Summit Mutual Funds - Glossary of Terms




A	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Account Value	The value of each Mutual Fund account is measured by multiplying the most recent Net Asset Value by the number of shares owned.
	Advisor	The organization employed by a mutual fund sponsor to manage a particular fund's assets.
	Alpha	Alpha is defined as a measure of selection risk of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. The alpha compares the actual results of a portfolio with what would have been expected given the fund's beta and the market's behavior. It is often considered to represent the value the manager adds or subtracts from the fund's return.
	Annuity	A contract sold by insurance companies designed to provide payments to the holder at specified intervals, usually after retirement. Fixed annuities guarantee a certain payment amount. Variable annuities do not guarantee a specific payment amount, but provide the potential for greater returns. While payments are made with after-tax dollars, unless the variable annuity is an IRA, contributions grow tax-deferred until withdrawn. There may be penalties associated with the early withdrawal of an annuity.
	Asset	Anything having value that is owned by an individual, institution or business. Personal assets include cars, houses, savings and investments.
	Asset Allocation	The diversification of investments among categories of assets, such as short-term investments, stocks and bonds, as well as tangible assets, such as real estate, precious metals, and collectibles. Asset allocation is useful in balancing risk and return in pursuit of various investment goals.
	Asset Class	Types of investments. The primary asset classes are stocks, bonds and cash.
	Average Maturity	A fund's average maturity (traditionally used for bond funds) generally represents an average of the stated maturity dates of the debt securities (bonds) in the fund's portfolio. In general, a bond fund with a longer average maturity will be more sensitive to interest rate changes, and tend to have more price fluctuation, than a bond fund with a shorter average maturity.



B	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Balanced Fund	A mutual fund that buys a combination of stocks, bonds, and short-term securities. Generally, such a fund pursues high total return with reasonable risk. Such funds are designed to provide a high level of income and some capital appreciation potential. These funds may offer less growth potential, and have historically less volatility, than funds which invest solely in stocks.
	Beta	Measures the sensitivity of rates of return on a fund to general market movement. If the market, or index, has a beta of 1.0, the price of a portfolio with a beta of 1.30 would be expected to rise or fall by 13% when the overall market increased or decreased by 10%. The higher the beta, the greater the risk.
	Bond	Bonds are securities representing debt owed by companies to investors. They denote a contract which commits a borrower (the company) to pay a bondholder (the investor) fixed interest payments and to return the bondholder's principal amount by a specified maturity date. Companies pay bondholders interest (sometimes called the coupon rate) on the money borrowed. Bonds are useful ways for corporations, municipalities, states and the U.S. government to finance operations.
	Bond Fund	A mutual fund specializing in the purchase of bonds. By diversifying, the fund spreads risk. Bond funds pay regular distributions.



C	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Capital Gains Distribution	Mutual fund payments to shareholders resulting from the sale of stocks or bonds within a mutual fund portfolio. Capital gains distributions are considered ordinary income, and you may owe taxes on them in the year they are paid.
	Common Stock	A stock is a security that represents partial ownership of a public corporation. Stocks usually carry corporate voting rights and pay dividends out of the company's profits. Common stocks of publicly-owned companies typically trade on a stock exchange - such as the New York Stock Exchange (NYSE) - where shares are bought and sold. In the event of liquidation of the firm, common stock shareholders are paid off after bank creditors, bond holders and preferred stock holders.
	Compounding	When you deposit money in the bank, it earns interest. When that interest also begins to earn interest, the result is compounded interest. Compounding also occurs if income from bonds or dividends and capital gains from stocks or mutual funds are reinvested.
	Cost of Living Adjustment (COLA)	The change (usually an increase) in wages or pension benefits to keep pace with the change in the cost of living due to inflation.
	Coupon Rate	A synonym for the interest rate on a bond. A 6% coupon rate on a bond with a face value of $1,000 produces $60 in interest payments annually.



