by Mark B Kingsbery, FIC

With plenty of technical jargon, new financial products that are tailored to your specific situation, and an evolving financial services industry, it can be hard to keep up with all the financial terms out there. At Thrivent Financial, we realize finances may not be everyone’s favorite topic, so we’ve compiled a short list of some of the most common finance terms – translated into plain English. 


Asset: Something you own that has value. In the case of personal finances, something that has either a monetary or an exchange value, such as cash, shares of stock or a fund, or the home you own.

Capital gain: The profit from selling an asset for more money than you originally paid for it. If you sell it for less, you have a capital loss. Since capital gains and losses can affect how much you pay in taxes, these two terms may be important to discuss with your tax advisor come tax season.

Compounding: The act of taking interest earned on an investment and putting it back into the investment to earn still more interest

Dividend: When talking about a publicly traded company, dividends refer to the portion of a company’s profits paid out to shareholders. Profits can also go back into the company. When talking about a mutual fund, dividends are generally made up of the dividends received from the stocks held by the fund or the interest received for the bond holdings of the fund.

Diversified portfolio: An investment strategy that spreads your assets over a variety of stocks, bonds and other investments. This is fancier way of saying “don’t-put-all-your-eggs-in-one-basket.”

Dollar cost averaging: Investing smaller, fixed amounts at regular intervals, like $100 per month.

Load: A fee charged by certain mutual funds. These fees can be charged when you purchase a fund (front-end load) or when you sell a fund (back-end load).

Retirement plan distribution: A payout of funds from a retirement plan. These funds can come from a company-sponsored 401(k) plan or an Individual Retirement Account (IRA). 

Retirement plan roll over: Transferring funds from one retirement plan account (e.g. 401(k), IRA, etc.) to another retirement plan account. The funds are not subject to tax or penalties and continue tax deferred growth. 


Cash surrender value: The amount of money you would receive if you decided to cancel your permanent life insurance contract before it becomes payable upon death or maturity.

Cash value: The money you can access from tapping into the accumulated value of a permanent life insurance contract.

Elimination period: The amount of time you’ll have to wait until insurance benefits are paid. In general, the shorter the elimination period, the more expensive the contract is and vice versa.

Exclusion ratio: A ratio applied to each annuity payment to: 1.) find the portion of the payment that is subject to income tax and; 2.) the portion which is considered to be an income tax-free return of your investment in the annuity contract.

Living withdrawal benefit: As applied to an annuity contract, a living withdrawal benefit usually guarantees the annuity payments and/or guarantees a minimum income over a specified period to the annuitant and/or beneficiary of the contract.

Rider: Special coverage added to insurance contracts and annuity products to cover additional items or provide extra benefits. With life insurance, one popular rider is a “waiver of premium,” allowing you to keep your coverage without paying if you become ill or disabled. 

Preferred risk: Insurance companies reward positive decisions and lifestyle choices by offering reduced insurance rates. Or if a doctor’s checkup shows a clean bill of health, it can help to lower your health or life insurance premiums.

Special risk: If your lifestyle or circumstances suggest that the odds are better than average that you’ll collect on your insurance, you’ll be deemed “special risk” and pay a higher price for the coverage.

Standard risk: When you buy any type of insurance, the standard price you pay for that insurance will depend on your age, health, lifestyle and other factors affecting the odds that you’ll collect on that insurance.

Financial terms aren’t always easy to understand.  That’s why it’s important to select a financial representative who speaks in a language you can understand. You should never be afraid to ask for clarification about a term you don’t recognize or understand.

This article first appeared in Thrivent Magazine. To read articles from previous Thrivent issues on a variety of these topics, go to