Individual Investors

Tax Center

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Alpha

A mathematical estimate of risk-adjusted return expected from a portfolio above and beyond the market return at any point in time. A positive Alpha figure indicates the fund has performed better than its Beta would predict, and vise versa.

Alternative Minimum Tax

A federal tax designed to ensure that high-income individuals pay a fair amount of income tax.

Average Credit Quality

Represents the grading of a debt security with respect to the issuer's ability to meet interest and principal requirements in a timely manner. Issues rated AAA, AA, A and BBB are considered investment grade. Higher rated bonds generally provide lower returns and greater safety.

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Beta

Beta is a quantitative measure of the volatility of a given portfolio to the overall market. Higher beta suggests higher volatility.

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Correlation Coefficient

A measure that determines the degree to which two variables' movements are associated.

Cost Basis

Purchase price, including commissions and expenses, used to determine capital gains or losses for tax purposes.

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Downside Capture Ratio

A measure of a manager's ability to retain capital as the market declines. A value below 100 indicates a manager was able to out-perform in down-markets.

Duration

Represents the interest rate sensitivity of a fixed income fund. For example, if a fund's duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund's price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund's price.

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Exchange

A sale of shares from one fund and a purchase of shares into another fund.

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Gain

An increase in the value of mutual fund shares. The gain is not realized until the shares are sold for a price higher than the purchase price.

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Income Distribution

Interest and dividends earned on securities that are paid out to shareholders (after subtracting fund expenses) in the form of dividends.

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Long-Term Capital Gains

Gains on sales of stocks in the mutual fund portfolio that have been held for more than 12 months.

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Net Asset Value (NAV)

The value of a mutual fund's assets after deducting liabilities divided by the number of shares outstanding.

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R2

A statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index.

Redemption

A sale of mutual fund shares.

Reinvestment

An option whereby dividend and capital gains distributions automatically purchase new fund shares.

Retirement Plan

A type of investment account. Examples of such accounts include: Individual Retirement Accounts (IRAs), Roth IRAs, Simplified Employee Pension (SEP) plans, and SIMPLE accounts.

Rollover

The transfer of funds from one qualified retirement plan to another qualified retirement plan within a specified period of time; otherwise the funds are taxed as ordinary income.

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SEC Yield

Represents net investment income earned by a fund over a 30- day period, expressed as an annual percentage rate based on the fund's share price at the end of the 30-day period.

Sharpe Ratio

The portfolio's annualized return, minus the annualized risk-free rate (typically the 90-Day T-bill return), divided by the portfolio's annualized standard deviation and measures the efficiency, or excess return per unit of risk, of a manager's returns. A Sharpe Ratio greater than 1 indicates a good level of excess return relative to the volatility of the performance.

Short-Term Capital Gains

Gains on sales of stocks in the mutual fund portfolio that have been held for less than 12 months.

Standard Deviation

A measure of variability of returns around the average return for an investment fund. Higher standard deviation suggests greater risk.

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Tax-Deferred Account

Investment vehicles that shield earnings from taxes, such as 401(k) plans, 403(b) plans, and individual retirement accounts. Although mutual funds held in these accounts are not taxed currently, they are subject to state and federal taxes when withdrawn.

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Upside Capture Ratio

A measure of a manager's ability to capture up-swings in the market. A value above 100 indicates a manager is capturing more of the market's positive movement than its benchmark.

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Wash Sale Loss

A wash sale loss occurs when you redeem or exchange mutual fund shares at a loss and replace those shares by purchasing shares or reinvesting dividends in the same fund or very similar fund within 30 days before or after the redemption or exchange. Tax regulations prohibit claiming a loss on the sale to prevent investors from realizing losses solely to offset capital gains. The loss is included in calculating the cost basis of the repurchased shares.

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