See: Balance Sheet; Financial Statement; Fundamental Analysis; Income Statement

Inverted Scale
Serial bond issue in which earlier maturities have higher yields than later maturities.

See: Maturity Date; Yield

Investment
The use of money through various vehicles, or an individual's time and effort, to make more income or increase capital, or both. The term "investment" infers that the safety of principal is important. On the other hand, speculation connotes that risking principal is acceptable.

See: Principal; Speculation

Investment Advisor
Individual or organization who provides investment advice for a fee. In most cases, investment advisors with more than 15 clients must register with the SEC and abide by the Investment Advisors Act of 1940. Brokers, banks and general circulation periodicals are exempted from registration with SEC. Most states require an investment advisor to pass an examination.

See: Investment Advisors Act

Investment Advisors Act
Act passed by Congress in 1940 that requires investment advisers to register with the SEC. The intent of the Act is to protect investors from fraud or misrepresentation by investment advisors.

See: Investment Advisor

Investment Banker
A firm, acting as an underwriter or an agent, who serves as intermediary between an issuer of new securities and the investing public. The usual practice is for one or more investment bankers to form a syndicate to buy a corporation's new issue and then sell the issue to individuals and institutions--commonly called a "firm commitment underwriting". In a provisional arrangement--called "best effort"--the investment banker acts as an agent rather than principal and markets a new issue without underwriting it. Under another provisional arrangement--called "standby commitment"--the investment banker agrees to buy for resale any securities not taken by existing holders of rights.

If a client relationship exists, the investment banker's role starts with pre-underwriting counseling and continues after the distribution of securities is completed by offering ongoing advice and guidance. Some underwriting responsibilities include preparing the SEC registration statement, pricing the securities, forming and managing the syndicate, and pegging (stablizing) the price of the issue during the offering and distribution period.

Besides new securities offerings, investment bankers manage the distribution of secondary offerings, maintain markets for already distributed securities and act as finders for private placements. Most investment bankers also maintain broker-dealer operations that serve wholesale and retail clients in brokerage and advisory capacities.

See: Firm Commitment; Initial Public Offering; New Issue; Secondary Distribution; Secondary Market; Underwrite; Underwriter

Investment Certificate
Certificate that evidences investment in a savings and loan association and states the dollar amount invested. The certificates do not involve shareholder responsibility nor do they have voting rights.

See: Voting Rights

Investment Club
Individuals who pool their funds to make joint investments. Each member of the club contributes a certain dollar amount periodically, with the additional money usually invested in growth stocks using a dollar cost averaging approach. Dividends and capital gains are reinvested in most cases. Security purchases are determined by a vote of the members. The clubs permit investors with small dollar amounts to participate in larger investments and thus pay lower commissions. It also assists the club member in becoming more knowledgeable about investing. There are approximately 28,000 investment clubs in US today with about 7000 belonging to the National Association of Investment Clubs (NAIC), a nonprofit organization that provides guidance and literature to its membership. For information about establishing an investment club, the NAIC can be contacted by calling (313) 543-0612 or by writing 1515 E. Eleven Mile Rd. Royal Oak, Michigan 48067.

See: Capital Gains; Dividend Reinvestment Plan; Dollar Cost Averaging; Growth Stock; National Association Of Investment Clubs

Investment Company
A company or trust, such as unit investment trusts and management companies, engaged in the business of investing the pooled funds of small investors in securities appropriate for stated investment objectives. For a fee, it provides investors with more diversification, liquidity, and professional management service than would normally be available to them as individuals.

There are two types of management companies--closed-end and open-end mutual funds. Closed-end investment companies are traded in the open market and are bought and sold like any other stock. The capitalization of a closed-end fund usually remains constant and has a fixed number of outstanding shares. Open-end mutual funds sell their shares directly to investors, are ready to buy back their old shares at their current net asset value, and are not listed. The capitalization is open-end funds are not fixed--they issue more shares as investors want them.

Open-end management companies may either be "load" or "no-load" mutual funds. Load funds are sold by broker-dealers who receive a percentage that is added into the net asset value. The percentage is determined by the amount of the client's investment into the fund. Load funds often can be redeemed free of any charges from the fund. No-load funds are usually bought from the mutual fund and do not charge a loading fee. However, small redemption fees are not uncommon.

Every investment company states its specific investment objectives in its registration statement and prospectus. An investment company usually falls within one of the following categories:

* Diversified common stock funds;
* Balanced funds that mix bonds and preferred and common stocks;
* Bond and preferred stock funds that feature fixed income;
* Specialized funds by industry, groups of industries, geography or size of company;
* Income funds--income generated from high-yield securities;
* Performance funds (growth stocks);
* Dual-purpose funds--a closed-end investment company that offers a choice between dividend shares or capital gain shares and;
* Money market funds (money market instruments).

See: Closed End Management Company; Diversification; Dual Purpose Investment Company; GrowthFund; Growth Stock; Investment Company Act Of 1940; Liquidity; Load Mutual Fund; Money Market Fund; Mutual Fund; Net Asset Value; No Load Mutual Fund; Open End Management Company; Performance Fund; Unit Investment Trust; Yield

Investment Company Act Of 1940
Federal law that regulates investment companies. The Act regulates how mutual funds and other investment vehicles of investment companies operate.

See: Investment Company; Mutual Fund

Investment Counsel
Person whose principal business consists of acting as investment adviser and providing investment supervisory services.

See: Investment Advisor

Investment Grade
A bond that is rated within the top four categories by Moody's or Standard & Poor's.

