Financial Glossary - P

Passbook Savings Account - A bank account that is very liquid but usually pays a very low interest rate. Passbook accounts should be used for emergency savings and short-term goals.

Penalty - An additional tax due when conditions of retirement savings plan are not fulfilled. An example is the 10% penalty for early withdrawals before age 59½. Late withdrawals (i.e., not making minimum required distributions after age 70½) from a traditional IRA or 401(k) plan are another example of an instance when penalties are assessed.

Penny Stocks - Stocks that sell for $5 per share or less and are generally considered risky.

Pension - An employment-based retirement savings plan that pays benefits to workers at retirement. There are two general types of pensions: defined benefit and defined contribution.

Periodic Expenses - Household expenses that occur generally one to four times a year, instead of monthly, such as quarterly insurance premiums or property tax payments.

Portfolio - The combined holding of stocks, bonds, cash equivalents, or other assets (e.g., real estate) by an individual or household.

Portfolio Rebalancing - Periodically adjusting the holdings in an investment portfolio to maintain a certain asset allocation.

Premium - A fee paid to an insurance company in exchange for third-party protection against a certain type of risk (e.g., loss of a home, disability, liability).

Present Value - Today's value of a sum of money that will be received at a future date.

Principal - The original amount of money invested or borrowed, excluding any interest or dividends.

Probate - The court-supervised process of validating a will, paying debts of the deceased, and distributing the proceeds to named beneficiaries (heirs).

Prospectus- An official booklet that describes a mutual fund including its objectives, expenses, historical performance, purchase and redemption policies, and fees.

Updated:E.J.B.