Financial Glossary

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Market risk

The risk posed by general fluctuations in the market, which may cause investments to lose value. For example, a recession may negatively affect the value of most stocks. Market risk cannot be reduced through diversification.

Medical power of attorney

A legal document that allows you to empower another person to make medical decisions on your behalf. Medical power of attorney is used if you are unable to make decisions or communicate your wishes about medical treatments.

Money purchase plan

A defined-contribution plan where the employer contributes an agreed-upon percentage of an employee’s wages to the plan. The employer must make contributions each year, regardless of the company’s financial position.

Mortgage

A loan used to finance a real estate purchase, where the real estate property is used as collateral. The borrower must pay back the loan through a predetermined series of payments.

Municipal bonds

Debt securities issued by a state, city, county, school district or other political entity. These bonds are used to fund both day-to-day activities and special projects, like highway construction. The interest investors receive from municipal bonds is usually exempt from federal taxes and is often exempt from state and local taxes as well.

Mutual funds

Pools of funds that are collected from individual investors and then used to invest into a portfolio of assets. Mutual funds are managed by an investment company and invested according to the stated goals of the fund. For example, one mutual fund may have the objective of investing in rapidly growing companies and another may have the goal of protecting its investors’ money. The risk associated with a mutual fund varies according to the fund’s goals.