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Accidental death insurance

Insurance that pays money to you or your beneficiary (or beneficiaries) if you are hurt or die in an accident. It does not cover death due to sickness or natural causes. Also called Accidental Death & Dismemberment (AD&D) insurance.

Account

An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.

Account fees

The fees you pay to a financial institution for transactions and other services related to the operation of an account.

Account statement

A summary of the activity in your account over a period of time. This includes money that you put in and take out, investments that you buy and sell, and fees that you paid. Statements are typically provided monthly, qarterly or annually.

Accredited investor prospectus exemption

In Ontario, the accredited investor prospectus exemption allows companies to sell their securities to individuals who meet certain income or financial assets criteria without preparing a prospectus.

Accumulated value

What your money is worth after it earns interest, dividends, or capital gains. Includes the amount you started with, plus any income earned to date.

Active management

An investing strategy that makes specific investments to try to get better returns than a benchmark such as a stock market index.

Adjusted cost base (ACB)

Represents the amount you paid for an investment plus any additional costs, such as fees and commissions.

Administration fee

The fees you pay to a financial institution for activities related to the operation of the account.

After-tax

The money you have left after you pay taxes on money that you made working or investing.

Alternative trading system (ATS)

Generally, an ATS provides automated trading systems which bring together orders from buyers and sellers. They are privately owned computerized networks that match orders outside of an exchange.

Annual fee

A fee that is charged on an annual basis. One common occurrence of an annual fee is the fee charged by credit cards.

Annual growth

How much your money or an investment grows each year.

Annual information form (AIF)

An AIF provides material information about a company and its business in the context of its historical and possible future development. It describes the company and its operations, prospects, risks and other factors that impact its business.

Annual percentage rate (APR)

The total costs of a loan or other debt each year. It is stated as a percentage (for example, 5%). Use it to compare your borrowing options (for example on a mortgage or credit card)

Annual report

A financial report that a company prepares for its shareholders each year. Includes a balance sheet, financial statement, auditor's report, and information about the company's operations and financial situation.

Annuity

A contract usually sold by life insurance companies that guarantees an income to you or your beneficiary at some time in the future. An annuity is a contract with a life insurance company. When you buy an annuity, you deposit a lump sum of money, and the insurance company agrees to pay you a guaranteed income for a set period of time – or for the rest of your life. Annuities are money commonly used to generate retirement income.

Appraisal

An evaluation of what your home or other property is worth today. Most often done by someone who is an expert or is certified by an organization or the government. The Appraisal Institute of Canada is one organization that designates individuals.

Appreciation

How much your money, investments or other assets go up in value as time passes.

Arbitration

An alternative of resolving disputes outside of the civil courts. It puts your case in front of an impartial arbitrator. You must accept the decision as final. Available to all clients of firms that belong to the Investment Industry Regulatory Organization of Canada (IIROC).

Ask, Ask price

The lowest price at which someone will sell a stock on a stock exchange.

Asset

Something of value that a company or an individual owns or controls. Examples: buildings, equipment, property, a car, investments, or cash. Can also include patents, trademarks and other forms of intellectual property.

Asset class

A group of securities that have similar characteristics. Examples of asset classes include, such as stocks, bonds, real estate or cash.

Asset mix

The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.

Auditor

An auditor is an individual whose job it is to check the accuracy of financial records. An auditor might be either an internal auditor, external auditor or independent auditor for accounting firms in the public or private sector. Professional auditors are generally Chartered Professional Accountants.

Auditor’s report

An auditor's report is an important report when reporting financial information on a company's financial data. The report provides an opinion by an auditor on whether the financial information presented is correct and free from material misstatements.

Automatic withdrawals

An arrangement you make with your financial institution to move money regularly from any number of different account types.

Back-end load

A sales fee that you pay when you sell an investment. Also called a "deferred sales charge." The fee often goes down the longer you hold onto the investment.

Balance sheet

A financial statement showing a company's assets, debts and how much money shareholders have invested in the company as at a certain date.

Balanced fund

A mutual fund that generally has the goal to provide capital growth and income and invests in a mix of investments ranging from low to moderate risk. Its goal is to make you a reasonable return. Sample investments: stocks, bonds, and money market funds.

Bank of Canada

The central bank that sets Canada’s money policies. These policies help keep the Canadian dollar stable. They also affect our economy and our money supply. The goal of the Bank of Canada is to keep currency and the financial system stable. They are the sole authority to issue banknotes - bills.

Banker’s acceptance

One of the most popular forms of commercial paper. You loan your money to a corporation for a set period of time. But you don't make interest. Instead, you buy the investment at a discount and get the full value back on the maturity date.

Bankrupt, Bankruptcy

A general term to describe the legal status of when a person or company cannot repay the debts it owes.

Bear market

A weak market where stock prices fall and investor confidence fades. Often happens when an economy is in recession and unemployment is high, with rising prices.

Benchmark

A yardstick that you can use to measure the performance of an investment. Example: a stock market index may be a benchmark you can use to compare how well your own stocks are doing.

Beneficiary

The person(s), institution, trustee or estate you choose to give money, property or other benefits when you die. You may name beneficiaries in your will, insurance policy, retirement plan, annuity, trust or other contracts.

Benefit

Money, goods, or services that you get from your workplace or from a government program such as the Canada Pension Plan.

Beta

Measures how the stock is doing compared to overall stock market. A beta of 1.0 tells you that a stock has been going up and down with the overall stock market and is considered as volatile as the market. A stock with a beta between 0.0 and 1.0 has smaller ups and downs and may be less risky. A beta greater than 1.0 has wider price swings and may be riskier. Stocks with a negative beta are moving opposite to the stock market.

Bid-ask spread

The gap between the price a buyer is willing to pay and the price a seller is willing to accept.

Bid, Bid price

The highest price at which anyone is willing to buy a stock on a stock exchange.

Blue-chip stock

The stock of a leading company with a solid record of strong performance. For example, pays dividends, has a good management team, and is a company of "good" investment value.

Board lot

A standard amount of shares for trading, usually 100 shares. Set by stock exchanges.

Bond

A kind of loan you make to the government or a company. They use the money to run their operations. In turn, you get back a set amount of interest once or twice a year. If you hold bonds until the maturity date, you will get all your money back as well. If you sell early and bond prices are up, you will make money. If prices are down, you will lose money.

Bond laddering

A way to invest in bonds by buying bonds with different maturity dates. This helps you avoid having all your bonds mature when interest rates are down. It also lets you create a steady income from your bonds as they mature on different dates.

Book alue

For investors, it’s what you paid for an investment. For companies, it’s the true value of everything that it owns. If the company had to close its doors and sell everything, the book value is the amount that shareholders would get (amount of net assets that the business owns).

Bottom-up investing

An investment approach that seeks out undervalue companies. This involves using financial ratios and other indicators to pick stocks based on a company’s basic strengths, including its management team. Bottom-up investors hope a stock can perform well even in if its industry or the economy is not doing well.

Branch manager

A person who supervises employees in the branch of an investment firm or bank. Responsible for supervising and overseeing operations of a branch, including its employees.

Broker

A registered person who brings together someone who wants to buy investments with someone who wants to sell. Brokers often charge a fee or commission for buying and selling investments for you.

Brokerage firm

A company, corporation, partnership, or other organization that buys and sells stocks, bonds and other investments for investors.

Budget

A monthly or yearly estimated plan for spending and saving. You work it out based on your income and expenses.

Bull market

A strong market where stock prices rise and investor confidence grows. Often tied to economic recovery or an economic boom, as well as investor optimism.

Buy-sell-agreement

A legal contract between business partners or shareholders about who will own the business in the future. It covers things like: - who can buy each partner or shareholder’s share of the business. - when they can sell. - what price they will get. - what happens if an owner leaves or dies.

Buying on margin

A way to borrow money to buy investments.

Caisse populaire

A credit union which is primarily found in the province of Quebec.

Call option

An agreement that gives you the right to buy a stock, bond, or other investment at a set price by a set date (within a set time period). Also called a “call.” You buy a call hoping that the stock price will rise and you can buy it for less than its market price.

Canada Deposit Insurance Corporation (CDIC)

A crown agency that protects the Canadian dollars that you deposit with banks and trust companies. If the bank or trust company goes out of business, CDIC can reimburse you for eligible deposits, up to a set limit.

Canada disability savings bond

The federal government makes contributions to an RDSP. To be eligible for bonds, net family income has to be below a certain level. You do not need to make any contributions to your RDSP to receive the Bond. The maximum bond per year is $1,000, until the end of the year the beneficiary turns 49, with a $20,000 lifetime limit for a beneficiary.

Canada disability savings grant

The federal government provides matching RDSP contributions of 1x, 2x or 3x - up to $3,500 annually - on contributions made to an RDSP. The Grant amount depends on annual contributions and family income and is paid until the end of the year the beneficiary turns 49, with a $70,000 lifetime limit for a beneficiary.

