Charles Schwab, U.K., Limited

Charles Schwab, U.K., Limited
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Glossary

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A
After-Tax Proceeds Money received from a sale after deducting commissions, fees and taxes.
Actively Managed Mutual Fund A type of mutual fund in which the fund manager actively attempts to outperform the market by making decisions to buy or sell individual securities to manage the overall fund portfolio. For comparison, see Index Fund.
Aggressive
Growth Funds
Stock mutual funds that seek high growth through aggressive investment strategies. These funds generally buy stocks of emerging companies that offer the potential for rapid growth.
All or None Directs the broker to attempt to fill the entire amount of the order or none of it during the time limit you specify. This differs from "Fill or Kill" orders because "All or None" orders do not require immediate execution. Only applicable to Limit Orders.
American Depositary Receipt (ADR) Receipt for shares of foreign-based companies that entitle the shareholder to all dividends and capital gains. ADRs allow Americans to buy shares of foreign-based corporations' securities at American Exchanges instead of having to go to overseas exchanges.
Arbitrage Profiting from the differences in price when the same security, currency or commodity is traded on two or more markets.
Ask The lowest price at which someone is willing to sell a security.
Asset Allocation The strategy of spreading your investment funds across categories of assets such as Stocks, Bonds and Cash Equivalents to help offset risks and rewards, based on your goals, time horizon and risk tolerance.
Asset Allocation Fund A mutual fund that typically includes a mix of stocks, bonds and cash equivalents to meet its objective. This type of fund allows you to diversify among classes with one investment. Over time, fund managers reallocate the fund's assets based on changing market conditions with the objective to keep the asset allocation percentages steady despite the market's fluctuations.
Asset Class A broad categorization of an investment. The main asset classes are Stocks, Bonds and Cash Equivalents.
Assets Any item of monetary value owned by an individual or corporation.

Companies have two basic types of assets: tangible and intangible. Tangible assets include equipment, inventory, and real property. Intangible assets include goodwill (the value of the company's name in the market), patents and other intellectual property that are owned by a company and given financial value in the company's balance sheet.
Average Maturity The lifetime of a bond, concluding when the final payment of that obligation is due.



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B
Back-end Load A fee charged by a mutual fund when you sell your shares.
Balanced Asset Allocation Funds Balanced funds (also known as domestic hybrid funds) invest in a mix of stocks, bonds and cash within one fund.
Balanced Funds The objective of these funds is to preserve initial principal, provide current income and provide long-term growth of principal and income. These funds buy a mix of bonds, preferred stocks and common stocks.
Benchmark A standard used for comparison. For example, the performance of some index mutual funds is compared to the performance of the S&P 500® Index which serves as a benchmark.
Beneficiary A person or organization designated to receive the funds or other property from an annuity, insurance policy, retirement account, trust, will or other contract.
Beta A statistical measure of a security's or portfolio's volatility (price fluctuations) relative to the market as a whole. (The beta of the overall market is defined as 1, and is represented by the S & P 500® Index over the last 36 months). A security with a beta of 1 indicates its price moves exactly with the overall market. A beta greater than 1 is more volatile than the overall market, while a beta less than 1 indicates that the security's price is more stable than the market (in general and over a long time period).
Bid The highest price at which someone is willing to buy a security.
Blue Chip Describes stocks of companies known for high quality management or products who have a long history of stable earnings and/or dividend growth.
Bond A long-term debt security of the Government or a corporation with maturity of 10 years or more from the issue date. Interest is usually paid every six months and its face value returned, repaid at maturity. The minimum denomination is $1,000, with $1,000 increments thereafter.
Brokerage Account An account with a brokerage firm that holds your investments, which allows you to buy and sell securities.
Bulletin Board Stocks These stocks are part of the non-NASDAQ over-the-counter market, which are not listed on an exchange.
Buy Indicates you want to purchase a security.
Buy to Close You "close" a short option position when you buy it back. You must be pre-approved by Schwab to trade options. See Options.
Buy to Open You "open" a long position when you buy an option. You must be pre-approved by Schwab to trade options. See Options.
Buying Power This is the maximum dollar value of marginable securities that you can buy in your margin account without depositing additional equity. Buying power is calculated at the close of business each day and may fluctuate throughout the day.


