Table of Contents
- Capital Gains and Losses
- Capital Market Assumptions
- Emerging Market Bonds
- Emerging Markets
- ETF (Exchange Traded Fund)
- FDIC Cash
- High-Yield Bonds
- High-Yield Municipal Bonds
- Inflation-Protected Bonds
- International Bonds
- International Real Estate
- Municipal Bonds
- Roth IRA
- Short-Term Bonds
- Short-Term Municipal Bonds
- SIPC Insurance
- Taxable Investment Account
- Traditional IRA
- US Large Cap Value
- US Mid Cap
- US Mid Cap Value
- US Small Cap
- US Small Cap Value
- US Total Bond Market
- US Total Stock Market
- US Real Estate
- Wash Sale
A 401(k) is a tax-advantaged retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck. Some employers will match a portion of the employees’ contribution with their own funds.
A 403(b) is a tax-advantaged retirement savings plan that’s offered by non-profits or governmental organizations. It’s available for employees of public education organizations, cooperative hospital service organizations, and self-employed ministers. It’s also available from non-profit employers, if they are Internal Revenue Code 501(c)(3) organizations.
A bond is a type of “fixed-income” investment that acts as a loan between the person investing in it (the holder) and the institution issuing it (the issuer). Typically, corporations or governments issue bonds, which are used to fund projects and operations.
A broker-dealer, or brokerage firm, buys and sells securities on behalf of a client. Brokerage firms must register with the SEC (the US Securities and Exchange Commission) and join a self-regulating organization such as FINRA (the Financial Industry Regulatory Authority).
Capital Gains and Losses
A capital gain happens when you sell an investment at a higher price than you paid for it. The gain is the difference between the (higher) amount you sold it for and the (lower) amount you originally paid. If you incur a capital gain, you'll need to claim that as capital gain income when you file your taxes.
A capital loss is the opposite: It happens when you sell an investment at a lower price than you paid for it. The loss is the difference between the (higher) amount you originally paid and the (lower) amount you sold it for. If you incur a capital loss, you may be able to claim that loss as a deduction when you file your taxes.
You may also be able to offset that loss with any earned capital gains from other investments, which would lower your taxable income. When Ellevest sells investments on your behalf, we work to maximize capital losses and minimize capital gains in order to reduce what you’d owe in capital gains taxes.
Capital Market Assumptions
Capital market assumptions (CMAs) are all the things investment advisors consider when they’re trying to understand how investments from a certain economy might behave. That includes the economy’s rate of inflation, expected returns, risk characteristics for different asset classes (like stocks and bonds), and information about interest rates.
Commodities are an asset class that includes investments in raw materials or agricultural products, like wheat, nickel, and coffee. These investments can offset the impact of inflation and provide diversification benefits.
A custodian is a financial institution that safeguards the securities and cash that’s held in their clients’ accounts.
Dividends are the share of the profit of a stock that’s distributed to stockholders. Ellevest clients see dividends appear on their Goal Detail page as they’re paid out. Click the dropdown arrow next to the dividend payment to see which security paid out which dividends.
At Ellevest, we automatically reinvest your dividends.
Emerging Market Bonds
Emerging Market Bonds are an asset class that includes bonds issued by non-US, emerging-market governments like those in China, India, and Russia. Because the economies of these countries are in a growth phase, these bonds generally have both a higher risk and interest rate than those issued by more developed governments.
Emerging Markets is an asset class that includes stocks of companies in emerging economies, like Brazil, India, China, and South Africa. They provide diversification of investment risk.
ETF (Exchange Traded Fund)
An ETF, or exchange-traded fund, is an investment that’s built like a mutual fund but trades like an individual stock — you can buy or sell your investment in an ETF whenever the markets are open.
FDIC Cash is cash held in banks insured by the Federal Deposit Insurance Corporation, an independent agency of the US government, and not by the Securities Investor Protection Corporation (SIPC). The value of FDIC cash is guaranteed, meaning if you deposit $100, you're entitled to your full $100 regardless of what happens to the bank itself.
High-Yield Bonds are an asset class that includes bonds with lower credit quality ratings. That means there’s a higher chance that the company won’t be able to make payments — but because the risk is greater, high-yield bonds also offer higher interest rates than other bonds.
High-Yield Municipal Bonds
High-Yield Municipal Bonds are an asset class that includes bonds issued by US state and local governments and have lower credit quality ratings. That means there’s a higher chance that the entity won’t be able to make payments. But because the risk is greater, high-yield bonds also offer higher interest rates than other bonds. Municipal bonds’ interest is exempt from federal (and potentially state) taxes.