D	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Diversification	Diversification involves acquiring several kinds of assets - for example, stocks, bonds, mutual funds, and real estate. By doing so, you may reduce the impact of a loss in any single asset class by a potential gain in another. When you own just one security or single fund, you concentrate risk; by owning several securities, you help spread risk among various securities which may have different risk characteristics.
	Dividend	In stock market terms, dividends are the payments to shareholders from profits on a per-share basis. In mutual fund terms, dividends are paid out of the income generated from the fund's investments.
	Dividend Yield	The current, annualized rate of dividends paid on a share of stock, divided by its current share price. For a mutual fund, the Dividend Yield is generally the weighted average yield for stocks it holds as of the profile processing date.
	Dollar-Cost Averaging	Strategy of investing a fixed amount of money at regular time intervals regardless of share prices. This means more shares are purchased when prices are low and fewer shares are purchased when prices are high, thus increasing the buying power of a given investment. You should keep in mind that a program of regular investment cannot guarantee a profit or protect against a loss in a declining market, so choose an amount you feel comfortable investing under all market conditions.
	Duration	A measure of a bond fund's price sensitivity to interest rates. The longer the duration, the more sensitive a bond's price will be to changes in interest rates.



E	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	EAFE Index	Morgan Stanley Capital International's Europe, Australia and Far East ("EAFE") Index is an unmanaged index that is a generally accepted benchmark for the major overseas markets. Data is dollar-adjusted. Investors may not actually make investments in this index.
	Effective Rate	Truer indication of the return on a bond investment than the simple coupon payment. Computed using both the capital gain from price appreciation and the bond's current yield.
	Employer-Sponsored Retirement Savings Plan	Any of several plans set up by employers so that their employees may take advantage of tax-deferral on retirement savings. Additionally, some employers match employee savings or make other contributions to the plan.
	Equity	A synonym for stock, or shared ownership in a firm, as opposed to "debt", which is a loan to the firm. Equity represents the positive difference between assets (amounts owned) and liabilities (amounts owed).
	Exchange-Traded Funds	At the most basic level, exchange-traded funds are baskets of securities designed to replicate the performance of a stock or bond index (e.g., S&P 500, DJIA), and are traded on an exchange, like an individual stock. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day. They can also be sold short and bought on margin. In brief, anything you might do with a stock, you can do with an ETF.



F	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Fixed Income Security	Any security that pays a stated or predetermined rate of interest over time. Bonds, notes and money market instruments are all considered fixed-income securities. Most income-oriented mutual funds include these kinds of securities in their portfolios.
	Futures	A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.



G	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Growth and Income Fund	A mutual fund that invests primarily in dividend-paying stocks, or a combination of stocks and bonds, potentially offering a combination of capital (share price) appreciation and dividend (income) payments.
	Growth Fund	A mutual fund that invests in stocks whose primary objective is capital (price) appreciation. Growth funds typically experience greater share-price volatility than more conservative funds, such as growth and income funds, bond funds, or money market funds.
	Growth Stock	The stock of firms which give indications of "better than average" expansion potential. Growth stocks are generally less affected by economic factors than cyclical stocks and tend to plow earnings back into the company to finance future growth. For this reason, they tend to have more growth potential, and be more volatile, than dividend-paying stocks.



H	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	High Yield Fund	A mutual fund composed primarily of lower-quality, lower-rated securities which offer higher than average income, or yield. They often are accompanied by greater price fluctuations and risk to principal than funds which invest in higher-rated, higher-quality bonds.



