Glossary of Terms

Annuity: An annuity is an investment vehicle which allows an individual to invest and accumulate funds tax deferred. Later, these funds can be converted to a stream of income payments, in some cases, income payments the investor cannot outlive.

Asset Classes: Refers to the different categories of investments, such as: stocks, bonds, cash equivalents and real estate.

Bond: An ‘IOU’ where an investor lends money to a company or government for a set period of time at a set interest rate.

Brokerage Window: A separate tier of investing for those employees who have financial planners or who are extremely confident in their investing skills and can devote the time to managing their funds more actively. The remaining Tufts University Fidelity funds will be available through the Fidelity BrokerageLink account (Tier 3).

Capital Preservation: Protecting the initial investment from loss of principal, typically accomplished by investing in conservative or guaranteed vehicles (i.e. Money Market funds).

Cash Equivalent: A financial vehicle that guarantees the principal and that earns interest at prevailing short-term interest rates.

Diversification: A technique designed to reduce risk by dividing an investor’s investments among (and within) different asset classes.

Domestic Equity Fund: Domestic stock funds are investment vehicles that invest in stocks of U.S.-based companies. These funds offer investors the potential for large gains while minimizing the potential risks.

Fixed Annuity: A type of investment annuity where the principal is guaranteed by the issuing insurance company and earns a set rate of interest that reflects the current interest rate environment.

International Equity Fund: Foreign-stock funds allow you exposure to overseas markets at varying levels of risk.

K Share Class Fund: K Shares are institutional class shares; this class of shares generally have lower fees than shares offered to the general public since they require a higher initial investment. K shares have the same management team, investment objectives and will invest in the same underlying funds as the non-K share class. However, K shares are not available in the Fidelity BrokerageLink account since BrokerageLink is a retail product.

Lifecycle Fund: Sometimes referred to as a ‘target retirement date fund’ is a fund that automatically adjusts its investment mix as you age. For example, a fund intended for those who want to retire in 2030 would have more risk now, i.e. more stocks, and gradually, by 2030, it will have changed to a more conservative mix of investments.

Mutual Fund: A mutual fund is a professionally managed investment that pools individuals’ funds and invests them according to the fund’s objectives.

Open Architecture: With open architecture, a company can create their own investment platform where they can select the total number of funds to offer in their retirement plan, the asset classes to cover, the investment categories to include, the fund families to utilize, and the individual funds to offer.

Portfolio: All the investment assets (i.e. stock, bonds, and investment real estate) an investor owns.

Rebalance: The act of realigning the proportions of your portfolio due to changes that have occurred as a result of increases/decreases of the assets in your portfolio.

Risk Spectrum: The tendency for potential risk to vary directly with potential return, so that the more risk involved, the greater the potential return, and vice versa.

Short-term Investments: Short-term Investments are generally investments with maturities of less than one year.

Stock: A proportionate ownership unit of a company which can be sold to investors; each share represents a fractional portion of ownership, or ‘equity’ in the company.

Variable Annuity: An annuity, the value of which fluctuates based on the market performance of an underlying securities portfolio, similar to a mutual fund. The annuity owner can elect to turn the accumulated value into a stream of income at retirement. However, unlike Fixed Annuities, there is no guarantee of principal repayment or rate of return for Variable Annuities.