Canada learning bond (CLB)

The federal government makes contributions to an RESP. To be eligible for the CLB, net family income has to be below a certain level. The CLB provides up to $2,000 in RESP contributions, subject to edibility and age of the beneficiary.

Canada Mortgage and Housing Corporation (CMHC)

A Canadian government agency that oversees the housing industry in Canada. Its main job is to help Canadians get affordable housing. They also provide mortgage loan insurance if a buyer of a home has less than 20% down payment.

Canada Pension Plan (CPP)/Quebec Pension Plan (QPP)

A government pension plan. It gives you monthly income starting as early as your 60th birthday. How much you get depends on what you paid into the plan while you were working.

Canada Premium Bond (CPB)

A low-risk investment from the Bank of Canada. It offers a higher interest rate than a Canada Savings Bond. You can only redeem CPBs once a year. When? Either on or within 30 days of the anniversary date each year (the date that you bought it).

Canada Savings Bond (CSB)

A low-risk investment backed by the government of Canada. You lend the government money for a set period of time at a fixed rate of interest. You can redeem at any time.

Canadian Securities Administrators (CSA)

The Canadian Securities Administrators (CSA) is an umbrella organization of Canada’s provincial and territorial securities regulators whose objective is to improve, coordinate and harmonize regulation of the Canadian capital markets

Capital gain

The money you make when you sell an investment or some other asset for more than you paid for it.

Capital gains tax

A tax you may pay on the profit (money) that you make investing.

Capital loss

The money you lose when you sell an investment or some other asset for less than you paid for it.

Capital markets

Where people buy and sell investments.

Capital property

Property you own that could give you a capital gain if you sold it. Can include investments, a property other than your home and money from a trust account.

Cash equivalent

An investment that is like cash because it’s typically easy to get your money back. It is safe and short-term. Examples: Bank accounts and Treasury bills.

Cash flow

The sums of cash a business gets in and spends out during a set period of time.

Cash flow statement

A record of the flow of cash in and out of a company over a set period of time.

Cash position

The amount of cash a company has at a set point in time.

Cash value of insurance contract

The amount of cash you save from your premium when you buy permanent life insurance. It goes into a separate cash account and grows over time. You can borrow against this sum or get it back as cash if you cancel your policy.

Certified Financial Planner (CFP)

A financial planning professional who helps individuals with their financial goals in the areas of financial planning, taxes, insurance, estate planning, retirement, and more.

Closed-end fund

A type of fund that only issues a set number of units. You can buy and sell these units on a stock exchange.

Closing costs

The costs you pay to buy or sell a home. Can include loan fees, appraisal fees, legal fees, title search, title insurance, survey, taxes and more.

Collateral

Property or assets that you pledge as a borrower as a guarantee that you will repay the loan. You may lose your collateral if you don’t pay back your loan.

Collectibles

Items whose worth may go up over time because they are rare or have special value. Examples: artwork, antiques, coins. As an investment, they carry the risk that their value will not increase.

Commercial paper

A kind of unsecured loan you make to a corporation. You buy the investment at a discount and you get the full value back on the maturity date. The time period is usually nine months or less.

Commissions

What you pay to a broker or agent for their services. Often called a "sales commission". For example, you pay a fee to someone who buys or sell stocks or real estate for you.

Commodity

A raw material that trades in large amounts on a stock exchange. For example, grain, gold, and oil.

Commodity pools

Like mutual funds, in that investors assets are pooled together, but they follow special rules and invest in special areas. For example, they may deal with investments in bulk goods such as wheat, cattle, gold and oil. Or, they may invest in options and futures.

Common share

The most common type of stock you can buy. It represents ownership in a company and may give you the right to: - Elect directors and vote on some corporate matters. - Share in the company's success through dividends and/or capital appreciation. - Share in any assets if the company winds up.

Common stock

See Common Share.

Commuted value

The amount of money you will get as a lump sum if you leave a pension early. Complex to calculate because it involves determining the value today of a future pension payment. Only calculated when a member leaves a pension plan early.

Compounding

A way to grow your money faster. Instead of spending the money you make investing, you reinvest it so it can grow.

Concentration risk

The risk of loss because your money is concentrated in one investment or type of investment sector.

Consolidation loan

A loan you take to pay off many other debts. Often a way to get a lower interest rate or a set interest rate that won’t change.

Consumer Price Index (CPI)

The CPI, as it is called, measures the prices of consumer goods and services. It is used to track changes in the cost of living. When the CPI rises quickly, it’s often a sign of inflation.

Contract

A binding written or verbal agreement that can be enforced by law.

Contribution

Money that you put into a savings or investment plan.

Contribution room

The amount you can put into a savings plan like a Registered Retirement Savings Plan (RRSP). If you do not put the full amount into the plan each year, you will have extra, unused contribution room that you can use in later years. Example: Let’s say you can contribute $12,000 to your RRSP this year, but you only save $2,000. You may put in $10,000 more next year, for a total of $22,000 (if your income is the same).

Convertible

An investment like bonds or preferred shares that may be exchanged, usually for common stock of the same company.

Convertible life insurance

Term life insurance that lets you change to permanent life insurance without any medical exam. You must make the change within a set period of time after you buy the term life policy.

Corporate bond

A bond issued by a company.

Coupon rate

The annual interest rate paid on a bond. Also known as the coupon rate.

Credit rating

A way to score a person or company's ability to repay money that it borrows based on credit and payment history. Your credit score is based on your borrowing history and financial situation, including your savings and debts.

Credit report

A detailed report that shows your borrowing history, including any bankruptcies. Also includes a list of companies that have asked about your credit history.

Credit risk

The risk of default that may arise from a borrower failing to make a required payment.

Credit union

A non-profit financial institution whose members own and operate it. Members can borrow money at low interest rates and make deposits. Sometimes large organizations set them up for their members or employees. Offer services similar to a bank such as chequing and savings accounts.

Creditor

A person or institution that lends money. To borrow from a bank or finance company, you must sign a legal contract that gives them the right to claim your car, home or other assets if you don’t pay back the loan.

Creditor insurance

Insurance that you can get on most types of debt, including your mortgage, line of credit, credit card and loan. It pays off whatever you owe in case you get critically ill or injured, or die.

Crowdfunding prospectus exemption

In Ontario, the crowdfunding prospectus exemption allows Canadian companies, particularly start-ups and businesses in early stages of development, to sell securities online through a single portal that is registered with the Ontario Securities Commission (OSC). Anyone can buy securities under this exemption but there are dollar limits.

Cryptocurrency

Digital currency that is not regulated by the government. Cryptocurrencies are risky, vulnerable to hacking and are often used to support illegal activities. They are decentralized, meaning that no one owns or controls their networks, instead using peer-to-peer structures with hundreds of computers working together to process transactions.

Cryptocurrency exchanges

Exchanges that allow individuals and businesses to trade cryptocurrency for fiat currency (such as Canadian dollars), funds or other forms of virtual currency, often for a fee. Many cryptocurrency exchanges operate across the world and often without any oversight or regulation. By buying and selling on a cryptocurrency exchange, you will not have the same protections as you would if you used a stock exchange.

Currency risk

The risk of losing money because of a movement in the exchange rate. Applies when you own foreign investments.

Dealing representative

Dealing representatives (commonly known as stockbrokers) are registered to buy and sell a variety of investments on your behalf, such as stocks, bonds, mutual funds, ETFs and closed-end funds. The investment firms they work for (commonly known as brokerage firms) are registered as investment dealers.

Death benefit

Money that your life insurance or savings and pension plan(s) pays to your estate or beneficiary after your death. Example: If you contributed to the Canada Pension Plan, money may go to your estate, spouse or common-law partner and children.

Debenture

An investment like a bond where you are lending money to a government or company based only on their reputation. The borrower does not back the loan with any collateral. Example: A Treasury bill (T-bill).

Debt

Money that you have borrowed. You must repay the loan, with interest, by a set date.

Deduction limit

The most you can deduct for your RRSP contribution on your income tax return. Any money that you put into a pension plan at work counts as part of your RRSP contribution.

Deferred profit sharing plan (DPSP)

A plan that employers use to build a retirement fund for employees. The company pays a share of its profits into the fund. The money grows inside the plan tax-free. Note: employees cannot put their own money into a DPSP.

Defined benefit (DB) pension plan

A registered savings plan that promises to pay you a set income when you retire. A formula sets how much you will get. It is often based on your income when you were working and the number of years you have worked.

Defined contribution (DC) pension plan

A registered plan that tells you how much your company will save for you in a personal account. The amount is based on how much you make every year. The best deal is where you can contribute to and your employer matches your contribution. Also known as a money purchase plan. Note: DC plans don’t guarantee what you will get when you retire. That depends on how well you invest the money over the years.

