Investment Terms

Government/Treasury Securities: Treasury bills, notes, and bonds. The government sells these products to finance day-to-day governmental operations and provide funding for special infrastructure and military projects.

Treasury Securities: Considered virtually risk-free because they are backed by the full faith and credit of the U.S. government. You can count on getting interest and your principal back at maturity. 

Treasury Bills: Maturity of one year or less. They are sold at a discount from their face value, but when they mature, the government pays you full face value. For example, if you buy a $1,000 T-bill for $980, you would earn $20 on your investment.

Treasury Notes: issued in terms of two, three, five, seven and 10 years. Holders earn fixed interest every six months and then face value upon maturity. Traded notes reduce investor return.

Bonds: A bond is a fixed income tool that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. 

Check: A check is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer from one account to another.

Common Stock: A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and by capital gains or losses in the stock's share price.

Debit Card: A means of payment that directly draws from your checking account.

IRA (Individual Retirement Account): These types of retirement accounts make saving for retirement easier. IRA’s are tax-favored but have deadlines and contribution limits. Taxpayers 50 and older can make a "catch-up contribution" of an additional $1,000.

Educational IRA: Funds saved under an education IRA are meant to be used to cover future educational expenses such as tuition, books, and uniforms at the elementary, secondary, and higher education levels for children under 18 years of age. The funds in an education IRA can be withdrawn tax-free when they are needed for educational purposes.

Brokerage Account: An LPL account used to hold various securities.

Traditional IRA: allows individuals to direct pre-tax income up to a specified maximum dollar amount toward investments that can grow tax-deferred until withdrawal during retirement, which will be taxed at your current income tax rate.

Roth IRA: You can fund this account and pay the current tax rate, then withdraw it at a later time tax-free. However, you must meet certain requirements in order to use this type of account, just like most account types.

(Simplified Employee Pension) SEP IRA: Similar to a traditional IRA where you are taxed at withdrawal (tax-deferred), but your employer (you, if self-employed) contributes to it. It has a higher annual contribution limit ($57,000 in 2020) and funds are vested (put into your account’s possession) immediately.

(Savings Incentive Match Plan for Employees) SIMPLE IRA: Easy to set up and they can be a good option for small businesses. But saves less for retirement than SEP or a 401k. Employers can freely choose to make a 2% retirement account contribution to all employees or an optional matching contribution of up to 3%.