Inflation-Protected Bonds are an asset class that includes bonds issued by the US government. Their principal value (aka the amount they’re worth before interest) is indexed to inflation. This protects against the risk that inflation will lower a bond’s real value.
International bonds are an asset class that includes bonds issued by non-US, developed-market governments like those in Western Europe, Australia, and Japan. They help to diversify an overall investment portfolio.
International Real Estate
International Real Estate is an asset class that includes investments in commercial properties, apartment complexes, and retail space outside the US.
Municipal Bonds are an asset class that includes bonds issued by US state and local governments. While these bonds aren’t as safe as US Treasuries (aka T-bonds), most municipal bonds have investment-grade credit quality ratings, and historically, they’ve defaulted (aka been unable to pay) less than 2% of the time. Plus, municipal bonds’ interest is exempt from federal (and potentially state) taxes.
A Roth IRA is a type of Individual Retirement Account created by Congress to allow individual people to save for retirement. Roth IRA contributions are made with after-tax funds. This means, unlike a traditional IRA, withdrawals from a Roth IRA are usually tax-free. The assets in a Roth IRA grow tax-free until retirement as well.
Short-Term Bonds are an asset class that includes US government bonds, high-credit quality (aka low-risk) corporate bonds, and high-quality international US dollar-denominated bonds with maturities of 1–5 years.
Short-Term Municipal Bonds
Short-Term Municipal Bonds are an asset class that includes bonds issued by US state and local governments that have remaining maturities of 1–5 years. Their shorter maturities reduce risk, and their interest is exempt from federal (and potentially state) taxes.
SIPC insurance is the type of account protection provided to customers of brokerages registered with the Securities Investor Protection Corporation (SIPC), in the rare event the registered brokerage fails.
Taxable Investment Account
A taxable investment account (also known as a brokerage account) is funded with any amount of after-tax dollars and can be invested in virtually any type of security, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). When securities are sold for a profit, there are generally taxes due.
At Ellevest, your taxable investment account may be allocated to mutual funds and ETFs. With the exception of the Emergency Fund goal, each of the Ellevest goals offers taxable investment accounts.
A traditional IRA is a type of Individual Retirement Account created by Congress to allow individual people to save for retirement. Traditional IRA contributions may be tax deductible or not depending upon the contributor’s financial situation, and all earnings within the IRA grow tax-deferred. Withdrawals from the account at retirement are typically taxed as income.
US Large Cap Value
US Large Cap Value is an asset class that includes stocks of large companies (typically those worth over $10 billion) that trade at lower prices than investors believe they should be worth. These big companies are typically less volatile than smaller companies and generally deliver dividends.
US Mid Cap
US Mid Cap is an asset class that includes stocks of mid-sized companies (typically those worth between $2 billion and $10 billion).
US Mid Cap Value
US Mid Cap Value is an asset class that includes stocks of mid-size companies (typically those worth between $2 billion and $10 billion) that trade at lower prices than investors believe they should be worth.
US Small Cap
US Small Cap is an asset class that includes stocks of smaller companies (typically those worth less than $2 billion).
US Small Cap Value
US Small Cap Value is an asset class that includes stocks of smaller companies (typically those worth less than $2 billion) that trade at lower prices than investors believe they should be worth.
US Total Bond Market
US Total Bond Market is an asset class that includes a broad index of US investment-grade taxable bonds with maturities of at least one year.
US Total Stock Market
US Total Stock Market is an asset class that includes broad-based ownership of the entire US stock market. This class includes stocks that are growing more quickly, as well as those that trade more cheaply, across industries and across a range of company sizes.
US Real Estate
US real estate is an asset class that includes investments in commercial properties, apartment complexes, and retail space. Investing in real estate can help diversify the risk of an overall investment portfolio because it’s a very different type of investment from stocks and bonds. Real estate can also help protect an investment portfolio against inflation because real estate values tend to go up as inflation rises.
A “wash sale” happens when you sell an investment but then buy it again (or buy a very similar one) within 30 days. If you do that, you can’t deduct any capital losses that you incur from that transaction when you file your taxes.
You don’t have to sell and buy with the same investment advisor or brokerage for a sale to be considered a wash sale. For example, if you sell an investment from a non-Ellevest account and then buy the same (or similar) investment with Ellevest, that’s still a wash sale.