Deflation

A drop in the cost of goods and services over time. Often happens when the supply of money or credit shrinks, or when consumers or government cut spending. This means the same number of dollars will buy more.

Depreciation

The amount that something drops in value over time. Example: A home may go down in value if you don’t maintain it well. A car or a piece of business equipment will go down in value as it wears out.

Derivative

An investment that is based on a contract that gives you the right to buy and sell at set prices. Value is based on performance of an underlying financial asset, commodity or other investments. Examples: Futures, options and swaps.

Designation

A title that tells you that a person has qualified to work as a financial planner. For example, an advisor may get the Certified Financial Planner (CFP) credential based on their education, experience, exams and ethics.

Developed market

Generally defined as a country with well-developed capital markets and economy. Developed market countries may be less risky than countries in emerging or frontier markets.

Direct deposit

A way to have money from your pay, investments or the government put into your account without a cheque. Example: You can ask the Canada Revenue Agency to deposit your tax refund directly into your bank account rather than mailing you a cheque.

Disability insurance

Insurance that gives you income in case you get sick or hurt and can’t work.

Discount

When something sells for less than its normal price.

Discount broker

A stockbroker who charges lower fees to buy and sell investments, as opposed to a full-service broker. Does not provide investment advice.

Discount brokerage

A brokerage firm that charges lower fees to buy and sell investments, as opposed to a full-service brokerage. Does not provide investment advice.

Discount series (Series D)

A series or class of mutual funds that are tailored to do-it-yourself investors who purchase mutual funds through a discount brokerage.

Distribution

A payment you get from a mutual fund or company stock. Funds must distribute any capital gains to shareholders at least once a year. This payment can take the form of cash or additional units. Some companies offer Dividend Reinvestment Plans (DRIPs).

Diversification

A way of spreading investment risk by by choosing a mix of investments. The idea is that some investments will do well at times when others are not.

Dividend

Part of a company's profits that it pays to shareholders in proportion to the total number of shares held. The Board of Directors sets the amount. For common shares, the amount varies. It may skip dividends if business is poor or the directors invest money in things like new equipment or buildings.

Dividend payout ratio (DPR)

Measures what a company pays out to investors in dividends compared to what the stock is earning. It's calculated by dividing the annual dividends per share by the EPS.

Dividend reinvestment plan (DRIP)

The automatic reinvestment of shareholder dividends in more shares of the company's stock.

Dividend stocks

Provide regular income in the form of a dividend, which is a part of the company’s profits paid to its investors.

Dividend yield

A ratio that shows annual dividend rate expressed as a percentage of the current market price of a stock. To calculate, you divide the total dividends you get in a year by the price of each share that you own.

Dollar-cost averaging

A strategy where you try to reduce the cost of buying securities by spreading your purchases out over time. You buy a set amount of a security, such as a mutual fund, at regular intervals. In the end, you average out your cost per unit.

Down payment

The money you put into buying a large item like a car or home.

Duration

Duration is a way to compare bonds with different interest rates and terms. It measures how sensitive a bond’s price is to interest rate changes. It is stated in years.

Earnings

For companies, it’s the money they make and share with their shareholders. For investors, it’s the money they make from their investments.

Earnings per share

A company’s profit divided by the number of shares.

Education assistance payment (EAP)

The amount your child or other beneficiary gets from a Registered Education Savings Plan to help them pay for their education. EAPs only include money that you made investing and government grants. You can take back the money you invested any time.

Emerging market

The financial markets of developing economies. Also called emerging economies. Examples: China, India, much of Southeast Asia, countries in Eastern Europe, and parts of Africa and Latin America.

Employee profit sharing plans (EPSPs)

A type of workplace savings plan. Lets you share in the profits of the company you work for. Your employer is required to make contributions to the EPSP according to a formula based on its profits.

Employee savings plan (ESP)

A type of workplace savings plan. A non-registered account that your employer sets up to help you save. You decide how your money is invested from the investment options your employer makes available. Investment earnings are taxable to you.

Employee stock purchase plan (ESPP)

A company-run program that lets employees buy company shares at a lower price -- as much as 15% lower than the price you would pay on the stock market. The money you put into the plan often comes off your pay.

Employment insurance (EI)

A government plan that helps unemployed Canadians while they look for work or upgrade their skills. EI may also help Canadians who are sick, pregnant or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill.

Encryption

A way to make it safer to send information online by putting data into a secret code.

Equities

Another word for investments in the stock market.

Equity

Two meanings: 1. The part of investment you have paid for in cash. Example: you may have equity in a home or a business. 2. Investments in the stock market. Example: equity mutual funds.

Equity crowdfunding

Equity crowdfunding allows new business or start-ups to raise capital by selling many small stakes, usually in the form of shares, to a large number of investors over the internet. In return for their money, investors are given a small stake in a business.

Equity index

A way to measure the performance of equity investments that trade on a certain stock market.

Equity mutual fund

A mutual fund that invests in a broad mix of stocks. In most cases, an equity fund won't invest in any bonds.

Equity risk

Equity risk is the risk of loss because of a drop in the market price of shares.

Estate

The total sum of money and property you leave behind when you die.

Estate planner

Someone who helps you plan how you will take care of your spouse, children or other family members if something happens to you. It takes a special knowledge of law and taxes.

Estate planning

The plans you make to build and manage wealth for your lifetime and thereafter. Goals may include leaving the most money possible to your loved ones, with the least amount of taxes. Other goals may include caring for children, paying off debt or passing on a business.

Estate tax

In the United States, a tax that your estate must pay after your death, before any property (such as real estate, cash and investments) can go to your heirs. In Canada, there is no estate tax. Instead, the government charges probate fees.

Estate trustee

In Ontario, another term for executor. Someone whom you appoint to carry out the terms of your will.

Exchange rate

How much one country's currency is worth in terms of another. In other words, the rate at which one currency can be exchanged for another.

Exchange-traded fund (ETF)

A fund that chooses investments based on a market index or sector. ETFs trade on a stock exchange. They are not actively managed, so costs tend to be lower than regular mutual funds.

Executor

Someone you name to carry out the wishes that you set out in your will after your death. May be named by the court if you don’t name one. In Ontario, an executor is called an estate trustee.

Existing security holder prospectus exemption

In Ontario, the existing security holder prospectus exemption allows public companies listed on certain exchanges to sell securities to their existing investors.

Expected return

Estimated value of your investment in the future. Tells you the overall profit you might expect - either as income (interest or dividends), or as capital gains (or losses). Often expressed as a percentage.

Expenditures

A payment or the promise of future payment.

Expiry date (options)

The date after which an option can no longer be used or exercised.

Face value

What you pay to buy a bond or some other investment.

Family of funds

A group of different kinds of investment funds managed by the same company.

Family RESP

An RESP for more than one child. The children must be related to the person who opens the RESP.

Family trust

A trust created for family members. The trust may hold investments, a family business, rental property and more. Example: You could set up a family trust for your spouse children and grandchildren.

Family, friends and business associates prospectus exemption

In Ontario, the family, friends and business associates prospectus exemption allows companies to sell securities to the owners, offices and directors of the business or most of their immediate family members, their close business associates, or their close personal friends.

Fee-based advisor

Fee-based advisors get paid through a combination of fees (paid by you) and commissions (paid by the firm they represent).

Fee-based series (Series F)

Series F mutual funds are available to investors who have fee-based arrangements with their advisor. An investor in a fee-based series or class typically negotiates the rate of their advisor’s fee with, and pays such fee directly to, the advisor. There are generally no trailing commissions on a fee-based series because the advisor is being compensated based on the rate negotiated with the investor. As a result, this series generally has a lower management fee than a retail series.

Fee-only advisor

Fee-only advisors are paid directly by you. They don’t earn any commissions. They may charge a flat fee based on the services they provide to you, or they may charge you by the hour.

Finance company

A company that makes loans but does not offer all the other products and services of a bank.

Financial Consumer Agency of Canada (FCAC)

A Canadian agency that protects and educates consumers about financial services.

Financial plan

Your financial plan should cover every aspect of your finances: saving and investing, paying down debt, insurance, taxes, retirement planning and estate planning.

Financial planner

An individual who looks at your financial situation and builds a complete plan to help you reach your goals. The process may cover: financial planning, risk management, investment planning, tax planning, retirement planning, and estate planning.

Financial Planning Standards Council (FPSC)

The Financial Planning Standards Council (FPSC) is a not-for-profit industry group that develops, promotes and enforces professional standards for financial planners in Canada.

Financial ratio

A ratio that you make using numbers from the financial statements of a business. You use these tools to assess how well a company is doing.

Financial statements

Reports that sum up a company’s financial data and tell you how it is doing. The four basic statements are: the statement of financial position (balance sheet, statement of profit or loss (income statement), cash flow statement, and statement of changes in equity.