I	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Income Fund	A mutual fund which emphasizes current income in the form of dividends or coupon payments from bond and/or preferred stocks, as opposed to capital (price) appreciation.
	Index	The performance of individual mutual funds is frequently compared to that of indexes such as the Standard & Poor's 500, Russell 2000 or Europe, Australia, and Far East (EAFE). Indexes, prepared by independent companies, are broad statistical benchmarks designed to measure changes in segments of the U.S. or international stock markets. These indexes commonly are used as standards against which fund managers and investors can compare the performance of their investment portfolios.
	Individual Retirement Account (IRA)	An account that enables individuals to set aside up to $2,000 of earned income each year toward retirement. All dividends and capital gains earned on an IRA investment compound tax free until they are withdrawn, usually at retirement, when the investor is in a lower tax bracket. In addition, many people can fully or partially deduct IRA contributions from their federal income tax. Several types of IRAs are Rollover IRAs and Roth IRAs.
	Interest	Money, like any other commodity, has a price. Money's price is called the interest rate, which represents the cost a borrower incurs for borrowing money, and the earnings a lender receives for lending money.
	Investment Advisor	An individual or organization that manages a portfolio and makes day-to-day investment decisions involving the purchases or sales of securities.
	Investment Company	A company which, for a management fee, pools many investors' money and determines an asset allocation/investment strategy consistent with published investment objectives. Benefits include professional management, diversification and liquidity. Two kinds of investment companies are mutual funds and investment trusts.
	Investment Objective	The financial goal that an investor or a mutual fund pursues. A growth fund, for example, typically seeks to provide growth of capital.
	Investment-Grade Bonds	According to commercial rating services, such as Standard and Poor's or Moody's, investment-grade bonds are those which carry higher credit ratings and are unlikely to default. Investment-grade bond ratings range from AAA to BBB, with AAA being the highest rating.



L	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Large Cap Stock	Refers to a stock with a large market capitalization, generally a company that offers some growth potential with steady or growing dividends. These companies generally have a market capitalization over $10 billion. These stock prices tend to be less volatile than those of smaller companies. Most companies listed on the Dow Jones are large caps - examples include IBM and Coca-Cola.
	Long-Term Bonds	Generally, bonds with maturities of ten years or more. These bonds typically pay investors higher yields to compensate for a greater time commitment. Long-term bond values tend to be more sensitive to interest rate changes, and therefore may have greater price fluctuation, than short-term bonds.



M	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Market Capitalization	The value of a publicly traded firm; found by multiplying the number of its outstanding shares by the current market price per share.
	Market Value	The price agreed on by communities of buyers and sellers. In the case of investments, the last price of record multiplied by the number of outstanding shares
	Maturity	The date on which a bond's principal is due and repaid to the investor.
	Median Market Capitalization	Identifies the median market capitalization of the assets in a fund.
	Mid Cap Stock	The stock of a company with a median market capitalization that may offer above-average growth potential. Because medium-sized companies have operated in the marketplace longer than smaller companies, their stocks generally have less price volatility. MidCap stock companies generally have a market capitalization between $1 billion and $10 billion.
	Money Market Fund	A mutual fund which is designed for current income and invests in very liquid assets such as federal securities, certificates of deposit, and commercial paper (very short-term bonds). An investment in a money market fund is neither insured nor guaranteed by the U.S. government, and there can be no assurance that money market funds will be able to maintain a stable net asset value of $1.00 per share.
	Mutual Fund	An investment company which pools the money of many investors and determines an asset allocation strategy to pursue in accordance with the fund's stated investment objectives. Mutual funds sell shares to the public, and offer the advantages of diversification and professional management.



N	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	National Association of Securities Dealers (NASD)	A self-regulatory organization (SRO) operating under the supervision of the Securities Exchange Commission (SEC). Its purpose is to standardize practices, establish high ethical standards and enforce fair and equitable rules.
	National Association of Securities Dealers Automated Quotations (NASDAQ)	The nationwide electronic quotation system for up-to-the-minute bid and asked quotations on approximately 4,000 over-the-counter stocks.
	Net Asset Value (NAV)	The value of one share in a mutual fund company computed daily. In general, it is calculated by summing the values of all the fund's investments, subtracting its expenses and liabilities, and dividing by the number of shares outstanding.
	*No-Load Mutual Fund**	A mutual fund that does not charge a fee, or "load" for the purchase or sale of its shares. No-load mutual funds sell and buy back shares at their Net Asset Value. * Other fees and expenses still apply and are described in the prospectus.



