A
Account statement
A record of transactions and holdings in an account at a financial institution or investment firm provided at the end of a period (i.e., each month, quarter, year).
Accredited investor
A government, financial institution, large company, or persona with a minimum level of income, assets or securities registration, allowed to invest in certain types of securities sold without a prospectus.
Active Trading
Active Trading is a specific type of investment management that involves shorter holding periods for individual investments. An active trader may buy multiple stocks in a day, hold some for a few days, and some for a few weeks.
Adjusted cost base (ACB)
The initial value of a security based on its cost, added contributions, reinvested amounts and other additions and subtractions (e.g., any costs of purchase, returns of capital etc.).
Affinity fraud
A type of scam that usually occurs in a group setting (ethnic/ cultural groups, clubs, associations, religious groups, etc.). Fraudsters will gain trust by joining groups with common interests; it is often easier to trust someone who is like you or has similar interests to you. Once trust is gained, it is easier to perpetrate a scam.
Annuity
A financial instrument that delivers a regular series of payments for a specified period of time.
Appreciation
A term that represents how much your money, investments, or other assets go up in value over time.
Ask Price
The lowest price a seller is ready to receive for a security.
Asset allocation
A portfolio’s mix of equities, fixed income, cash and other asset classes. Your asset allocation should reflect your goals, risk profile, income needs, and other factors.
Asset Class
Groups of investments that act alike and are regulated in a similar way. The following are all general asset classes: Stocks, Bonds, Cash, Real Estate, and Commodities.
Assets
Resources with financial value that are owned or controlled by a person or organization. Examples of assets are cash, securities, real estate, equipment, and jewelry.
B
Balanced portfolio
An investment portfolio that holds a mix of different types of investments, such as bonds and stocks.
Benchmark
A market or sector index against which you can measure the performance of an investment.
Beneficial owner
The individual who has the benefits of owning a security or asset even though if the title is registered in another name.
Bid Price
The highest price a buyer is willing to pay for a security.
Bonds
Bonds are debt securities are issued by corporations and government when they want to raise money. By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you interest payments along the way, (i.e., twice a year).
Book Value
The price paid for a security or debt investment.
Budget
The estimate of the income and expenses of a person, family, or organization, over a period of time.
Buy and hold
An investing strategy based on holding stocks and other assets in your portfolio for a long period of time, regardless of the ups and downs of the market.
C
Canada Deposit Insurance Corporation (CDIC)
A federal government organization that provides insurance to protect money deposited in Canadian banks and certain other financial institutions. See more at CDIC.
Canadian Premium Bonds (CPBs)
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 on or within 30 days of the anniversary date each year.
Canadian Securities Administrators (CSA)
A council of the securities regulators of Canada’s 13 provinces and territories. See more at CSA.
Canadian Securities Exchange (CSE)
A stock exchange for trading the equity securities of rising companies. Formerly known as Canadian National Stock Exchange and CNQ, Canadian Trading and Quotation System Inc. See more at CSE.
Capital gain
The difference between the price or earnings you receive when selling an asset and its adjusted cost base. For example, a capital gain can be the profit you make when you sell a stock for more than you paid.
Capital loss
The difference between the price or earnings you receive when selling an asset and its adjusted cost base. A capital loss happens when you sell for less than you paid.
Cash equivalent
An investment that can be changed to cash with little risk, such as a treasury bill.
Canadian Investment Regulatory Organization (CIRO)
CIRO is the national self-regulatory organization that oversees all investment dealers, mutual fund dealers and trading activity on Canada’s debt and equity marketplaces. Learn more at CIRO.ca.
Client Relationship Model 2 (CRM2)
Securities law requirements that provide investors with information from their registered investment advisors on the costs and performance of their investments, as well as other information related to their accounts.
Commissions
Fees paid to your investment dealer or advisor for services provided such as investment advice and directing transactions.
Commodities
Basic goods used in business that are exchangeable with another similar product. Commodity prices are subject to supply and demand. I.e., grain and oil.
Common share
A security representing part ownership of a company. Common shareholders can normally vote for the board of directors and receive dividends after preferred shareholders. See also preferred share.
Compound interest
Interest that is paid on the original amount deposited, and also on any interest that’s been earned in previous periods (e.g., in year 1, the bank pays you $5 interest on your $55 deposit; in year 2, it pays you interest on $60).
Coupon rate
The interest rate stated on a bond, note, or other fixed income security when it is first sold.
D
Debenture
Like a bond, a company promises to repay money borrowed from investors at a specified time and interest at a specified rate. A debenture is secured against the credit of the borrower.
Debt
An amount borrowed from lenders. The borrower pays interest for the money and must repay by a specific date. Examples include bonds, commercial paper, and debentures.
Derivative
A contract between two parties which gets its value or price from an underlying asset. Examples include futures and options whose price or value is based on a security or commodity.
Discount broker
A firm that allows you to buy and sell securities at a lower cost than a full-service brokerage. Discount brokers are not usually allowed to provide advice on securities, they simply take your order and execute.
Diversification
The method of spreading out investments across different securities, sectors and asset classes to lower risk.