Fiscal year

Any 12-month period that a company uses for its accounting records. The year does not have to start on January 1.

Fixed income

An investment that pays regular income to you. Examples: Guaranteed Investment Certificates, Canada Savings Bonds and types of other bonds.

Fixed income mutual fund

Funds that hold investments that pay interest (such as bonds and mortgages) or pay dividends (such as preferred shares). Most pay out income monthly.

Fixed term deposit

An investment that you buy and hold for a set period of time. You get back the money you invested only at the end of that time.

Flow-through share

A share typically issued by a mining, oil or gas company that allows income to flow through to investors or owners. This is often the main source of financing for junior mining companies. Gives investors a major tax break.

Foreign investment risk

The risk of loss when investing in foreign countries.

Foreign tax credit

A credit you claim on your income tax return for taxes that you paid to a foreign government on money that you made in a foreign country.

Front-end load

A sales fee that you pay at the time when you buy the investment. It reduces the amount you invest. Also called an Initial Sales Charge. Example: Let's say that you have $1,000 to invest in a mutual fund with a 5% front-end load. You pay a $50 sales fee and invest $950.

Frontier market

Generally defined as a country that has signs of development, but cannot be considered an emerging market. Frontier market investments generally carry high investment risk.

Fund Facts

A user-friendly guide that provides key information about a mutual fund including fees and performance. Mutual fund companies are required to give investors a copy of Fund Facts before they decide to purchase a fund.

Fund manager

A fund manager is responsible for investing the pool of money that people have put into the fund. The manager chooses investments that match the fund’s goals for risk and return.

Fund return

What you estimate your mutual fund will earn in a year, minus the management fees and other costs. Often stated as a percentage of the money you invested. To estimate, look at how well the fund has done over various time periods in the past.

Fund type

A way to group funds based on what they typically invest in. Types include: money market, Canadian fixed income, foreign fixed income, Canadian equities, U.S. equities, international equities and balanced (mix of fixed income and equities) funds.

Fund-of-funds

These funds invest in other funds. Similar to balanced funds, they try to make asset allocation and diversification easier for the investor. The MER for fund-of-funds tend to be higher than stand-alone mutual funds.

Future income

Money that a business or income trust expects to make in the future. This income is less sure than current cash flow. Also, a dollar may be worth less tomorrow than it is today. That’s why investors often discount the stated value of future income.

Futures

A derivative contract that commits you to buy or sell a commodity, currency or stock market index at a set price on a set date in the future. Unlike an option, you can’t change your mind later; you must do what your contract says you will do.

GAAP

See Generally accepted accounting principles

Generally accepted accounting principles

A common set of accounting principles, standards, and procedures that companies follow when they prepare their financial statements.

Global and foreign funds

Funds that invest in foreign securities. Can give investors a way to invest in companies and markets outside Canada, but there are risks investing in foreign countries and foreign currencies.

Government bond

A bond issued by government - federal, provincial or municipal.

Gross income

Your total personal income before you pay taxes or apply tax credits. Sometimes called "gross pay".

Group insurance

Insurance for a group, such as people who work for the same company, or belong to the same union or other association. Often costs less than insurance that you buy on your own, but not always.

Group Registered Retirement Savings Plan (Group RRSP)

A registered retirement plan that works a lot like a regular RRSP. You and/or your employer both put money for your retirement into the plan. Often, the money comes right off your pay so you won't be tempted to spend it first.

Group scholarship plan

An RESP where your savings are invested in a pool with money from other plan members. If you drop out of the plan, or your child does not go on to studies after high school, the money made investing your savings is shared among the other plan members and the CESG is returned to the government.

Group TFSAs

A type of workplace savings plans. A group TFSA works the same way as an individual TFSA. While you’ll have a variety of investment options to choose from, you may have less choice than you would with an individual TFSA.

Growth funds

Funds that invest primarily in common shares of Canadian or foreign companies, but may hold other assets as well. The goal is typically long-term growth because the value of the assets held increases over time. Also called equity funds.

Growth investing

This involves picking companies that keep all their earnings to invest in growing their business. The stock may be expensive today, but growth investors believe that the company’s future growth will help the stock continue to go up in price.

Growth rate

The change in a company's revenues, earnings, dividends, etc., over a set period of time. Often stated as a percentage.

Growth rate per year

Growth Rate Per Year is the annual growth of the investment after all market return and fees are taken into consideration. Often stated as a percentage.

Guaranteed annuity

An annuity that guarantees to make a set number of payments. If you die before the guarantee period ends, the money goes to your estate. If you live on after the guarantee period, payments will continue until your death.

Guaranteed income supplement (GIS)

Extra money from the government for people with low¬ incomes who get Old Age Security. What you get depends on your income or your joint income if you have a spouse or common-law partner. GIS is not taxable.

Guaranteed interest annuity (GIA)

Like a GIC, but you buy them from a life insurance company, so you get different guarantees. And, you can name a beneficiary. The value grows as you deposit money and earn interest. Also called an accumulation annuity.

Guaranteed investment certificate (GIC)

An investment that works like a special kind of deposit. Most GICs pay you a set rate of interest for a set length of time. Some GICs base what you get on the performance of a benchmark such as a stock exchange index.

Guaranteed minimum withdrawal benefit (GMWB)

Guaranteed minimum withdrawal benefit (GMWB) products are a combination of investments and insurance. This is known as a variable annuity. With GMWB products, you get a guaranteed minimum income from your savings each year – starting as early as age 50 for some products. They also provide the potential for investment gains to help increase this income over time.

Guardian

A person that you give the legal responsibility to care for a child or adult who cannot take care of themselves. There are different types of guardians for property or health.

Health insurance

Insurance that covers some or all of your medical bills if you get sick or hurt.

Hedge fund

A lightly regulated fund that pools people’s money to invest in different investments. Hedge funds can invest in almost anything. They often mix different approaches to investing as a way to ‘hedge’ or protect investors from poor results.

Heir

A person you choose to leave some or all of your estate after your death. You name them in your will as your beneficiary.

High yield bonds

Offer a higher return, like some equities, but with lower risk. Note: overall rating for risk is higher than other types of bonds, or sometimes not rated.

High-interest savings account

A savings account that pays a higher rate of interest. Some rules apply. Examples: You may have to make a minimum deposit. You may have to do your banking by phone or Internet. You may also have to wait a couple of days to take money out.

Holdings

Shares or other interests in a business. Also refers to investments in a portfolio.

Home buyers’ plan (HBP)

The Home Buyers' Plan (HBP) is a federal government program that allows you to borrow up to $25,000 from your RRSP tax free to fund your purchase. If both you and your spouse qualify, you can each borrow up to $25,000 from your RRSPs, for a total of $50,000. The money must have been in your RRSP for at least 90 days.

Home insurance

Insurance that covers your home and its contents against losses. Also covers you for accidents that may happen at your home.

Horizon risk

The risk that your investment horizon may be shortened because of an unforeseen event. This may force you to sell investments that you were expecting to hold for the long term. If you must sell at a time when the markets are down, you may lose money.

Hourly wage

The fixed amount you earn per hour.

Human capital

Human capital is someone's ability to generate income from work.

IFRS

See International Financial Reporting Standard

In-trust

An informal account set up to hold assets for a beneficiary. A trustee manages the assets until the beneficiary reaches legal age. The person who sets up the trust can be the trustee or can appoint someone else. You can close the trust if you want to.

Income statement

See Operating Statement.

Income tax

A charge you pay based on your total income from all sources. The Canadian government and your province set the rate.

Income trust

An investment that holds assets that pay income to investors. An income trust often pays out income monthly, but there is no guarantee.

Index

A benchmark or yardstick that lets you measure the performance of a stock market, part of a stock market or a single investment. Examples: S&P/TSX, S&P/TSX Canadian Bond Index.

Index bonds

Index bonds keep pace with inflation. If the Consumer Price Index (CPI) goes up, so does the interest rate on your bond. On the other hand, because index bonds are longer-term bonds, interest rates can affect their value more than other bonds.

Index fund

A fund that invests in investments that track a specified target index or benchmark. For example, an index fund may track the S&P/TSX Composite Index. Also called an Exchange Traded Fund (ETF).

Index investing

This means investing in a group of stocks that behave like a particular market index. You can make your own picks, or simply buy units of an index mutual fund or index ETF.

Indexed annuity

An annuity that pays less at the start, but raises your income each year. Helps you keep up with rising prices over many years. Example: An annuity with 3% indexing will pay about 21% less than a similar non-indexed annuity at first. After about 7 years, your income will be higher and keep going up.

Indexed GIC

A GIC that bases what you make in part on a stock market index. When the stock market is doing well, you make more. But if the stock market does badly, you will not lose money. You will get the stated interest rate.

Indexing

A way to invest that is based on choosing investments that track or mirror a stock market index. Your goal is to get the same return as the index.

