Asset Allocation
The process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash, to optimize the risk/reward tradeoff based on an individual's or institution's specific situation and goals. A key concept in financial planning and money management.

Efficient Portfolio
A portfolio that provides the greatest expected return for a given level of risk, or equivalently, the lowest risk for a given expected return. also called optimal portfolio.

Financial Planner
An investment professional who helps individuals set and achieve their long-term financial goals, through investments, tax planning, asset allocation, risk management, retirement planning, and estate planning. The role of a financial planner is to find ways to increase the client's net worth and help the client accomplish all of his/her financial objectives.

Roth IRA
A new type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all.

Simple plan: SIMPLE
A retirement plan sponsored by companies with fewer than 100 employees which is attractive for employers because it avoids some of the administrative fees and paperwork of plans such as 401(k)s. A SIMPLE plan may be structured as either a 401(k).

SIMPLE 401k plan
A retirement plan sponsored by employers which is attractive for employers because it avoids some of the administrative fees and paperwork of plans such as 401(k)s. Employers benefit from the tax-deductible contributions made to the plan, and employees may elect to have salary deferrals in order to contribute to the plan. The employer has the option of matching a certain portion of the employee's deferrals or making non-elective contributions to all eligible employees (an annual limit applies in both cases). A minimum compensation eligibility requirement exists for employees who want to join this plan, and employees cannot establish any other qualified retirement plans at the same time.