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C
Call Option Gives its buyer the right to buy 100 shares of the underlying security at a fixed price before a specified expiration date. Call buyers hope the price of the stock will rise. Call sellers hope the price will stay the same or go down. You must be pre-approved by Schwab to trade options. See Put Option.
Capital Appreciation The growth of the principal of your investments.
Capital Gains The difference in value between what you originally paid for an investment and the price at which it was sold, assuming the investment gained value.
Capital Loss The result when an investment is sold for less than its original purchase price. For comparison see Capital Gains.
Cash Account A type of brokerage account that requires you pay for trades in full by the settlement date. Some customers have both Cash and Margin Accounts. By law, Individual Retirement Accounts and Custodial Accounts for minors must be cash accounts.
Cash Available The dollar amount available in your account to buy non-marginable securities without depositing additional equity. It includes the dollar amount of cash in your account plus the loan value of your marginable securities.
Cash Investments Relatively safe and liquid assets. These types of investments can be readily converted into cash under most conditions with minimal impairments to principal and/or interest. Cash investments include: Treasury bills (T-bills), Money market funds, and Short-term Certificates of Deposits (CD).
Cash-up-front A requirement for funds on deposit or on receipt in a Schwab office at the time you enter your order. Cash-up-front is required to trade certain types of securities and is also required for all orders placed in accounts that have a cash-up-front restriction imposed on them.
Category Average In mutual fund investing, the average return, expense ratio or other criteria for all the funds within a specific fund category.
Certificate of Deposit A type of debt instrument offered by banks or savings and loans. (Also, CDs can be brokered by a Broker Dealer). Generally, a CD is issued for a specific dollar amount, for a specific period of time at a preset, fixed interest rate. CDs are FDIC-insured up to $100,000.
Closed Order Indicates that a trade order is no longer an active order because it has either been executed or cancelled.
Commissions The fees paid for executing a trade.
Common Stock An "equity" security. Common stock is "ownership" of a corporation. An owner of a company's common stock is considered to have an equity position in the corporate structure of that company.
Compounding The computation of interest paid, using the principal plus the previously earned interest. Compounding measures the growth of an investment when dividends or appreciation are reinvested.
Conditions Time and execution instructions included when you place a stock trade order. Time conditions indicate how long the order can be open; execution conditions identify how you want the order to be filled.
Contingent Beneficiary A person of organization designated to receive the funds or other property from a trust, insurance policy or retirement account if the primary beneficiary dies or no longer exists.
Corporate Bond Debt obligations issued by corporations as an alternative to offering equity ownership by issuing stock. Like most municipal bonds and Treasuries, most corporate bonds pay semi-annual interest and promise to return their principal when they mature. Maturities range from 1 to 30 years.
Corporate Governance Standards These are the Securities and Exchange Commission rules that a corporation must follow after meeting initial Nasdaq listing requirements, such as holding an annual shareholders meeting, and distributing annual and interim reports to shareholders.
Cost Basis Cost basis is used to determine capital gains and losses. Generally, cost basis is the original price of a security, including commissions and applicable fees. There are special rules for determining basis in some situations (i.e., property received by gift or bequest, as compensation or in a tax-free exchange). (See your tax advisor for more information.)
Current Yield The annual interest on a bond divided by the current market price.
Custodial Account An account for the benefit of a minor with an adult as the custodian.


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D
Day Order Automatically expires at the end of the day's standard market trading session if it is not filled. All Market Orders are automatically Day orders. Orders are generally considered to be day orders unless otherwise specified.
Derivative Instrument A financial instrument or security whose value is based in part upon another security . For example, a stock option is a derivative instrument because its value is based in part upon the value of the underlying stock.
Developed Market A sector within international stocks made up of countries where the government and economy are more soundly established.
Dilution Effect on earnings per share and book value per share if all convertible securities were converted and all warrants and stock options were exercised.
Distributions The income or capital gain made by a mutual fund that is paid to the fund's investors.
Diversification A portfolio strategy designed to spread risk by allocating assets among a variety of investments (such as Stocks, Bonds and Cash Equivalents).
Dividend A distribution of company Earnings to shareholders. Dividends are typically paid to you in cash or stock. You may choose automatic Dividend Reinvestment to buy more shares.
Dividend Amount Value of last quarterly cash dividend or the number of shares an investor receives for each share owned in a stock dividend.
Dividend Reinvestment An investment plan in which you can elect to automatically reinvest cash dividends and capital gains distributions, thereby accumulating more shares.
Dividend Yield A stock's market value in relationship to its dividend amount expressed as a percentage. Calculation tip: Divide the dividend by the market value of the stock.
Do Not Reduce (DNR) Instructs the broker not to reduce your limit price by the amount of the cash dividend when a stock goes ex-dividend and the market price is reduced by the amount of the dividend. You can specify DNR on Limit Orders to Buy, Stop Orders to Sell, or on Stop Limit Orders to Sell.
Dollar Cost Averaging A strategy of buying securities (typically mutual funds) in fixed dollar amounts at scheduled intervals, with the aim being to lower the average cost per share over time. Dollar cost averaging does not assure a profit and does not protect against loss in declining markets.
Dow Jones Industrial Average (DJIA) Measure of the performance of the collection of 30 "blue-chip" stocks traded on the New York Stock Exchange (NYSE), considered the leaders of the market.


