and interest it receives from securities it owns. A fund also passes along an investor's share of the profits it makes when it sells securities for a higher price than it paid for them. Investors may choose to have these distributions sent to them or have them reinvested. Disributions are subject to federal tax, and may also be subject to state or local taxes. Distributions are taxable when they are paid, whether they are taken in cash or reinvested.
diversification A risk-reduction strategy that involves spreading assets across a mix of companies, investments, industries, geographic areas, maturities, and/or investment categories. There is no guarantee that diversification will protect against a loss of investment or income.


early withdrawal penalty A penalty on money withdrawn early from a fixed-term investment. For example, withdrawing from a tax-advantaged retirement plan before age 59 1/2 or cashing in a certificate of deposit (CD) before its maturity.
earnings Revenue for a specified period of time, after related costs and expenses have been deducted.
emerging market fund A fund that invests primarily in emerging market countries.
employee contribution An employee's own deposit to a company retirement plan.
equity A synonym for ownership or a share of ownership (e.g., stock or real estate holdings). In finance, equity is synonymous with stock and real estate.
equity fund A fund that invests primarily in equities.
equity income mutual fund A mutual fund that invests primarily in equity securities of companies that are concerned with both income generation and capital gains. In addition, these companies exhibit much higher yields than the average dividend yield of S&P 500 companies.
expense ratio A measure of what it costs to operate an investment, expressed as a percentage of its assets or in basis points. These are costs the investor pays through a reduction in the investment's rate of return (See gross expense ratio and net expense ratio.)


federal funds Federal Reserve deposits that banks and other financial institutions "borrow" from one another to meet short-term cash needs.
fiduciary An individual, corporation, or association entrusted with the management, investment, or disposition of another's property.
financial planning A comprehensive strategy to integrate an individual's or family's financial goals, including risk management, investments, tax planning, retirement planning, and estate planning.
fixed annuity A traditional insurance investment vehicle, often used for retirement accounts, that guarantees principal and a specified interest rate and may also offer dividends.
fixed-income fund A fund that invests primarily in bonds and other fixed-income securities to provide shareholders with current income and to preserve capital. Often used interchangeably with bond fund.
403(b) A defined contribution retirement plan for pre-tax contributions by an employee (and sometimes also the employer) available to faculty and staff members of not-for-profit private organizations. 403(b) funds grow tax deferred until retirement (or age 59 1/2), when they may be distributed without penalty, to be taxed at the account holder's ordinary income tax rate. Distributions must begin by age 70 1/2 if not actively employed.
457(b) A plan similar to a 401(k) or 403(b) plan that enables governmental faculty and staff members to contribute pre-tax dollars until the employee retires or terminates employment. These plans may also be offered to a select group of management at some nonprofit institutions.


global fund A fund with holdings in worldwide (U.S. and foreign) investments, mainly common stocks. Global bond funds,with holdings in international bonds, are also available.
gross expense ratio The percentage of a fund's average net assets used to cover the annual operating expenses of managing the fund before any fee waivers or reimbursements for fund expenses are made by a fund's investment advisor. Fund managers often waive or reimburse for fund expenses to keep the fund expenses low when funds are initially launched, or, in the case of money market mutual funds, from falling below $1 per share and reflecting a negative return.
growth fund A fund that invests in the stocks of companies whose growing earnings are reinvested for the purpose of expansion, research, or development.
growth-and-income funds Growth-and-income funds are designed to pursue long-term growth of capital as well as regular dividend income.


high-yield bond fund A mutual fund that invests primarily in bonds with a credit rating of BB or lower. Because of the speculative nature of high-yield bonds, high-yield funds are subject to greater share price volatility and great credit risk than other types of bond funds.


income fund A mutual fund that seeks current income rather than growth of capital. Income funds typically invest in bonds and/or high-yielding stocks.
income options Choices for receiving retirement income from a pension plan or annuity.
index fund An investment fund. A passively managed mutual fund with relatively lower expenses, that attempts to parallel the risk and return profile of an unmanaged established stock index--such as the S&P 500, Dow Jones, Industrial Average, or Wilshire 5000--by holding a portfolio of stocks or bonds that is representative of that market.
international funds These funds invest only in foreign securities (of countries outside the U.S.). Most foreign investments, particularly those in emerging markets, present additional risks, including currency fluctuation and political instability, than those of U.S. investments. These risks have, in the past, caused the prices of foreign stocks to be more volatile than those of U.S. stocks.
investment The purchasing of stocks, bonds, mutual funds, options, real estate, etc., made with the expectation of future income or capital gains.
investment advisor An individual or organization that makes investment recommendations or conducts securities analysis in return for a fee.
investment risk A type of risk incurred when making investments. Examples include financial risk, market risk, interest rate risk, and inflation risk.