Dividend
A portion of a company’s profit that a company decides to pay to shareholders.
Deferred sales charge
A type of back-end load charge that investors pay if they sell shares of a mutual fund within a specific period of time, usually the first 6 or 7 years.
Dividend reinvestment plan (DRIP)
The automatic reinvestment of shareholder dividends in more shares of the company's stock.
Dividend tax credit
A credit you can claim on your tax return that lowers the amount of tax you pay on dividends from Canadian companies.
Dividend Yield
A financial ratio that shows how much a company pays out in dividends relative to the current share price.
Dollar Cost Averaging
Investing the same amount of money at regular times over a period of time, no matter the purchase price.
E
Earnings per share (EPS)
A company’s net income divided by the number of shares outstanding.
Equities
Shares issued by a company which represents ownership in it.
Exchange-traded fund (ETF)
An investment fund that holds a mix of assets such as shares, bonds, commodities, derivatives or currency. An ETF is traded like a stock.
An index ETF holds the same mix of investments as a stock or bond market index and trades on a stock exchange.
Expected return
The overall profit you expect to receive from an investment in the future which may be very different from the actual returns that you eventually receive.
F
Face value
The value on the face of currency or other financial instruments, like bonds or debentures. The amount that a lender will receive when a bond or debenture is repaid, exclusive of interest.
Fair market value (FMV)
The price an asset is worth in the marketplace.
Financial Industry Regulatory Authority (FINRA)
FINRA is a government-authorized not-for-profit organization that oversees U.S. broker-dealers. See more at FINRA.
Financial institution
A bank, trust company, credit union, or other institution that offers financial services such as savings and chequing accounts, loans, and credit cards.
Financial plan
A written plan that helps you show your goals and figure out how to manage your money to achieve your goals.
Financial planners
People who decide how individuals can meet their financial goals through proper management of their finances. They may offer financial services such as budgeting, cash and debt management, retirement, estate and tax planning.
Financial statements
A formal record of a company’s financial activities for a period of time, usually including a statement of financial position or balance sheet, statement of complete income or income statement, cash flows or a cash flow statement, and notes.
First Home Savings Account (FHSA)
A first home savings account (FHSA) is a registered plan allowing you, as a potential first-time home buyer, to save for your first home tax-free (up to certain limits).
Fixed income Investments
Investments that pay you preset interest or dividend income such as government and corporate bonds and debentures.
Fixed Income Securities
Investments that pay a pre-determined rate of interest or dividend income such as government and corporate bonds, debentures and preferred shares.
Front-end load
A type of fee that investors pay when a mutual fund is first purchased. Front-end loads decrease the size of the investment because they are subtracted from the initial investment amount.
Full-service investment firm
A firm that buys and sells securities on your behalf and offers professional advice on investments. Full-service brokers charge higher fees than discount brokerages.
Fund Facts Sheet
A document that highlights key information for an investor in a mutual fund and ETF, in language the investor can easily understand, including a description of the fund as well as the performance, risks, and costs of buying and owning the fund.
Future
A derivative product whereby the seller agrees to deliver to the buyer an agreed amount of an asset at a specified price on a future date. Futures are traded on an exchange.
G
Guaranteed Investment Certificate (GIC)
An investment sold by a financial institution that pays a fixed rate of interest for a set period, usually one to five years.
I
Index
A selected number of stocks or bonds used to represent an asset class or segment of the market and is used as a performance benchmark. For example, the S&P/TSX Composite Index is made up of approximately 260 stocks.
Insider
An individual with who has access to nonpublic information about a corporation due to their position or close association with the corporation such as, a director or officer of a company, or a shareholder who owns a significant number of shares.
Interest
A fee paid for borrowing money expressed as a percentage rate over a period of time.
Investment
A way to put your money to work with the expectation it will provide income, increase in value, or both.
Investment fund
An investment entity where money is pooled by several investors and invested in various assets on their behalf by a manager. Each investor owns unit or shares of the fund. Investment funds include mutual funds and exchange-traded funds.
K
Know your client
The duty of investment dealers and advisors to understand the general investment needs and objectives of their client.
L
Leverage
An investment method where you borrow money to make an investment. It can increase gains or losses.
Liquid asset
An asset that can be converted to cash or sold easily, with minimal or no loss in value. If your asset is illiquid, you may have to hold on to it even if it loses value.
Liquidity
Ability to sell an investment quickly and at a fair price.
Locked-in retirement account (LIRA)
An account for locked-in pension funds. It is like an RRSP, but funds are not normally available to holders until retirement.
M
Margin account
A trading account that allows you to borrow money to buy securities.
Management Expense Ratio (MER)
The MER is the total of the management fee and operating expenses expressed as a percentage of the fund's value. A fund’s MER is the main cost of investing in a mutual fund or ETF. Funds show their MER as a percentage of the fund's assets.
Management Fee
A service fee you pay out of the funds’ assets to the fund's investment adviser (or its affiliates) for managing the fund's investment portfolio.
Market price
The price that buyers and sellers agree to trade the security on the open market. The prevailing price that the security is sold at.
Material change
A change in a company's business that significantly affects the market value of its securities.
