Financial Glossary - I

Income - A source of money with which to save and pay household expenses. Common sources of income include salary from a job, self-employment earnings, alimony and child support payments, gifts, tax refunds, and public assistance.

Income Fund - A mutual fund that invests in stocks or bonds with a high potential for current income, either dividends (e.g., utility stocks) or interest (e.g., bonds).

Index - An unmanaged collection of securities whose overall performance is used as an indication of stock or bond market trends. An example of an index is the widely quoted Dow Jones Industrial Average. Another frequently reported index is the Standard & Poor's 500.

Index Fund - A type of mutual fund that aims to match a particular stock or bond index by investing in the securities found in the index.

Inflation - The erosion of purchasing power over time through an increase in the cost of goods and services. For example, $100 at the beginning of the year buys less than $100 at the end of the year. If the annual inflation rate is 2 percent, the $100 you spend on groceries in January buys only $98 of food in December. People on a fixed income feel the effects of inflation the most.

Installment Loan - An amount of money that is borrowed to buy things like a house, car, or appliance. Loans are typically repaid in equal monthly amounts, such as a 36-month loan to buy a car. The longer the repayment period, the lower the monthly payment but the greater the total interest cost.

Interest from Borrowing - The cost for borrowing money, generally expressed as a percentage of the amount borrowed, such as 18% interest on a credit card balance. Actions by the Federal Reserve System influence the interest rates charged to consumers.

Interest from Saving - The return on an investment, such as 5% earned on the amount invested in a bond.

Interest Rate Risk - The risk that the value of fixed-income securities (e.g., bonds) will decline when interest rates rise.

Intestate - Dying without a will.

Investing - The process of purchasing assets such as stocks, bonds, real estate, and mutual funds with the expectation of future income and/or capital gains (growth in value).

Investment Clubs - Organizations of investors who meet regularly, study investment options, and contribute money toward the purchase of securities.

IRA - An acronym for Individual Retirement Account, IRAs are tax-deferred accounts established by workers with earned income to save for retirement. There are two types of IRAs: Traditional IRAs, which may or may not be tax-deductible, and Roth IRAs, described below.

IRA -Roth - A type of IRA where contributions are not tax-deductible but earnings on savings are tax-exempt if made more than five years after a Roth IRA is established and after age 59 ½.

Updated:E.J.B.