See: Junk Bond; Legal List; Moody's Investment Grade; Rating; Standard & Poor's Corporation

Investment Income
Income, such as dividends, interest and capital gains amongst other sources, that is generated from securities and other investments. Under current tax regulations, an investor's interest charges from a margin account can be used to offset investment income.

See: Capital Gains; Dividend; Margin Account

Investment Letter
A letter that is an agreement between a seller and a buyer who is purchasing private placement securities (unregistered securities under Regulation D). The investor affirms that the purchase is a long-term investment and not for resale. The securities are also called "letter stock".

See: Letter Security; Registered Security; Rule 144

Investment Strategy
Strategy used to allocate funds among such vehicles as stocks, bonds, cash equivalents and commodities. An investor's strategy should be based on their view of the direction of economic factors such as economic growth, interest rates and inflation. At the same time, the investor may also take into account their age, tolerance for risk, funds available for investment and future needs.

See: Cash Equivalent; Economic Growth Rate; Inflation; Risk; Risk/Reward Ratio

Investment Strategy Committee
Committee in a brokerage firm's research department that sets the investment strategy that the firm recommends to its clients. The committee typically consists of the firm's research director, chief economist, and top analysts. The group recommends industry groups and individual securities that appear especially attractive. They will also advise how much money should be invested into stocks, bonds, or cash equivalents.

See: Cash Equivalent; Fundamental Analysis; Research Department; Technical Analysis

Investment Value Of A Convertible Security
The estimated price at which a convertible security would be valued if it did not have a stock conversion feature. A convertibles' investment value is determined by investment advisory services. Theoretically, it should not fall lower than the related stock's price. It is set by estimating the price at which a non-convertible bond or preferred stock of the same issuing company would sell.

See: Convertible Securities; Preferred Stock

Investor Relations Department
A department within a listed corporation that is responsible for investor relations. Some of the department's functions may include:

* Assuring that a company's activities and objectives are understood and are regarded favorably by the investment community.
* Ensuring full and timely disclosure of material information, and assisting the legal staff with compliance of SEC rules and industry regulations.
* Responding to requests from shareholders, institutional investors, brokers and the media for information and written material such as its quarterly and annual reports.

See: Annual Report; Full Disclosure; Institutional Investor; SEC; Shareholder

Investors Service Bureau
A service of the New York Stock Exchange that answers written inquiries regarding securities investments.

See: New York Stock Exchange

IOC (Immediate Or Cancel)

A limit order to buy or sell a security that requires all or part of the order to be executed immediately. Any part of the order that is not executed, is automatically canceled. An IOC order is usually for a significant share quantity.

See: Fill Or Kill Order; Limit Order; Orders

IPO (Initial Public Offering)
The first public issuance of stock from a company that has not been publicly traded before.

See: Going Public; Hot Issue; Publicly Held; Underwriting; Venture Capital

IRA (Individual Retirement Account)
A personal savings plan that offers tax advantages to save and invest for retirement. Contributions are often tax deductible in whole or in part, depending upon individual cirumstances, including compensation levels and participation in an employer sponsored qualified retirement plan. Income derived from investments in a traditional deductible or nondeductible IRA are tax deferred until withdrawn. Under certain circumstances, withdrawals from a Roth IRA are tax free. Tax penalties may apply to IRA distributions taken before age 59 1/2. Contributions to an IRA may not exceed $2,000 per year. Individuals with earned income may contribute up to $2,000 to the IRA of a nonemployed spouse.

See: IRA Rollover; Lump-Sum Distribution; Qualified Pension Plan Or Trust; Self-Directed IRA; Spousal IRA; Tax Deferred

IRA Rollover
An individual's reinvestment of assets received as a lump-sum distribution from a qualified tax-deferred retirement plan such as a corporate pension plan. The assets must have been received because of either the individual's retirement or employment termination. If the assets are deposited in an IRA within 60 days from the time they are withdrawn, the individual will not have any tax consequences and the assets will continue to accumulate on a tax-deferred basis.

See: IRA; Lump-Sum Distribution; Qualified Pension Plan Or Trust; Self-Directed IRA; Spousal IRA; Tax Deferred

Irredeemable Bond
A bond that does not have a call feature or a redemption privilege. A call feature allows an issuer to redeem the bond before its maturity and a redemption privilege allows a bondholder to redeem the bond before its maturity.

See: Call Features Of A Bond; Maturity Date; Redemption

Issue
A process by which new securities of an entity, such as a corporation or a municipality, are sold and distributed. The securities are distributed through an underwriter or by a private placement.

See: Underwriter

Issued And Outstanding
Corporate shares that have been authorized within the corporate charter and have already been issued. The share may represent all or only part of the number of shares authorized. Authorized shares not yet issued are called "unissued stock". Issued shares repurchased by the corporation are called "treasury stock". Treasury stock is held in the corporate treasury pending reissue or retirement. Although these shares are issued, when making calculations such as earnings per share and dividends, they are not considered to be outstanding. Authorized, issued and outstanding, and treasury shares are usually noted in a corporation's annual reports.

See: Annual Report; Authorized Shares; Earnings Per Share; Issued Shares; Outstanding Stock; Retirement; Treasury Stock; Unissued Stock

Issued Shares
Amount of common shares that a corporation has issued (sold).

See: Issued And Outstanding

Issuer
Entities, such as corporations, municipalities, governments and investment trusts, that may issue and distribute securities. Stock issuers are required to report corporate developments to its shareholders and, if declared, pay dividends. Bond issuers must make timely payments of interest and principal to its bondholders.

See: Issue; New Issue