Individual pension plan (IPP)

A retirement savings plan that allows bigger tax-deductible contributions than an RRSP. It is designed for people with higher incomes. It works like a defined benefit plan and must follow Canada’s pension plan rules.

Individual RESP

An RESP that you open for a single child or other beneficiary. The beneficiary does not have to be related to you by blood. You choose when and how much you want to contribute.

Inflation

A rise in the cost of goods and services over a set period of time. This means a dollar can buy fewer goods over time. In most cases, inflation is measured by the Consumer Price Index.

Inflation risk

The risk of a loss in your purchasing power because the value of your investments does not keep up with inflation.

Inheritance

Property, money, titles, or debts that pass to you after someone’s death.

Initial public offering (IPO)

The first sale of shares that a company offers to the general public. Also called a Primary Distribution.

Initial sales charge (ISC)

See Front-end Load.

Insider

Every director/senior officer of a reporting issuer; every director/senior officer of a company that is an insider or subsidiary of a reporting issuer; any person/company who owns or controls more than 10% of the voting securities of a reporting issuer.

Institutional and high net worth series (Series I)

Series I mutual funds have high minimum investment requirements and are typically aimed at institutional investors (such as pension plans) or investors making large investments in the fund. Funds in these series generally have lower management fees than the retail series of the same fund.

Insurance advisor

See Insurance agent.

Insurance agent

A person who is trained and licensed to give expert advice and sell insurance. Some get extra training so that they can also sell investments. They get paid by the companies whose products they sell.

Insurance broker

See Insurance agent.

Insurance company

A company that sells insurance products. Some companies sell only life insurance. Some sell only property insurance. Others sell all types of insurance.

Insurance policy

A written contract for insurance. It describes how long you are covered, what you are covered for, any part that you have to pay (the deductible) and what you will pay for the insurance (your premium).

Insurance premium

The amount you will pay regularly to receive insurance.

Interest rate

A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.

Interest rate risk

Interest rate risk applies to debt investments such as bonds. It is the risk of losing money because of a change in the interest rate.

International Financial Reporting Standards

A set of international generally accepted accounting principles (GAAP).

Intestate

When a person dies without a legal will. The probate court then decides what will happen to their money, property and other assets.

Inverse ETF

An inverse ETF allows investors to “short” an index. It’s called “inverse” because it profits when the index declines (and vice versa). Inverse ETFs can be risky for investors who hold them for too long – they are designed for day-to-day use and investors should monitor their performance daily.

Invest

To use money for the purpose of making more money by making an investment. Often involves risk.

Investment

An item of value you buy to get income or to grow in value.

Investment dealer

A securities firm that buys and sells a wide range of investments. They are likely a member of the Investment Industry Regulatory Organization of Canada (IIROC).

Investment Funds Institute of Canada (IFIC)

An association of the mutual fund industry. Its role is to serve its member firms, work together with regulatory bodies, and protect the interests of mutual fund investors.

Investment horizon

How long you expect to hold onto your investment. Based on when you believe you will need your money back. In most cases, the shorter the horizon, the less risk you will want to take with your money.

Investment Industry Regulatory Organization of Canada (IIROC)

National self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.

Investment policy statement (IPS)

An investment policy statement (IPS) outlines the rules you want your advisor to follow for your portfolio. These rules can help you avoid making decisions based on your emotions – in good or bad times. An IPS does not provide a complete detailed financial plan, but it does provide guidance that ensures your plan stays on track over the long term.

Investment representative

See Dealing representative.

Issuer

An organization that offers securities for sale to investors. Examples: corporations, investment trusts and government bodies.

Joint account

A bank or investment account that you own together with another person. Most often people hold accounts jointly with their spouse.

Joint-and-last-survivor benefit

An annuity that pays income to you and your spouse for life. Even if you die, your spouse will continue to get income. To cover the costs of this extra guarantee, the annuity pays less than a life annuity for one person.

Junk bond

A bond with low ratings, often issued by new or less stable companies. The risk is higher that the company will not be able to pay back the people who buy its bonds.

Know your client (KYC)

Advisors are required to gather personal and financial information about you and your investment experience. This is the Know Your Client (KYC) information. This includes details about your investment objectives and goals, your income and net worth, your investment experience, your time horizon (how soon you’d like to reach your goal or how long you’re willing to keep money invested) and your willingness to accept risk.

Labour-sponsored investment fund (LSIF)

An investment fund sponsored by labour organizations. Must follow government rules and meet specific investment criteria. Often provides tax breaks for investors.

Laddering

A way to invest where you spread your money across the same investment with different maturity dates. Example: With $5,000, you could put $1,000 into a 1-year GIC, $1,000 into a 2-year GIC and so on. That way you would have $1,000 of principal maturing every year for 5 years.

Large-cap stock

The stock of a company that has issued shares worth between $10 billion and $200 billion.

Lender

Any person or organization that lends money.

Leverage

A way to make a larger investment by using borrowed money to invest. The more you invest, the more money you can make. But if things don’t work out, you will have bigger losses.

Liabilities

What a company owes, including money, goods or services.

Licensed

An advisor or firm that has met the standards set by the insurance industry. Regulated by the Financial Services Commission of Ontario (FSCO).

Life annuity

A life annuity gives you a guaranteed regular income for life. Payments usually stop when you die, and no money will go to your estate. You may choose to add an option that allows your spouse, beneficiary or estate to continue to receive your payments after your death.

Life income fund (LIF)

A fund that you open with the money from your pension plan when you leave your company or retire. They give you a regular flow of income, but they have rules about how much you withdraw each year.

Life Insurance

Insurance that pays cash to your family or other beneficiary after your death. This can give them income and help pay your funeral and other final costs.

Lifelong learning plan (LLP)

You and your spouse each can borrow up to $20,000 from your RRSPs to pay for full-time or part-time education or training expenses under the government's Lifelong Learning Plan (LLP). The maximum you can take out in any year is $10,000. You won’t pay any tax on the money as long as you pay it back over a period of 10 years.

Limited partnership

A special type of business partnership. Two or more partners own and manage a business together, along with one or more limited partners who only invest money. The limited partners have limited liability for the company’s debts.

Line of credit

An account that you set up with a financial institution (often a bank) to borrow money. It lets you borrow what you need, when you need it, up to a certain limit.

Liquidity

Refers to how easy it is to change an investment or asset into cash, without affecting the price. Liquid assets include most stocks, money market instruments and government bonds. Your home or other property is not very liquid.

Liquidity risk

The risk of being unable to sell your investment at fair price and get your money out when you want to. To sell the investment, you may need to accept a lower price. In some cases it may not be possible to sell the investment at all.

Living trust

A formal account set up to hold assets for a beneficiary. You cannot take back the assets of the trust. A trustee manages them until the beneficiary reaches legal age. The person who sets up the trust can be the trustee or can appoint someone else.

Living will

A legal document that sets out the medical care that you do or do not want in case you are ever not able to state your wishes.

Loan

An agreement to borrow money for a set period of time. You agree to pay back the full amount, plus interest, by a set date.

Loan insurance

Insurance that pays your loan payments if you lose your job or become sick or hurt and can’t work.

Locked-in

An account that you cannot take money out of until you retire. In most cases, you can't get a cash payout. Your plan may make exceptions if you have a terminal illness, or a small pension benefit.

Locked-in retirement account (LIRA)

An account that holds money moved out of a pension plan. You may use one if you are changing companies and can take your pension savings with you. It works like an RRSP, but your money is locked in. You cannot withdraw the funds until you retire.

Locked-in retirement income fund (LRIF)

A fund that you open with the money from your pension plan when you leave your company or retire. They give you a regular flow of income, but they have rules about how much you withdraw each year.

Locked-in RRSP

An account that holds money moved out of a pension plan. You may use one if you are changing companies and can take your pension savings with you. It works like an RRSP, but your money is locked in. You cannot withdraw the funds until you retire.

Long position

An investment strategy where you buy a security you believe will rise in value.

Longevity risk

The risk of outliving your savings. This risk is particularly relevant for people who are retired, or are nearing retirement.

Lost profit potential

A way to measure the possible gains that you give up when you buy mutual funds, because you pay fees to an expert fund manager instead of investing that money yourself. Also called foregone earnings.

Lump-sum payment

A large one-time payment of money.

Managed RESP

An RESP where you have professional money managers invest your money for you.

Management Discussion and Analysis (MD&A)

A section of a company's annual report where management discusses how the company is doing and what it expects will happen in the coming year. It may also talk about future goals and new projects.

Management expense ratio (MER)

The yearly cost of a fund investment, whether it makes or loses money. It covers investment management, marketing, administrative costs, and fees to salespeople (called trailer fees). It’s written as a percentage of the fund’s value, such as 3%.

Management fee

A charge that you pay for having an investment professional manage an investment fund. The fee pays the managers for their time and skills. It may also cover things like communicating with investors and doing all the paperwork needed to run the fund.

