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Glossary

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valuation: the process of determining the value of an asset or company. Stock analysts determine the value of a company based on current and future earnings, the market value of the company’s assets and the balance sheet. A company with a high price-to-earnings ratio is said to have a high valuation or be highly valued. Bond analysts determine the value of a bond based on projections of future interest rates, and they use their valuation to determine whether a bond should be bought or sold at its current price.

value investing: an investment style that favors buying stocks with lower price-to-earnings ratios and relatively high dividend yields, such as cyclical companies and mature industries. Different from growth investing, which emphasizes stocks with strong earnings and/or revenue growth or growth potential.

variable annuity: a contract underwritten by life insurance companies that pays different amounts based on the performance of the underlying investments. This is opposed to a fixed annuity, which pays out a fixed amount for the duration of the contract. Annuities offer tax deferral and, if elected, guaranteed payments to the annuitant — the beneficiary of these payments — for a specified period of time. Annuities are sold in units, not shares. The account value of an annuity is often at least partially guaranteed by the issuer.

volatility: the size and frequency of fluctuations in the price of a security or mutual fund. Funds that hold stocks are generally more volatile than bond funds, since stocks generally have more frequent and pronounced price movements than bonds. Volatility is a key measure of the risk of a security or mutual fund. The more volatile the security, the greater the risk of losing money, though the greater risk is generally compensated by the potential for higher returns.


Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.