Tax liability
A debt to be paid in taxes. A capital gains tax liability is created every time you sell a security or mutual fund that has increased in price. Sometimes mutual funds distribute capital gains that the manager of the fund has realized from selling securities. This, too, creates a tax liability, even though you may still own the fund. Funds with high turnover ratios tend to distribute the most capital gains.
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Technical analysis
The study of all factors related to the supply and demand of stocks. Unlike fundamental analysis, technical analysis doesn't look at underlying earnings potential of a company when evaluating a stock. Rather, the technical analyst uses charts and computer programs to study the stock's trading volume and price movements in hopes of identifying a trend. Technical analysts don't care about a business's intrinsic value, only the movements of its stock. Most technical analysis is used for short-term investing.
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TED spread
The difference, or spread, between yields on Treasury bills and those on Eurodollars -- dollar-denominated deposits of major commercial banks held outside the U.S. The TED spread is an indication of investor confidence; if the spread widens it signals investor concerns about the financial system.
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Tenancy in common
A way in which two people can own property together with no rights of survivorship. Should either die, the deceased's share of the property will pass through his or her estate, not to the survivor.
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Tender offer
A formal offer by a company to buy a certain amount of its own securities or another company's securities at a stated price within a specified time limit. The offer price is usually at a premium above the current market price. When the offer is for another company's shares, it usually involves a takeover attempt. The Securities and Exchange Commission requires any corporate suitor that acquires more than 5% of a company to disclose its position.
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Tenure
The year a mutual fund's current portfolio manager took control. A fund's performance track record is virtually meaningless if the current manager hasn't been running the fund for long. The average fund manager sticks around for just 4.6 years. See 7 Steps to Picking A Good Fund.
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Tequila effect
A slang reference to the general loss of confidence in emerging markets, as a result of the Mexican financial crisis in late 1994. The tequila effect, or hangover, has taken root largely in Latin America, Eastern Europe and much of Asia.
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Term life
The simplest form of life insurance, in which an insurer promises to pay a certain death benefit if you die during the term for which the policy is in effect. Types include annual-renewable and level-premium term.
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Third-market trading
Over-the-counter trading in stocks that are listed on an exchange.
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Ticker symbol
Letters that identify a security for trading purposes. Trades are reported on the consolidated tape and on quote machines by the company's symbol. For example, MSFT is Microsoft's ticker. Also called a stock symbol.
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Ticks
Upward or downward price movements in a security or index. A downtick is the sale of a security at a price below the preceding deal. An uptick is a sale executed at a price higher than the preceding sale. For stocks, ticks are in 1/8 increments. For bonds, a tick can be a move of 1/32.
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Time horizon
This refers to the length of time you should expect to keep your money in a mutual fund in order to enjoy a good return. Aggressive funds, which are volatile, require a longer time horizon because the risk of losing money over the short term is great. See "Time vs. Risk."
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Tokyo Stock Price Index
Index of the larger issues on the Tokyo Stock Exchange. Also called TOPIX.
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Total assets
A company's total current assets plus total noncurrent assets. Noncurrent assets include property, plant and equipment, and other noncurrent receivables and investments. Total assets can be found on a company's balance sheet. It is a crucial figure for calculating return on assets (ROA), an efficiency ratio. Also, total assets minus total liabilities equals book value. See "Efficiency Ratios."
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Total invested capital
Total invested capital is a tally of all the outside investments a company's management has used to finance its business -- everything from equity (the amount of stock sold) to long-term debt. It is calculated by taking the sum of common and preferred stock equity, long-term debt, deferred income taxes, investment credits and minority interest. Total invested capital is the denominator of the debt-to-total-capital ratio, a ratio that measures how leveraged a company is. See "Long-Term Debt."
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Total liabilities
A company's total current liabilities plus long-term debt and deferred income taxes. Total assets can be found on a company's balance sheet. Total assets minus total liabilities equals book value or net worth. See "Price/Book Value."
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Total return
The full amount an investment earns over a specific period of time. When dealing with mutual funds or securities, total return takes into consideration three factors: changes in the NAV or price; the accumulation/reinvestment of dividends; the compounding factor over time. The return is presented as a percentage and is usually associated with a specific time period such as six months, one year or five years. Total Return can be cumulative for the specific period or annualized. If it is cumulative, it describes how much your investment grew in total for the entire period. If it is annualized, it describes the average annual return over the period of years described. See " The Power of Compounding."
