Glossary of Terms
Here are some important financial terms to know when investing.
Annual Report: The yearly record of a corporation’s or a mutual fund company’s performance and condition. Distributed to investors and/or shareholders.
Asset Allocation: Distributing portfolio investments among various asset classes or investment sectors.
Automatic Investment Plan (AIP): Monthly payments drawn on a shareholder’s bank account and invested systematically. The minimum amount of a monthly AIP with Principal Funds is $100 per fund or a total of $1,200 annually.
Automatic Reinvestment: In mutual fund accounts, the use of fund dividends and/or capital gains distributions to purchase additional shares automatically. See Reinvestment Privilege.
Breakpoint: The schedule of sales charge discounts offered by a mutual fund for lump-sum or cumulative purchases of front-end loaded (Class A) shares.
CDSC (Contingent Deferred Sales Charge): A fee investors may pay when selling shares, also referred to as a back-end load. The CDSC varies among share classes and holding periods. See the prospectus for details.
Contribution: An investment into a retirement plan. Some may be tax deferred.
Current Yield: The annual return on an investment stated as a percentage of the actual amount invested. With stocks, current yield is the annualized dividend divided by the stock’s current market price. With bonds, current yield is the amount of return (the stated interest) divided by the current market price.
Diversification: Investing in a variety of investments to spread risk.
Financial Professional/Investment Representative: A registered professional trained in various investments and who may provide information to clients about mutual funds, retirement plans, and other financial products.
Medallion Signature Guarantee: Certain transactions require a Medallion Signature Guarantee, unless specifically waived by the fund’s transfer agent. If required, the signature(s) must be guaranteed by a commercial bank, trust company, credit union, savings and loan, national securities exchange member, or brokerage firm which participates in a Medallion program recognized by the Securities Transfer Association. A signature guarantee by a notary public or savings bank is not acceptable. See the prospectus for details on when a Medallion Signature Guarantee is required.
Money Market: A market for short-term debt issues. Money market instruments are forms of debt that mature in less than a year and are typically very liquid.
Mutual Fund: An investment company that offers and sells outstanding securities redeemable on demand by the shareholder at current net asset value. All owners of the fund share in the gains or losses of the fund.
Net Asset Value (NAV): The value of mutual fund shares. NAV is determined by deducting the fund’s liabilities from the total assets of the portfolio and dividing this amount by the number of shares outstanding.
Non-Qualified Retirement Plan: Any plan that does not meet IRS requirements for contributions to qualify as a current tax deduction. Examples include individually purchased annuities, deferred compensation, and mutual fund accumulation plans.
Prospectus: The legal document that must be given to every investor who purchases registered securities in an offering. It explains the details of the offering and all charges and expenses. This legal document is required by and filed with the Securities and Exchange Commission.
Maximum Offering Price (MOP) or Public Offering Price (POP): The price at which an investor may buy shares of a mutual fund. MOP in this case is equal to Net Asset Value, plus the highest load (or sales charge), if any. As with the Net Asset Value, the maximum offering price will typically change on a day-to-day basis. An investor’s purchase price may be lower that the maximum offering price due to breakpoints or other circumstances.
Qualified Retirement Plan: A pension, profit-sharing, or employer-maintained retirement plan meeting the requirements of Sections 401(a), 403(a), or 501(c) of the Internal Revenue Code.
Redemption: Selling mutual fund shares at the current net asset value (NAV), which may be higher or lower than the original price of the fund. For certain share classes, a contingent deferred sales charge (CDSC) may also be deducted from the net amount received.
Reinvestment Privilege: A service provided by most mutual funds for the automatic reinvestment of income dividends and capital gains distributions in additional shares. Reinvestment is at net asset value (NAV) and usually without a sales charge.
Rights of Accumulation (ROA): A term referring to the reduction in sales charges if the current share purchase qualifies for a breakpoint when aggregated with the existing value of other eligible holdings.
Sales Charge or Load: The amount added to the net asset value (NAV) of mutual fund shares, which provides the offering price.
Statement of Intention (SOI): A signed purchase agreement under which a mutual fund can sell shares to an investor at a lower overall sales charge based on the total dollar amount of the intended investment combined with the existing value of eligible accounts at the time the SOI is established. A statement of intention is valid only if the investor completes the terms of the purchase agreement within the specified time period.
Systematic Withdrawal Plan (SWP): Arrangement under which investors may withdraw a specific sum (minimum of $100 per fund or portfolio for Principal Funds accounts) on a recurring basis through prearrangement with the fund company. If a withdrawal frequency is not selected, Principal Funds will establish a monthly withdrawal. Systematic Withdrawal Plan (SWP) Request
To obtain a prospectus, download online or call Sales Support at 1.800.787.1621
While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Sales Support at 1.800.787.1621.
Investing involves risk, including possible loss of principal.
Principal Funds are distributed by Principal Funds Distributor, Inc.
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