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Municipal bond
An investment security for which a state or local government promises to pay an amount at maturity (usually more than five years in the future) with interest, in return for a current investment. Municipal bonds are generally tax-free, but not always.
Asset allocation
Diversification of your investments, usually between U.S. and international equities, fixed income, real estate, and commodities.
Trusts for Children
You can set up a trust for your children, too. The terms of the trust can specify which of the children's expenses to pay and under what circumstances.
Totten trust
A savings account that allows the depositor to open the account as trustee for someone else (no real trust is set up). Account owners may use the funds as they see fit during their lifetime, and then upon their death the account balance is paid to the named beneficiary.
Portfolio
A collection of securities assembled for an investment goal.
Tax-deferred earnings (investments)
Earnings on which taxes are not paid until a future date, usually when funds are withdrawn. The TSP and traditional IRAs are examples of vehicles that offer tax-deferred earnings.
Living trust
A trust that is established while the grantor is still alive. Compare to testamentary trust.
Asset Allocation
When you divide your money among various types of investments, such as stocks, bonds, and short-term investments (also known as "instruments"), you are allocating your assets. The way in which your money is divided is called your asset allocation.
Beneficiary
The person who receives the benefits or gifts from an estate, insurance policy, IRA, pension plan, or trust.
Testamentary trust
A trust that is established by will. Compare to living trust.
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