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E
Earnings The amount of profit a company realizes over a given time period after all costs, expenses, and taxes have been paid.
Earnings Per Share (EPS) A company's earnings, also known as net income or net profit, divided by the number of shares outstanding. Calculation tip: Four times the last quarter's earnings divided by the number of shares outstanding.
Earnings Per Share Date Date of the last earnings announcement.
Electronic Funds Transfer Transferring funds between accounts and firms electronically.
Emerging Market A sector within international stocks made up of developing countries, such as Kenya and China, where economic and political conditions may be more volatile.
Exchange A marketplace, or any organization or group that provides or maintains a marketplace for trading securities, options, futures, or commodities. Examples of exchanges: New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX).
Ex-Dividend Date Date a split or dividend is reflected in the price of the security (if you buy a stock on the ex-dividend date, you are not entitled to the dividend); for splits, this is the trading day after the distribution is made.
Expense Ratio A mutual fund's cost of doing business passed on to shareholders -- expressed as a percentage of assets.


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F
Face Value The displayed value on a bond also called principal or par value.
Fed Call Also known as Regulation T or Reg T Call. This type of call occurs when establishing a margin position. Investors must deposit 50% of the cost of the trade per current Federal Reserve requirements. Schwab reserves the right to impose higher or Special Maintenance requirements.
Federal Deposit Insurance Corporation (FDIC) A U.S. Government agency that insures cash deposits, including certificates of deposit, that have been placed in member institutions. The basic insured amount for each depositor is capped at $100,000. The FDIC's mission is to maintain the stability of and public confidence in the U.S. banking system.
Fiduciary One is legally required to act in the best interest and trust of a beneficiary or minor.
Fill or Kill (FOK) Instructions that your order must immediately be filled in its entirety or canceled. Only applicable to Limit Orders.
Fixed Income Investments These debt securities (or IOUs for borrowed money) include bonds, money market instruments or preferred stock. They obligate the borrower to pay the bond owner a fixed rate of interest during the term of the loan and to return the principal or face value when the loan matures, and a preferred shareholder would get a fixed dividend. A variety of institutions issue debt obligations, including the U.S. government, state and local governments, publicly held companies, banks and savings and loans.
Fixed Income Securities Debt securities or IOUs for borrowed money. They obligate the borrower to pay the owner interest during the term of the loan and to return the principal or face value, when the loan matures. A variety of institutions issue debt obligations including the U.S. government, state and local governments, publicly held companies, banks, and savings and loans.
Freeriding This trading violation is the result of buying a security in your Cash Account and then selling the same security without making separate payment on the full purchase price by Settlement Date. This situation is called freeriding because basically it is unauthorized borrowing to pay for a trade.


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G
GNMA (Ginnie Mae) A bond issued by the Government National Mortgage Association.
Good 'Til Canceled (GTC) At Schwab, GTC orders remain open for 60 calendar days unless filled or you request that it be canceled before that time.
Government Bond A bond issued by the U.S. Treasury or other agency.
Growth Strategy An investment strategy that pursues capital appreciation over the long term by investing in growth stocks.


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H
Halted Securities Occasionally, trading on a given security may be suspended due to a variety of conditions including news and corporate actions. If the security you are attempting to trade has been halted, you can place an order but it will not be executed until the trading halt is lifted. If you have an open order for a security that subsequently is halted, your order will be eligible for execution after the halt has been lifted. Please be aware that when the security resumes trading it may be at a price significantly above or below the most recent trade price.
High The highest execution price of a trade that day, or on the last trading day.


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I
Immediate or Cancel Instructions to immediately fill your order either partially or entirely -- or cancel the order. Only applicable to Limit Orders on listed stocks.
Income Strategy An investment strategy that pursues income, typically by investing in bonds and high-yielding stocks.

For mutual funds, income is earned on a fund's investment portfolio after deducting operating expenses. Dividends and/or short-term capital gains are paid to a mutual fund's shareholders.
Index A statistical composite that measures changes in the economy or financial markets. Some indexes are used as benchmarks that economic or financial performance is measured against. Some well-known market indexes include: Standard & Poor's 500® Index, Dow Jones Industrial Average® , Nasdaq Composite® Index, Consumer Price Index, and Russell 2000. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs or expenses.
Index Mutual Funds Mutual funds that seek to replicate the performance of established securities indices. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.
Indexing Investing for market returns by purchasing shares in an index fund.
Industrials In stock market language, this is a general category of firms in the business of manufacturing products. Industrials exclude utility, transportation and financial services companies.
Inflation An increase in the cost of goods and services which, in turn, decreases the buying power of money over time. Inflation is usually measured by the Consumer Price Index and Product Price Index.
International Fund These funds seek growth by investing primarily in equity securities of issuers located in developed markets outside the United States. Includes Western Europe, Japan, Australia, New Zealand and Canada. International funds are not only subject to the usual market volatility, they may also be affected by other risks, including foreign taxes, differences in financial standards, currency fluctuations and political and economic instability.
International Stock The stock of a company that is based outside the United States.
Investment Objective The outcome desired by an investor or a mutual fund. For example, "current income" or "capital appreciation" are types of investment objectives.

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