Margin

A way to buy investments by borrowing money from a stockbroker. You must also invest some of your own money first. The extra that you borrow is your margin. Some rules apply about the size of margin that you can have.

Margin account

An account you open to buy investments using money borrowed from a stockbroker. Limits apply to what you can borrow. Not available from companies registered only as mutual fund dealers.

Margin call

A call that a broker makes to an investor when the margin in their account gets too high. This can happen if the value of your investments drops below a certain level. You will have to put more of your own money into your account to set it right.

Marginal tax rate

The amount of tax that you have to pay on each extra dollar of income you make. As your income rises, so does your tax rate.

Market index

A measure of price changes in a stock market. Based on the performance of selected stocks, bonds or commodities. Examples: Dow Jones Industrial Average, S&P/TSX Composite Index, Standard and Poor's 500.

Market price

The amount you must pay to buy one unit or one share of an investment. The market price can change from day to day or even minute to minute.

Market return

A ratio expressed as a percentage representing the amount earned or lost on your investment.

Market risk

The risk of investments declining in value because of economic developments or other events that affect the entire market. The main types of market risk are equity risk, interest rate risk and currency risk.

Market value

The value of an investment on the statement date. The market value tells you what your investment is worth as at a certain date. Example: If you had 100 units and the price was $2 on the statement date, their market value would be $200.

Market-linked

A guaranteed investment that works a bit like a stock as well. What you make is tied to the performance of an equity investment (such as stock or a stock market index). But you will not lose money if you hold the investment until it matures.

Material change

Any information about the company that would have a significant effect on a stock's price once it becomes known to the public. Examples: Takeover, management changes, new products.

Mature

When an investment such as a bond reaches its maturity date. On that date, you get your money back without any penalty. Any interest payments stop.

Maturity date

The date when an investment becomes due. On that date, you get your money back without any penalty. Any interest payments stop.

Maximum loan value

The most a dealer can lend you through your margin account. Based on a set percentage of your margin investment.

Mid-cap stock

The stock of a company that has issued shares worth between $2 billion and $10 billion. Also called "middle cap".

Minimum amount investment prospectus exemption

In Ontario, the minimum amount investment prospectus exemption allows companies to sell their securities to an investor who is not an individual person (such as a company) provided the purchase price of the security is at least $150,000 and is paid, in cash at the time of the purchase.

Minimum deposit

The lowest number of dollars you have to put in a bank account or other investment.

Minimum payment

The minimum amount that you must pay, usually monthly, on a loan or line of credit. In some cases, the minimum payment may be "interest only." In other cases, the minimum payment may include principal and interest.

Minimum wage

The lowest hourly wage a company can legally pay. Different provinces have different minimum wages.

Minimum withdrawal

The smallest sum that you can take out of an account or investment at one time.

Money market

Low-risk investments that mature in less than three years and are very easy to turn into cash. This includes short-term GICs, bonds, and treasury bills.

Money market fund

A fund that invests in short-term, low-risk investments such as treasury bills, bonds and bankers acceptances. Some money market funds specialize in Canadian or US investments or invest only in treasury bills.

Mortgage

A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.

Mortgage fund

A mutual fund that invests money in mortgages to create income for investors. The income comes from the payments the mortgage holders make.

Mortgage insurance

Insurance you get to cover your mortgage payments in case you get sick, hurt, or die.

Mutual fund

An investment that pools money from many people and invests it in a mix of investments such as stocks and bonds. A professional manager chooses investments that match the fund’s goals for risk and return. You can redeem your fund units at any time.

Mutual fund company

An investment company that pools money from investors and invests it in a mix of investments, such as stocks, bonds, and money market investments. Most mutual fund companies offer a choice of more than one fund.

Mutual fund dealer

A company that buys and sells the shares or units of mutual funds for investors.

Mutual fund dealers association (MFDA)

An industry group that represents companies that sell mutual funds. It sets and enforces rules, by-laws and policies for its member firms.

Mutual fund representative

Mutual fund representatives are registered to buy and sell mutual funds on your behalf. The companies they work for are registered as mutual fund dealers.

Mutual fund series

Mutual funds are often categorized into different “series” or “classes” which are designed to provide different benefits for investors and/or different compensation arrangements for the advisors that sell the fund. As a result, each series or class has different fees or expenses, and therefore sees different performance results.

Nasdaq

the National Association of Securities Dealers Automated Quotation System. NASDAQ is a computerized system that provides price quotes for securities traded over-the-counter. An American stock exchange and the second-largest exchange in the world by market capitalization, behind the New York Stock Exchange.

National child benefit

A government imitative that makes monthly payments to low-income families with children. Also provides other benefits and services to meet the needs of families with children.

Net asset value (NAV)

The amount that a single mutual fund unit is worth in dollars. It is based on the value of the assets of the fund, less the fees, expenses and taxes, divided by the number of units in the fund.

Net assets

For a person or company, the total of savings and other assets (for example, a house if you own one) minus any debts or liabilities.

Net pay

Your “net” or “take home” pay is your gross pay, less all amounts deducted by your employer, such as taxes and retirement contributions.

Net return

The amount you make from an investment after you pay fees and other costs, including taxes.

Net worth

The value of all your assets, less what you owe.

New York Stock Exchange

An American stock exchange, and the world's largest stock exchange by market capitalization. The exchange trades stocks for some 2,800 companies.

No-load fund

A mutual fund that does not charge a sales fee or commission when you buy or sell its units.

Nominal rate of return

The amount of money you make on an investment before expenses – this rate of return factor in expenses such as taxes, fees or inflation.

Non-guaranteed

Investments that do not guarantee what you will make. You could lose some or all of your money. Examples include mutual funds, stocks, real estate, gold and income trusts.

Non-refundable tax credit

Non-refundable tax credits can only be used against tax that you would otherwise owe.

Non-viability contingent capital (NVCC) securities

Subordinated debt or preferred shares that are issued by banks and can be converted into common stock if a trigger event occurs.

Notes to financial statements

Part of a company's financial statements. Provides details and additional information pertaining to the company's operations and financial position that are left out of the main statements.

NYSE

See New York Stock Exchange.

OAS

See Old age security.

OBSI

See Ombudsman for Banking Services and Investments.

Offering memorandum

A document describing the business of an issuer. This document is designed to help potential buyers make an investment decision when they are considering exempt-market securities.

Offering memorandum prospectus exemption

An exemption that allows companies to sell securities to a wide range of investors based on the availability of an offering memorandum. Anyone can buy securities under this exemption, but there are limits depending on whether they are an eligible or non-eligible investor.

Old age security

Canada's largest public pension program. You qualify if you are age 65 and you have lived in Canada for at least 10 years after age 18. You may pay tax on your OAS income.

Ombudsman for Banking Services and Investments

A national, independent and not-for-profit organization that helps resolve disputes between consumers and financial services firms when they can't come to a resolution on their own.

Online brokerage

A brokerage firm that lets you make your own investment choices and carry them out over the internet. You pay lower fees than if you used a full-service broker.

Online investment advisor

A business that offers professional money management services to investors over the internet. Often referred to as “robo-advisors.”

Ontario Securities Commission

An independent Crown corporation that is responsible for regulating the capital markets in Ontario. Its mandate is to provide protection to investors from unfair, improper or fraudulent practices and to foster confidence in fair and efficient capital markets.

Open-ended fund

A type of mutual fund where there are no limits on the number of units it can sell. If demand is high enough, the fund will continue to issue more. Will also buy back units when investors want to sell. Most mutual funds are open-ended.

Operating line

A type of loan that lets you borrow the money you need when you need it, up to a set amount.

Operating statement

A detailed statement of a business's income, spending and taxes. It shows the health of the business over a period of time, including whether it has made or lost money. Also called an income statement.

Options

An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a "call" option, and the sell right is termed a "put" option. You buy options on a stock exchange.

OSC

See Ontario Securities Commission.

Over-the-counter (OTC) markets

Dealer networks where "unlisted” stocks are traded.

Passive management

An investing strategy that generally involves a portfolio of securities that tracks the performance of a benchmark or investment model. The holdings of a fund that is passively managed are only adjusted if there is a change in the benchmark or investment model.

Payday loan

A small, short-term, high-rate loan that you can get if you have pay coming from work. A very costly way to borrow money. Also called a cash advance loan.

Payroll savings program

A way to have money taken automatically from your pay and put into a special savings account. The idea is that if you don’t see the money, you won’t miss it – or spend it.

Penny stock

Low-priced stocks that typically sell for less than one dollar per share. Usually offered by companies with good growth prospects but limited assets and a short operating history.

Pension

A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.

Pension fund

An account that holds all the money that an employer and employees contribute for pensions. It also holds interest and investment earnings. The fund pays out pension benefits to plan members when they retire.

