E
EAFE: see MSCI EAFE Index.
earnings: the single most important factor in determining a stock's price, earnings represent a company's revenues minus cost of sales, operating expenses and taxes. Earnings per share are the portion of a company's profit allocated to each outstanding share of common stock. See also price-to-earnings ratio.
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA): legislation that introduced a number of significant retirement and education savings provisions intended to give investors more opportunities to reach their financial goals.
emerging markets: also known as developing markets, emerging markets are generally defined as having a per-capita income below $9,265, and as countries in the process of developing existing or newly created market-based economies.
Employee Retirement Income Security Act (ERISA): the 1974 federal law governing the operation of most private pension and benefit plans. The law eased pension eligibility rules and established guidelines for the management of pension funds.
equity: a security representing shares of ownership in a corporation, unlike a bond, which represents a loan to the issuer. See also stock.
equity-income fund: a mutual fund that invests in a mixture of dividend-paying stocks and bonds to provide shareholders with current income and, as a secondary goal, growth of capital.
euro: the single currency adopted by 12 European countries. Since January 1, 1999, the trading of securities and goods has been conducted only in euros. The European Central Bank oversees monetary policy.
exchange: see stock exchange.
exchange privilege: the right of a shareholder to switch from one mutual fund to another in the same family, usually at no additional charge. The IRS treats an exchange as a sale and subsequent purchase for tax purposes.
exchange rate: the price at which one currency can be converted into another currency. Most exchange rates fluctuate from day to day; others are fixed or pegged to the movement of a major currency.
expense ratio: amount that shareholders pay annually for mutual fund expenses. Includes management fees, 12b-1 fees, administrative fees and operating costs. Expense ratios vary with the fund category; for example, a money market fund will generally have a lower expense ratio than a global equity fund, which has higher costs but also historically higher returns.
