Glossary of Terms
A Quick Reference
30-Day Yield
Measure of the yearly rate paid to investors of an interest-bearing account, based on the returns earned in a 30-day period.
529 College Savings Plan
Tax-advantaged college savings plans authorized under Section 529 of the Internal Revenue Code.
Account Owner
The person establishing the account. The Account Owner must be a U.S. citizen or resident alien and at least 18 years old at the time an account is opened. Only one Account Owner is allowed per account.
Accredited
An educational institution which has been recognized as maintaining standards that qualify graduates for admission to higher, or more specialized, institutions or professional practice.
Asset Allocation
An investment strategy that diversifies a portfolio among different types of assets such as stocks, bonds, or cash equivalents. It is used to meet specific financial goals and reduce investment risk. It does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
Automatic Investment Plan (AIP)
An automatic transfer of money from an Account Owner's checking or savings account on the date and for the amount specified by the Account Owner. A program of regular investment cannot assure a profit or protect against a loss in a declining market.
Beneficiary
Individual for whom an account is established for. An account can be set up for any U.S. Citizen or resident alien including the account owner. The beneficiary may be of any age. Common examples of beneficiaries are one's child or grandchild.
Bond Fund
A mutual fund that invests in bonds, typically with the objective of providing stable income with minimal risk to principal. Bond fund values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond fund values fall and investors may lose principal value.
Contribution Limit
Maximum allowable contribution limit based on the aggregate market value of the account(s) for a designated beneficiary currently set at $330,000 for EdVest.
Distribution
Money that you take out of an EdVest account. Distributions can either be qualified or non-qualified.
Dollar Cost Averaging
Investing the same amount in a portfolio at regular intervals. Over time, you buy more shares when the price is lower and fewer shares when the price is higher potentially reducing the average cost per share. Because such a program involves continuous investments regardless of fluctuating share values, investors should consider their financial ability to continue purchases through periods of low price levels.
Earnings
The increase or decrease in value of your investment.
EdVest
Wisconsin's official 529 college savings plan. Approved in 1997 by the Wisconsin state legislature as a way to help make college more affordable for Wisconsin taxpayers. Contributors can deduct up to $3,000 per eligible beneficiary from their Wisconsin taxable income each year. Eligible beneficiaries include your children, grandchildren, great-grandchildren, nieces and nephews, and even yourself.
Eligible Schools
Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited postsecondary schools in the country as well as some abroad.
Enrollment-Based Portfolios
Investment tracks that invest in a portfolio based on the anticipated year of enrollment for the beneficiary and automatically move to more conservative portfolios as the beneficiary nears enrollment.
Financial Aid
Financial support a student receives from federally and privately funded sources to attend college. Includes loans, grants, scholarships, and work-study programs.
Fixed Portfolios
Investment options that will remain in the chosen portfolio regardless of the age of the beneficiary. The portfolios range from very aggressive to very conservative. Once an option is chosen, an Account Owner may change their investment one time per calendar year.
Gift Tax
A tax levied by the federal government, and some states, on assets transferred from one person to another paid by the donor, not the recipient.
Investment Options
Diversified range of portfolios in which an Account Owner can choose to invest his or her contributions in EdVest.
Member of the Family
A person related to the beneficiary of an account used for purposes of changing the designated beneficiary or for determining qualified rollovers. As defined under Section 529 of the Internal Revenue Code, this includes: 1) Son, daughter, stepchild, foster child, or a descendant of any of them; 2) Brother, sister, stepbrother, or stepsister; 3) Father or mother or ancestor of either; 4) Stepfather or stepmother 5) Son or daughter of a brother or sister; 6) Brother or sister of father or mother; 7) Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; 8) The spouse of any individual listed above.
Money Market Fund
A mutual fund that invests in low-risk, short-term instruments such as commercial paper, government securities, and certificates of deposit. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. It is possible to lose money by investing in a money market fund.
Mutual Fund
A diversified, professionally managed portfolio of securities that pools the assets of individuals and organizations to invest in securities such as stocks, bonds, or cash equivalents.
Net Asset Value (NAV)
Net asset value per share is the value of a portfolio on a per share basis. It is computed by dividing the "net" assets (assets minus liabilities) of the portfolio by the total number of shares outstanding that day. The assets are valued at the current market value.
Non-Qualified Withdrawal
Money distributed from an account that is not used for qualified higher education expenses. The earnings portion of a non-qualified withdrawal would be treated as taxable income. In addition, the earnings may be subject to a 10% additional federal income tax.
Portfolio Expenses
Annual fee based on a percentage of each portfolio's average daily net assets. Total portfolio expenses include an Administration Fee, Audit Fee, and the weighted average of the underlying mutual funds' expense ratios.
Principal
The original amount of money invested, not including interest or dividends on that amount.
Program Manager
Organization contracted by the state to provide administrative and management services to a 529 plan. Wells Fargo Funds Management is the program manager for EdVest.
Qualified Higher Education Expenses
Amounts paid for tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible institution. Room and board is also considered a qualified expense for a designated beneficiary who is at least a half-time student. Qualified expenses also include the purchase of computer technology, equipment, or Internet access and related services paid for or incurred in 2009 or 2010, if such technology, equipment, or services are to be used by the beneficiary and their family during any of the years the beneficiary is enrolled at an Eligible Educational Institution.
Qualified Withdrawal
Distribution from a 529 plan that is used to pay for qualified higher education expenses and is generally tax-free.
Resident Alien
A citizen of another country who lives in the United States and/or has resident status by law or visa, or passes the substantial presence test.
Return
The increase or decrease in value of your investment, expressed as a percentage.
Rollover
Transferring the value of a Coverdell Education Savings Account, a qualified U.S. savings bond, or a 529 account into a 529 account without subjecting the amount to federal income tax when certain conditions are met.
Sales Charge
The fee charged when you purchase shares of an Advisor-sold 529 plan, usually payable as a commission to a financial advisor who is compensated for his assistance to the investor.
Section 529
Internal Revenue Code (26 U.S.C. 529) that defines the specific requirements for "qualified tuition programs" also known as 529 plans.
Stock Fund
A mutual fund that invests in stocks and is designed for growth or capital appreciation. Stock fund values fluctuate in response to the activities of individual companies and general market and economic conditions.
Successor Owner
The person designated by the Account Owner to assume ownership of the account in the event the Account Owner dies while there is still money in the account. The Successor Owner must be a U.S. citizen or resident alien and at least 18 years old.
Systematic Exchange
Exchanging funds from one portfolio to another on a set date and for a set amount specified by the Account Owner. Allows for dollar cost averaging between portfolios.
UGMA/UTMA 529 Account
An account established by an UGMA/UTMA (Uniform Gifts/Transfers to Minors Act) custodian. Considered an irrevocable gift to the minor beneficiary and the funds may only be used for the benefit of the minor applicable to state UGMA/UTMA statutes.
Volatility
A measure of price or interest rate fluctuations over a given period of time.
Wisconsin State Tax Deduction
Deduction of up to $3,000 from Wisconsin state taxable income available for contributions made to an EdVest account per eligible beneficiary. Eligible beneficiaries include your children, grandchildren, great-grandchildren, nieces and nephews, and even yourself.
For married couples filing jointly, the total deduction per child cannot exceed $3,000. For married couples filing separately, the maximum deduction each contributor can claim per beneficiary is $1,500.
In the case of divorced parents, the total deduction that may be claimed for each child is $3,000. The maximum for each former spouse is $1,500 unless the divorce judgment specifies a different division.