Performance ratios

Ratio analysis tools that investment analysts use to evaluate various aspects of a company's operating and financial performance such as its profitability or solvency.

Personal banker

Employees of banks and trust companies. They’re trained to sell investments such as GICs and savings bonds. They may also be registered to sell mutual funds.

Phishing

A type of fraud where a stranger poses as a trustworthy person or business to get your private information, such as passwords or credit card numbers. It is often done using email or an instant message.

Political risk

The risk of loss when there are changes to the political leaders or policies in a country. They may lead to changes in inflation and interest rates, which in turn may affect stock prices.

Pooled fund

Investments where funds from many investors, typically high net worth and institutional investors, are combined and are invested and managed by an investment manager. They are typically used to reduce trading costs.

Portfolio

All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.

Portfolio Management Association of Canada (PMAC)

A national association that represents Canadian investment management firms.

Portfolio manager

An investment professional who manages your investment portfolio. For example, they buy, sell and monitor investments that fit their clients’ goals and tolerance for risk.

Power of attorney

A written authorization for another person to make financial and health care decisions for you if you are not able. Rules vary from province to province.

Preferred share

A type of stock that gives you the right to receive regular dividends and part of the company’s assets if it shuts down, as well as the right to sell shares at set times or convert your shares to common shares. Usually does not give you voting rights.

Present value

The current value of money you will receive sometime in the future. Calculated by reducing the future amount at an appropriate compound interest rate.

Price-to-book value ratio (P/B)

A ratio that compares the value the market puts on a company to the value the company has stated in its financial books. It's calculated by dividing the current price per share by the book value per share. The book value is the current equity of a company, as listed in its annual report.

Price-to-earnings ratio (P/E)

A ratio that gives investors an idea of how much they are paying for a company's earnings , specifically whether a stock’s price is high, or low, compared to its earnings. For example, if a company's stock currently sells for $50 a share and its earnings per share are $5, it would have a price-to-earnings ratio of $50 divided by 5, to equal 10.

Price/earnings-to-growth ratio (PEG)

A ratio that indicates whether a stock may or may not be a good value. It’s calculated by dividing the P/E ratio by the company’s projected growth in earnings. The lower the number, the less you have to pay to get in on the company’s expected future earnings growth.

Primary market

The market where securities are offered to investors for the first time. The money from the sale of the securities goes directly to the company. For example, buying a company's stocks from a company it hires to sell them (the underwriter).

Principal

The total amount of money that you invest, or the total amount of money you owe on a debt.

Principal protected note (PPN)

A fixed-income security that guarantees a minimum return of your initial investment after 5 to 10 years, and a possible gain. It does not guarantee that you will make money.

Private issuer

A company with no more than 50 security holders (not including employees or former employees). It does not sell its securities to the public.

Private issuer exemption

An exemption that permits a private issuer to sell its securities to certain individuals (such as a founder, director, officer or accredited investor) without having to file a prospectus and without engaging the services of a registered dealer.

Pro-forma earnings

An informal way to show investors how certain changes in a company may affect its results. Shows results after giving effect to certain assumptions, projections or commitments not yet completed.

Pro-forma financial statements

Reports that help investors understand the affect of an actual or possible change in a company. Shows the effect to company results if the assumption had actually taken place.

Probate

Fees to settle your estate after your death. The probate process includes reviewing your will to ensure it's valid. Also includes paying any debts and giving your money and property to the beneficiaries you have named in your will.

Profits

A financial gain for a person or company. Equals the money left over after you subtract your costs from the money you made.

Projected cash reserve

The money that a company expects to have at some future date to fund its operations.

Projected growth

The amount that a company expects its earnings to grow by some future date.

Prospectus

A legal document that sets out the full, true and plain facts you need to know about a security. Contains information about the company or mutual fund selling the security, its management, products or services, plans and business risks.

Prospectus exemption

An exemption that allows a company lawfully to sell securities without providing a prospectus.

Put option

An agreement that gives you the right to sell a stock, bond or other investment at a set price within a set time period. Also simply called a “put.”

RDSP

See Registered Disability Savings Plan.

Real estate fund

A type of mutual fund primarily invests in securities offered by public real estate companies.

Real estate income trust (REIT)

A company traded on a major exchange that owns (and sometimes operates) income-producing real estate. Examples include apartments, malls, offices, and industrial parks.

Real return

What you make on an investment after you remove the effect of inflation.

Real return bond (RRB)

A special Government of Canada bond that protects you from inflation. You get higher interest payments if the Consumer Price Index rises. You also get back more money than you invested to keep pace with rising prices.

Real return bonds

Real return bonds are issued by the Government of Canada and are also designed to keep pace with inflation. Twice a year, you receive interest payments adjusted to the CPI. When a real return bond matures, the amount you get back (the face value) is also adjusted for inflation.

Realized capital gains

The money you make when you sell an investment for more than you paid for it. The gain is not realized until you sell the investment.

Record date

The cut-off date that determines which shareholders are eligible to receive a dividend or distribution. You must officially own a share on the record date to receive the upcoming dividend. The record date is two days after the ex-dividend date.

Redeemable GIC

A Guaranteed Investment Certificate (GIC) that gives you the option to cash out early without penalty. It guarantees that you will get your money back with interest.

Redemption fee

A fee that some mutual funds charge when you sell or redeem units. Unlike a deferred sales load, you pay this fee to the fund (not to a broker). It covers the costs of redeeming your units.

Refundable tax credit

The government will pay you the refundable tax credits you qualify for, whether you owe tax or not. To claim them, you must file a tax return.

Registered Disability Savings Plan

A savings plan that allows people with disabilities and their families to save for the future. Government grants add to your savings and your investments grow tax-free.

Registered Education Savings Plan

A savings plan that helps you save for a child's post-secondary education. The money that you save in the plan grows tax-free.

Registered Pension Plan

A formal plan that provides benefits to you when you retire. Your employer puts money into the plan (and sometimes you do, too). You don’t pay tax on the money in your plan until you take it out.

Registered Retirement Income Fund

A plan that holds your retirement savings and provides income after you retire. It works like an RRSP in reverse because you withdraw money instead of saving. There are rules about how much you can withdraw each year.

Registered Retirement Savings Plan

A plan that lets you save for retirement while lowering your income taxes. You choose how you want to invest your savings. You don’t pay tax on any money in your account until you take it out.

Registrant

A person or company that is registered with the securities regulator in the province or territory where they do business. They must be registered before they can legally sell securities or offering investment advice.

Registration

A requirement for any person or company trading investments or providing advice in Canada. Securities industry professionals are required to register with the securities regulator in each province or territory where they do business.

Reinvestment risk

The risk of loss from reinvesting principal or income at a lower interest rate.

RESP

See Registered Education Savings Plan.

RPP

See Registered Pension Plan.

RRIF

See Registered Retirement Income Fund.

RRSP

See Registered Retirement Savings Plan.

Savings account

A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.

Savings bond

A special bond that the federal and some provincial governments will issue. In most cases, it is sold at regular times each year and pays a set rate of interest. Fees are included in the cost of the bond. Examples include the Canada Savings Bond (CSB).

Scam

When someone tries to make money by misleading or tricking another person.

Scholarship plan

A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.

Scholarship trust company

A company that offers pooled scholarship plan RESPs.

Secondary market

The market where securities are resold by other investors, not the company that issued them. The money from trades goes to the selling dealers or investors, rather than directly to the company that issued the shares (which is the primary market).

Sector

A part of the economy where businesses provide the same or related products or services. May also refer to a group.

Securities regulator

A government agency that enforces the securities act in jurisdiction it has authority over. This act is made up of laws that establish rules for issuing and trading securities. The Ontario Securities Commission is the securities regulator for Ontario.

Security or Securities

An investment that gives you part ownership of a company, such as a stock, mutual fund or bond. The company that issues the security is known as the issuer.

SEDAR

See System for Electronic Document Analysis and Retrieval.

Segregated fund

An investment product sold by life insurance companies. They are individual insurance contracts that invest in one or more underlying assets, such as a mutual fund.

Self-directed RESP

An RESP plan where you choose the investments you want to hold. You can choose one type of investment (for example, GICs or mutual funds), or you can mix different types, including GICs, mutual funds, stocks and bonds.

Self-directed RRIF

A retirement plan that you use to create income after you retire. You can choose from a wide range of investments or work with an advisor. There are rules about how much you take out each year, and you don’t pay tax on the money that stays in your plan.

Self-directed RRSP

A retirement savings plan that lets you choose from a wide range of investments. You can choose from a wide range of investments or work with an advisor. There are rules about how much you can save each year, and you don’t pay tax on the money that stays in your plan.

Self-regulatory organization (SRO)

Non-government organizations that have been given the responsibility by provincial securities regulators to govern certain players in the financial system, such as investment firms, in order to protect investors from dishonest behaviour.