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Tracking error
The difference between the return on a stock-index mutual fund and the performance of the stock index it tracks. An index fund's objective is to match the performance of an index such as the S&P 500. The tracking error for a small fund is usually greater than that for a larger fund because tracking errors to a large extent are caused by the costs that mutual funds incur in buying and selling stocks. See "Index Funds."
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Traders
An individual who buys and sells securities for his or her own account as a dealer or principal, not as an intermediary (i.e., a broker). A secondary meaning is an short-term investor who buys or sells frequently in anticipation of a quick profit.
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Tranche
A portion of a bond offering, delineated by maturity.
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Treasury Bills (T-Bills)
Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days or 52 weeks. Unlike Treasury bonds and notes, which pay interest semiannually, Treasury bills are issued at a discount from their face value. Interest income from Treasury bills is the difference between the purchase price and the Treasury bill's face value. Bills are issued in denominations of $10,000 with increments of $5,000 for amounts above $10,000. Treasurys are widely regarded as the safest bond investments, because they are backed by the "full faith and credit" of the U.S. government. See "Types of Bonds."
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Treasury Bonds (T-Bonds)
Debt obligations of the U.S. Treasury that have maturities of 10 to 30 years. Treasury bonds pay interest semiannually and can be purchased in minimum denominations of $1,000 or multiples thereof. Until recently, the 30-year Treasury bond was considered the benchmark bond in determining trends in interest rates. (It was replaced by the 10-year Treasury note.) It typically has a higher interest rate than other Treasurys, but more inflation and credit risk. But as a group, Treasurys are regarded as the safest bond investments, because they are backed by "full faith and credit" of the U.S. government. See " Types of Bonds."
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Treasury Notes (T-Notes)
Debt obligations of the U.S. Treasury that have maturities of two to 10 years. Treasury notes pay interest semiannually and can be purchased in minimum denominations of $1,000 or multiples thereof. Treasury note yields typically are lower than Treasury bonds, which have longer maturities, but notes typically are about half as volatile as long bonds. The 10-year note now is considered the benchmark for determining interest rates. In general, Treasurys are regarded as the safest bond investments, because they are backed by "full faith and credit" of the U.S. government. See " Types of Bonds."
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Treasurys
Debt securities issued by the U.S. Department of the Treasury. Because principal and interest is backed by the U.S. government, Treasurys are viewed as having no credit risk. They are issued as bills, which have maturities of one year or less; notes, which have maturities of two to 10 years; and bonds, which have maturities of 10 to 30 years. Because Treasury issues have low liquidity risk and are considered to have no credit risk, required yield are typically lower than all other debt issues at any given maturity. Many other bonds, including corporate, municipal and mortgage-backed bonds, are evaluated on a spread basis to Treasurys. See "Types of Bonds."
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Triple-witching hour
Slang for the quarterly expiration of stock-index futures, stock-index options and options on individual stocks. Trading associated with the expirations inflates stock market volume and can cause volatility in prices. Occurs on the third Friday of March, June, September and December.
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TSE 300 Composite Index
Index of 300 leading stocks that trade on the Toronto Stock Exchange.
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Turnover
In accounting terms, the number of times an asset is replaced during a set period. In trading, the volume of shares traded on the exchange on a given day. In employment matters, turnover refers to the total number of employees divided by the number of employees replaced during a certain period. In the U.K., the term refers to a company's annual sales volume.
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Turnover ratio
A measure of a fund's trading history that is expressed as a percentage. A fund with a 100% turnover generally changes the composition of its entire portfolio each year. A low turnover figure (20% to 30%) would indicate a buy-and-hold strategy. High turnover (more than 100%) would indicate an investment strategy involving considerable buying and selling of securities. Funds with higher turnover incur greater brokerage fees for affecting the trades. They also tend to distribute more capital gains than low-turnover funds, because high-turnover funds are constantly realizing the gains. A change in a fund's general turnover pattern can indicate changing market conditions, a new management style or a change in the fund's investment objective. See "Cost Control."
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