O	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Options	Contracts giving the holder the right but not the obligation to purchase or sell a security on or before a predetermined future date for a fixed price. Options on securities indexes are similar, but settled in cash.



P	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Portfolio	A list of all investments owned by a mutual fund. Shareholders can diversify their investments and build their own portfolios by investing in a number of mutual funds.
	Portfolio or Investment Manager	The person responsible for managing a mutual fund's assets.
	Portfolio Turnover	The measure of how frequently a particular fund buys or sells securities. A fund with an annual turnover rate of 100% replaces its entire portfolio throughout the course of a year, whereas, a fund with a 50% turnover rate replaces half of its holdings.
	Preferred Stock	Stock that represents partial ownership in the company, pledges a regular dividend payment schedule, has priority over common stock holders in the event of liquidation, but normally does not carry voting rights.
	Price to Book Ratio	The weighted average of the P/B ratios of all the stocks in an underlying fund's portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company's per-share book value. The P/B ratio essentially shows whether or not a stock price accurately reflects the value of the company.
	Price-Earnings Ratio	The price of a stock divided by its reported earnings. It is an indicator of how much investors are willing to pay for an opportunity to share in firm's future earning potential.
	Principal	The amount of money an individual invests in a mutual fund. Also known as capital. It does not include the money that the investment has earned.



R	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	R-Squared	A statistic which indicates how much of a fund's fluctuations were attributable to movements in the fund's benchmark index. R-Squared ranges between 0 percent and 100 percent, which would indicate that 100% of the movements in a fund were completely explained by movements in the benchmark index.
	Rate of Return	From an individual investor's perspective, the dividend or interest earnings generated by an investment divided by the original investment amount. For corporations, it is the return on invested equity or capital.
	Reinvestment	An arrangement whereby distributions of mutual fund dividends or capital gains are used to purchase additional shares of the mutual fund.
	Retirement Income	All income which one receives during retirement. It can include Social Security, part-time employment, pension funds and amounts withdrawn from retirement accounts.
	Return	Represents the change in value of an investment over time. It is calculated by dividing the current market value by the cost of the initial investment. The calculation assumes all income (dividends or interest) and capital gains are reinvested.
	Risk	The volatility of returns, sometimes expressed using Standard Deviation, associated with a given asset. Both measurable and immeasurable possibility that a given investment will lose value. Types of investment risk include currency risk, inflation risk, principal risk, capital risk, market risk and interest rate risk. Investments can also be affected by market sentiment - which can be immeasurable. Being "risk averse" means preferring lower degrees of risk and accepting possible lower rates of return. Being "aggressive" describes a tolerance for higher degrees of risk in pursuit of higher returns.
	Rollover IRA	An individual retirement account that is established for the sole purpose of receiving a distribution from a qualified plan so that the assets can subsequently be rolled over into another qualified plan.
	Roth Conversion IRA	Any individual or married couple filing jointly can convert their Traditional or Rollover IRA assets to a Roth Conversion IRA, under certain provisions. Any before tax (deductible) contributions to the existing IRA assets are subject to current year federal income tax upon conversion.
	Roth IRA	A personal retirement savings vehicle created by the Tax Payer Relief Act of 1997. A Roth IRA allows certain investors to make non-deductible contributions of up to $2,000 annually, and provided certain requirements are met, offers tax-free and penalty-free withdrawals for important financial needs in addition to retirement.
	Russell 2000® Index	Issued by the Frank Russell Company, a measure of price performance of 2000 stocks with an average market capitalization of $225 million. The Russell 2000 Index is often used as a performance benchmark for mutual funds which invest primarily in small company stocks.



