Financial Terms “123”


Financial Terms Glossary


123


10-K

A 10-K is a company annual report required by the Securities and Exchange Commission. It provides an overview of the business, risk factors, financial data, and management’s analysis. This is a useful tool for investors. A company’s 10-K can be found on the company website in the investor relations section.


10-Q

A 10-Q is a company quarterly report required by the Securities and Exchange Commission. A company’s 10-Q can be found on the company website in the investor relations section.


12b-1 fee

A 12b-1 fee is paid by mutual funds for marketing and shareholder service costs. These 12b-1 fees are usually paid as a commission to third parties to sell investments in the fund.

These 12b-1 fees are not usually transparent and are not understood by investors.


1040 form

Form 1040 is the United States tax form for individuals. This Internal Revenue Service (IRS) form is normally due on April 15 for the preceding tax year. For example, Form 1040 for the tax year 2021 is due April 15, 2022.


1099 form

A 1099 Form is an Internal Revenue Service (IRS) form for reporting income other than salaries, wages, or tips. A W-2 form is for reporting salaries, wages, and tips.


3 fund portfolio

The 3 fund portfolio is a portfolio that uses 3 index funds. These funds are a U.S. stock fund, an international stock fund, and a bond fund. This approach emphasizes low-cost index funds with broad diversification.

The 3 fund portfolio is championed by the Bogleheads, a group that follows the work of John C. “Jack” Bogle. Jack Bogle was the founder of the first index fund and a lifelong champion of indexing.

The index funds in the 3 fund portfolio can be either mutual funds or exchange-traded funds (ETFs). Most 3 fund portfolio investors use either Vanguard, Fidelity, or Schwab as their brokerage.


401(k) Plan

A 401(k) plan is a retirement plan offered by employers to help employees save for retirement. Money saved by the employee is usually matched by the employer. The money saved goes in pretax. The account can grow without annual taxes until any amount is withdrawn years later. This is called a tax-deferred plan.


403(b) plan

A 403(b) plan is a retirement plan offered by public schools and 501(c)(3) tax-exempt employers. A 403(b) plan helps employees save for retirement. Money saved by the employee is usually matched by the employer. The money saved goes in pretax. The account can grow without annual taxes until any amount is withdrawn years later. This is called a tax-deferred plan. A 403(b) plan is similar to a 401(k) plan.


501(c)(3) organization

A 501(c)(3) organization is a charitable organization that is a tax-exempt entity under the U.S. tax code.


Jeff Mankin

Jeff Mankin teaches financial literacy. His website is FinallyLearn.com.

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