large-capitalization (large-cap) fund A fund that invests primarily in large-cap stocks.
lifecycle fund A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor's age or target retirement date through a mix of asset classes. The mix of changes over time to become less focused on growth and more focused on income. Also known as a target date fund.


market capitalization A determination of a company's total market value, calculated by multiplying the total number of company shares outstanding by the price per share. Also called capitalization.
mid-capitalization (mid-cap) fund A fund that invests primarily in mid-cap stocks.
money market fund A fund or annuity that invests in short-term debt instruments. Interest rates change daily, but the net asset value of one share generally stays at $1.
Morningstar A research company that rates the performance of mutual funds and variable annuities.
Morningstar category The Morningstar methodology that classifies funds based on their investment styles, market capitalization, and asset mix as measured by their underlying portfolio holdings over the past three years. If the fund is new and has no history, Morningstar estimates where it will fall before assigning a more permanent category. Some examples of Morningstar categories are: Large Value, Large Blend, Mid-Cap Value, Domestic Hybrid, Specialty, International Stock, and Domestic Bond.
mutual fund An investment company that pools funds from individuals to buy securities selected to meet specific criteria and goals.


net expense ratio Reflects the percentage of a fund's average net assets used to cover the annual operating expenses of managing the fund after (net) any fee waivers or reimbursements for fund expenses are made by a fund's investment advisor. Fund managers often waive or reimburse for fund expenses to keep the fund expenses low when funds are initially launched or, in the case of money market mutual funds, from falling below $1 per share and reflecting a negative return.


passive portfolio management A method of choosing individual securities designed to track a specific benchmark. This management style may have lower operating costs (expense ratio) due to less active trading. See active portfolio management.
portfolio The group of stocks, bonds, and other securities held by an investor or mutual fund.
pre-tax contribution An addition to an account made with funds from an employee's paycheck before federal income taxes are deducted.
prospectus A document outlining the terms of an investment offering.


real estate fund A fund that seeks a favorable rate of return by investing in a real estate portfolio.
redemption fee A fee charged by some mutual funds when an investor sells shares within a short period of time.
return The gain or loss on a investment. A positive return indicates a gain, and a negative return indicates a loss.
risk tolerance An investor's ability or willingness to endure declines in the prices of investments while waiting for them to increase in value.
rollover An employee's transfer of retirement funds from one retirement or tax-deferred annuity plan to another plan or to an IRA (without incurring a tax liability). The transfer must be made within 60 days of receiving a cash distribution. the law requires 20% federal income tax withholding on money eligible for rollover if it is not moved directly to the second plan or IRA via a direct rollover or trustee-to-trustee transfer.


self-directed account An account in which a plan participant makes individual decisions about what mutual funds to buy through a brokerage window.
share A unit representing a measure of ownership in a corporation.
share class Some mutual funds and companies offer more than one type or group of shares, each of which is considered a class (e.g., "Class A," "Advisor," or "Institutional" shares). For mutual funds, each class has different fees and expenses, but all the classes invest in the same pool of securities and have the same investment objectives.
small-capitalization (small-cap) fnd A mutual fund that invests primarily in stocks of companies whose market value is less than a certain amount.
Social Choice Account Composite Index A customized weighted benchmark index against which the performance of the CREF Social Choice Account is measured. Its target weight is 60% S&P 500 Index, which represents the equity component of the account, and 40% Lehman Brothers Aggregate Bond Index, which represents the account's bond component.
stable value fund A type of investment fun that is designed to preserve principal while providing a consistent rate of return. Stable value funds invest primarily in fixed-income securities.
stock A security that represents an ownership interest in a corporation.
stock fund A fund that seeks favorable rate of return through investments in the stocks of various companies.


target date fund A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor's age or target retirement date through a mix of asset classes. The mix changes over time to become less focused on growth and more focused on income. Also known as a lifecycle fund.
ticker symbol An abbreviation assigned to a security for trading purposes. A security's ticker symbol is often used in newspapers and price-quotation services. Also called a trading symbol or stock symbol.


value stock fund A mutual fund that emphasizes stocks of companies whose growht opportunities are generally regarded as subpar by the market. Value stock companies often pay regular dividend income to shareholders and sell at relatively low prices in relation to their earnings or book value.
variable annuity An annuity, the value of which fluctuates based on the market performance of an underlying securities portfolio. Unlike fixed annuities, there is no guarantee of principal repayment or rate of return.


withdrawal Money taken out of an account. A witdrawal from a tax-advantaged retirement plan may be subject to tax and, if the investor is under age 59 1/2, to a possible penalty, unless the withdrawal qualifies as an exception for certain cases, such as a medical emergency.

Questions about other financial terms?

Visit or call 800-682-9139.