Universal Life

A form of whole life insurance that contains a savings component in addition to the death benefit.

Value investor

Someone who buys stocks because they think that the price is lower than it should be based on the financial fundamentals of the company.

Variable interest rate

An interest rate on borrowed money that changes based on outside influences.

Variable Life

A form of whole life insurance that includes an investment component in addition to the death benefit.

Vesting

A process by which an employer increases your ownership of an asset based on how long you have worked for the employer. Vesting is often applied to employer’s matching contributions to a defined contribution retirement plan. For example, if an employer put $1,000 a year in a defined contribution plan for your benefit with a vesting schedule of 20% per year, you would own 20% of the first $1,000 or $200 at the end of the first year, 40% of the first two years’ $1,000 contributions or $800 at the end of the second year and so on up to owning 100% of all contributions once you have been with the employer for five years. If you leave the company before you are fully vested, the employer will take the portion of its contributions that are not yet vested and the related investment returns out of your account. You always own 100% of your contributions and their returns.

Volatility

The possibility that something will deviate from its expected or average value, including both good and bad results.

Weighted average

A calculation using all of the observations of a variable with each observation being assigned a weight.  The weight is the relative importance of that observation.  Each observation is multiplied by its weight.  The sum of those products is divided by the sum of the weights.  If all of the weights are equal, the result is the average most commonly used.  As an example, there are three observations of some variable – 0, 1 and 2.  If the weights applied to each of them is the same, e.g., 1, the weighted average is the sum of the three observations divided by the sum of the weights or (0+1+2)/(1+1+1) = 3/3 = 1.   If the weight given to 1 and 2 is still 1, but the weight given to 0 is increased to 4, the calculation becomes (4*0 + 1*1 + 1*2)/(4+1+1) = 3/6 = 0.5.

Whole Life

A type of life insurance that pays the death benefit regardless of when you die, as long as you pay your premiums.

Yield curve

The relationship between interest rates and the maturities of bonds with the same quality and characteristics.