Service fee

The fee that you pay to hold a bank or investment account. It covers services that help you access and manage your money. You may pay for each service you use or a flat fee that will cover a package of services.

Severance pay

The compensation that you may receive when you lose your job. It typically reflects your years of service with your employer.

Share

A piece of ownership in a company. A share does not give you direct control over the company's daily operations. But it does let you get a share of profits if the company pays dividends.

Share certificate

A document that represents a shareholder's part ownership of a company

Shareholder

A person or organization that owns shares in a corporation. May also be called a investor.

Short-selling

A way to make money on an investment that you believe will drop in value. You borrow shares of a stock and then sell them right away. When the price drops, you buy the shares back at a lower price and return them to the original owner.

Small cap

A term for companies where the total value of all their shares is small. Typically describes newer businesses that may be more volatile.

Specialty fund

A type of fund that may invest in a specific geographical area or a specific industry.

Speculative investment

A high-risk investment that you buy to profit from a change in price. In most cases, you do not buy these investments for income or dividends.

Spousal RRIF

A RRIF that you create with money from a spousal RRSP.

Spousal RRSP

An RRSP for spouses or life partners where the higher earner puts money into a plan in their spouse's name. The spouse can use the funds after a certain time period. You use it to split income in retirement, which lowers the tax you have to pay.

Spousal trust

A trust account that you set up for your spouse to defer tax. All income must be paid to your spouse and no one else can have use of the money, even by way of loan, during their lifetime. No tax is due until your spouse gifts or sells the assets, or dies.

Standard deviation

A measure used to determine a stock's volatility by measuring how widely its price has gone up and down in the past from its average price. More change results in a higher historic volatility.

Stock

An investment that gives you part ownership or shares in a company. Often provides voting rights in some business decisions.

Stock exchange

A market in which securities are bought and sold.

Stock market

The collection of markets and exchanges where stocks, bonds and other securities are issued or traded.

Stock market index

A listing that tracks a group of stocks and their value. Stocks in a given index will have something in common; they may trade on the same exchange, belong to the same industry or be about the same size. Indexes can help assess the results of mutual funds.

Stock option

A contract that gives you the right to buy ("call") or sell ("put") a stock at a set price within a certain period or on a specific date. You don’t have to use the option if you believe you will lose money doing so.

Stock purchase plan

A plan that lets employees buy shares of their company. Often you can get the shares at a discounted price or your employer will match the dollars that you put into the plan.

Stock split

When a company takes steps to divide the shares it already has into more shares. The total dollar value stays the same and the price-per-share drops, so more people can afford to buy the stock than before.

Strike price

The specified price at which the holder of an option can buy or sell the stock.

Strip bond

A bond that has its interest payments separated off. This leaves you only the principal to buy, often at a lower price because you don't get the interest. You get the money you invest back when the bond matures, without interest.

Succession plan

The plan outlining what will happen if a key person within a company leaves, retires or can no longer do their job.

Successor annuitant

A spouse or common-law partner who you name as the sole beneficiary of your RRSP or RRIF. The plan will pass to your surviving spouse, and payments may continue without any break. You can only name your spouse or partner as your successor annuitant.

System for Electronic Document Analysis and Retrieval

The electronic system used by public companies and investment funds across Canada to officially file disclosure documents. You can access this information free of charge.

Systemic withdrawal plan (SWP)

A service that some mutual funds offer where they pay cash distributions to investors at set intervals.

Tax

A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.

Tax bracket

The rate at which you pay tax, based on your income level.

Tax break

A credit or deduction that lowers the tax you owe. Governments often offer tax breaks to help people save, go to school or pay costs such as child care.

Tax credit

The amount you can deduct from your income when you file your taxes. This lowers the tax that you owe.

Tax deduction

A cost that you can deduct from your income when you file your taxes. This lowers the tax that you owe. For example, if you contribute $5,000 to your RRSP, you can deduct $5,000 from your income when you file your taxes.

Tax rate

The rate at which you or a business pays tax on income. Often stated as a percentage, such as 25%.

Tax-free

Money that you do not pay tax on.

Tax-Free Savings Account

A Tax-Free Savings Account (TFSA) is a registered savings account that provides tax benefits. In most cases, investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. There are annual contribution limits but you can carry forward any unused contribution room from previous years.

Taxable income

The amount of income you have to pay tax on, after tax credits and deductions.

Term

The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.

Term annuity

An annuity that pays a guaranteed income for a set term. If you pass away before the end of the term, your payments will go to someone you name as your beneficiary or to your estate. Also called a fixed-term annuity.

Term life insurance policy

An insurance policy that covers you for a set period of time (the term). It pays a set payment if you die before the end of the term. At the end of the term, you can choose to renew the policy or let it end.

Term loan

A loan from a bank for a specific amount that you must pay back along a set schedule.

TFSA

See Tax-Free Savings Account.

Thinly traded

An investment, such as a stock, that does not trade often or in big amounts. It could reflect a lack of interest in a stock or a limited supply of the stock.

Ticker

A record of the current or recent trading activity on an exchange.

Ticker symbol

The symbol for an investment traded on a stock exchange. All stock traded on the Toronto Stock Exchange have a ticker symbol.

Time horizon

The length of time that you plan to hold an investment before you sell it. This may be a brief period of time or span as long as decades, depending on your financial goals.

Tip

The sharing of important information about a company not known to the public.

Title

The legal right to own or hold an item.

Top-down investing

An approach to investing that looks at the overall economy to find strengths and opportunities, identifying industries or sectors that will most likely perform well, and then choosing stocks with the greatest growth potential within those industries or sectors.

Toronto Stock Exchange (TSX)

Canada's largest stock exchange, North America's third largest stock exchange, and the sixth largest in the world.

Trade

The process where one person or party buys an investment from another.

Trade confirmation

You receive a trade confirmation after you buy or sell an investment with the investment name, fees and commissions.

Trailer fees

Trailer fees are paid to salespeople monthly or quarterly for giving investment advice and other services to clients. The size of a trailer fee differs from one fund to the next and between fund companies.

Transaction

The process where one person or party buys goods or services from another for money. Examples include taking money out of an account, buying something with a credit card or taking out a loan.

Transaction fee

The fee that you may pay when you buy or sell a stock or other investment.

Treasury bill (T-bill)

An investment where you lend money to the federal or a provincial government for a set period of time. It does not pay interest, but rather you buy T-bills at a price below what the government will give you at the end of the term.

Trust

An account set up to hold assets for a beneficiary. A trustee manages the assets until the beneficiary reaches legal age.

Trust company

A company that offers the same services as a bank, but can also manage estates, trusts and pension plans, which banks cannot do.

Trust units

A way to represent the interests of each member of a trust. Assets often include property (real estate investment trusts), royalties from oil and gas production (royalty trusts) or business income (income trusts).

Trustee

A person or company that you appoint to manage the assets of a trust. You can name more than one trustee.

Underwriter

A firm, often an investment bank, that buys stocks or bonds from a company in the process of an initial public offering, and then resells the investments to investors.

Unit

What you buy when you invest in mutual fund. Similar to a share of a stock. For example, you could buy 100 units in a mutual fund.

Universal life insurance

A type of permanent life insurance that lets you save up some of your payments (your premiums) in a cash account (the cash value). You can change your premiums any time. The amount your insurance pays will vary based on your premiums.

Unsheltered

A regular investment or account that does not shelter your money from tax. In other words, you have to pay tax on your savings and the money you make investing them.

Value investing

The process of picking high-quality companies that seem to be undervalued because they cost less than similar companies in the same industry.

Volatility

The rate at which the price of a security increases or decreases for a given set of returns. A stock price that changes quickly and by a lot is more volatile. Volatility can be measured using standard deviation and beta.

Warrants

The right to buy more of an investment at a set price – which is often higher – by a set date. Frequently for sale when new preferred or common shares are offered for sale. Warrants are mostly offered to attract investors when a company issues new stock.

Whole life insurance

A type of permanent life insurance that lets you save up some of your payments (your premiums) in a cash account (the cash value). Your premiums are set, as is the amount of money your insurance will pay.

Wills

A legal document that establishes what you want to happen to your money, property and other assets after your death. A will can also set out plans to take care of your children or other family members who count on you financially.

Withholding tax

Tax that comes off your pay or other income and goes to the government before you get any money.

Witness

A person who watches you sign your will. You must have at least two witnesses. They must be of legal age, and they cannot be named in your will.

Wrap account

An investment account that is managed for a flat quarterly or annual fee. This fee covers – or wraps together – all the services you would have to pay, including investment advice.

Yield

Your yearly return on an investment. It’s often stated as a percentage, such as 5%. With stocks, yield can be your yearly income from dividends. With bonds, it’s the interest you get.

Yield curve

A graph that shows how bonds of similar quality pay out different yields over the years.

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