S	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	SEC Yield	SEC Yield is a standardized yield based on a 30-day period ending the last day of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. SEC Yield is a good measure of the income return currently priced into a fund's bonds, assuming all bonds are held to maturity
	Securities	General name for stocks, bonds, or ownership rights, such as options or futures, usually sold through a broker.
	Securities and Exchange Commission (SEC)	Federal oversight and enforcement agency created in 1934 for the purpose of regulating trading in the stock, bond and mutual fund industries and their sales staff. The SEC is responsible for insuring that the securities markets operate honestly and fairly.
	Sharpe Ratio	This is calculated by dividing the returns in excess of the 90-day T-bill rate by the standard deviation of those returns for a given time frame. This calculation results in a figure that determines reward per unit of risk. A high Sharpe ratio reflects a strong historical risk-adjusted performance.
	Short-Term Bonds	Generally, bonds whose maturity is between one and five years. The price and yield of short-term bonds will fluctuate, however both yields and volatility are lower than with long-term bonds.
	Small Capitalization Stock	Small cap companies may grow faster than large cap companies and typically use any profits for expansion rather than for paying dividends. They also may be more volatile than large cap companies, and fail more often. These stocks have historically provided greater returns than the stocks of larger, more established companies, but their prices are more volatile. Small capitalization stocks are generally defined as companies whose market capitalizations are $1 billion or less.
	Standard and Poor's 500 Index (S&P 500)	A closely followed index of 500 widely-traded industrial, transportation, financial and utility stocks. The S&P 500 is used as an overall measure of stock market conditions and as a performance benchmark. S&P 500 options and futures are also used by financial professionals as hedging instruments. Many professional market watchers believe the S&P 500 is a better general measure of market conditions than other market indices (such as the Dow Jones Industrial Average).
	Standard and Poor's MidCap 400 Index	Measuring the performance of the mid-sized company segment of the U.S. market, this index is used by over 95% of U.S. mutual fund managers and pension plan sponsors.
	Standard Deviation	The standard deviation of a mutual fund depicts how widely returns varied from an average over a given period of time. When a fund has a higher standard deviation calculated from its historical data, the fund shows a greater volatility because the predicted range of performance is high. The larger the standard deviation, the more volatile are the returns and the riskier is the investment.
	Stock Fund	A mutual fund which predominately holds stocks and is designed for growth, or capital appreciation. While stocks funds have greater price volatility than more conservative investments, they offer the potential for higher returns.



T	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Tax-Deferred Retirement Plans	A retirement plan that allows the investor to postpone current income taxes on pre-tax money invested or any earnings in an account until it is withdrawn from the plan.
	Taxable Account	Any savings or investment account in which the earnings are fully taxable.
	Ticker symbol	Letters that identify a security for trading purposes. A security's ticker symbol also may be used in news and price-quotation services to identify the security.
	Total Return	The annual return on an investment composed of two sources: income from dividends (stocks) or coupon payments (bonds), and appreciation or depreciation in the market price of the investment during a given time period.



V	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Value Stocks	Value stocks tend to be inexpensive based on various measures of their intrinsic or private market value, such as current earnings or total assets. The market is not willing to pay more for them because they are from companies that are out of favor for some reason. The job of value managers is to identify companies poised for a turnaround, leading to rising earnings and higher stock prices.
	Volatility	The increase or decrease in an asset's price over time. High volatility means wide price changes that can occur in a relatively short period of time, while low volatility refers to smaller, or more gradual fluctuations.



Y	A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

	Yield	Generally, the return on investment. In bond terminology, yield is the coupon payment divided by the bond's face value if held to maturity. Bond yields and bond prices are inversely related. For example, a bond with face value of $1,000 and coupon rate of 10% pays $100 per year and produces a 10% yield.
	Yield To Maturity	A measure of a bond's yield which takes into account both the market price of the bond as well as any capital gains or losses on the bond when held to maturity.