Maturity date
The date on which a bond, debenture, GIC, or term deposit is due to be paid back.
Mutual Fund
A type of investment that groups together money from many investors and uses that money to buy a diversified portfolio of stocks, bonds, or other securities.
Mutual fund dealer
A company that buys and sells the shares or units of mutual funds for investors.
N
Net asset value (NAV)
The value of all the assets of a mutual fund, less the fund's liabilities.
New client account form
You must complete this form when you open a securities trading account. This form includes basic personal information and your investment preferences.
No-Load Fund
A mutual fund in which shares are bought and sold without a commission or sales charge.
O
Ombudsman for Banking Services and Investments (OBSI)
An independent Canadian body that investigates complaints from individuals and small businesses about products and services provided by banks, investment dealers, and mutual fund dealers. See more at OBSI.
Option
The right to buy or sell an underlying asset at a specific price for a specific period of time.
P
Ponzi / Pyramids
This is an investment fraud where there is no actual investment. Money from new investors is used to pay existing investors to make it appear that money is being made.
Portfolio
The collection of stocks, bonds, or other investments you own.
Portfolio manager
A person who may make discretionary trades for institutional investors and high net worth individuals. Also, a firm or individual who manages a mutual fund or collection of securities.
Preferred share
A security providing the investor with a fixed dividend that must be paid before dividends to common shareholders. Owners have limited or no voting rights but preferred claim on assets in case of liquidation of the company.
Principal
The money originally invested or lent to earn interest or other income.
Pump and dump
A scheme where fraudsters use false statements to temporarily increase the share price so they can sell shares they bought cheaply.
R
Rate of return
The gain or loss on an investment expressed as a percentage of the total amount invested.
Redeem
To cash in a security.
Registered Education Savings Plan (RESP)
An education savings plan, set up to provide tax-sheltered financial assistance to fund post-secondary education. Income on savings within a RESP grows tax-sheltered. The Canadian government matches the money up to a certain percentage. The extra funds the government deposits are called the Canadian Education and Savings Grant (CESG).
Registered Retirement Income Fund (RRIF)
An account holding funds which have been transferred from an RRSP (or other registered account) on a tax deferred basis. The plan holder invests withdrawn RRSP funds in the RRIF, and each year must withdraw and pay income tax on a set portion of the fund.
Registered Retirement Savings Plan (RRSP)
An investment account that allows you to save for your retirement on a tax-deferred basis. Contribution limits are set according to your income and are tax-deductible. All growth and income grow tax-free in the account until you withdraw it.
Registrant
A firm or individual that is registered under the Securities Act to trade or advise in securities.
Return
The profit you make on an investment through interest, dividends, or increased value of the investment. Also see expected return.
Risk
Th amount of uncertainty about the expected return from an investment, including the possibility that the investment may lose money or become worthless.
Risk Tolerance
How willing or comfortable you are to risk losing your money on an investment.
S
Savings
Money you have not spent or have put aside.
Savings account
An account with a bank, trust company, or credit union that pays interest on the money you deposit and allows you to withdraw your money at any time.
Scam
A fraudulent or unethical activity; a fraud or trick, an unethical scheme.
Security
A financial instrument such as a stock or bond.
Self-Regulatory Organization (SRO)
An organization that establishes and enforces minimum standards and rules of conduct for members. CIRO is an example of a self-regulatory organization.
Short selling
The sale of borrowed securities with the purpose of buying them back later at a lower price and earning the difference.
Standard deviation
A statistical measurement in finance that, when applied to the annual rate of return of an investment, sheds light on that investment's historical volatility.
Stock
A security that gives partial ownership of a company to an investor. Stockholders typically have voting rights and are kept informed of the firm’s assets and earnings.
Stock exchange
A public place where shares and some other types of investments can be bought and sold.
Suitability
Every registered securities advisor in Canada is required by CIRO and securities legislation to recommend only investments that are right for an investor’s goals, risk tolerance and financial situation.
T
Tax-free savings account (TFSA)
An investment account that allows all growth and income to grow tax-tree. Contributions receive no tax deduction, but all withdrawals can be made tax-free.
Term deposit
A type of deposit with a financial institution that is repaid to you at a specified time (for example, 90 days or one year) and at a specified interest rate.
Term to maturity
Specifies the term period before a bond matures and is redeemable.
Ticker symbol
A one to five letter symbol used to find a company on a stock exchange.
Time Horizon
A time horizon is the length of time you expect to keep your money invested before you may want all or a significant portion back. People with long time horizons may be more willing to endure periodic fluctuations in the value of their investments.
Trailing Commission
An ongoing fee paid to your dealer or advisor for as long as you hold a fund. Trailing commissions are paid out of the management fees charged by the fund. Trailing commissions can vary depending on the type of fund purchased and the series of fund.
Treasury bill (T-bill)
A security where you lend money to the government for a short period of time. There is no interest, but rather you buy the T-bill at less than the price the government will pay you at the end of the loan term.
V
Volatility
This is how often and how much an investment fluctuates in value.
Y
Yield
The rate of return on an investment, expressed as a percentage.