Page 116 - The Informed Fed--Hearn Wealth Management

Annual Percentage Rate (APR): The annual percentage rate is the cost
of credit expressed as a yearly rate. The APR is a means of comparing

loans offered by various lenders on equal terms, taking into account
interest rates, points, and other finance charges. The federal Truth-in-
Lending Act requires disclosure of the APR.

Annuitant: An individual who receives payments from an annuity. The

person whose life the annuity payments are measured on or determined
by.

Annuity: A contract between an insurance company and an individual
which generally guarantees lifetime income to the individual or whose
life the contract is based in return for either a lump sum or periodic

payment to the insurance company. Interest earned inside an annuity is
income tax-deferred until it is paid out or withdrawn.

Asset allocation: Asset allocation is a strategy for offsetting systematic
risk by investing specific percentages of your investment principal in

different asset classes. For example, you might put 60% of your 401(k)
portfolio in equity investments, 30% in fixed income investments, and
10% in cash equivalents. You use different asset allocation models and

include different asset classes in your portfolio based on your investment
objectives, your risk tolerance, and your timeframe.

Basis Points: Basis points is a term used by investment professionals to
describe yields of bonds. One basis point equals one 100th of 1%, or
.01%. A bond yield increase from 10.0% to 10.1% represents an increase

of 10 basis points.

Bear Market: A prolonged decline in overall stock prices occurring over
a period of months or even years.

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