A

Accrued Interest
Interest that has been earned but not received.

Active Asset Allocation
The goal of active asset allocation is to add value to a passive or fixed asset allocation strategy by overweighing categories likely to outperform and underweighting categories likely to underperform.

Annual Report
A financial report sent yearly to a publicly held firm's shareholders. This report must be audited by independent auditors.

Annuity
A contract that guarantees a series of payments in exchange for a lump sum investment.

Ask Price
A proposal to sell a specific quantity of securities at a named price.

Assets
What a firm or individual owns.

B

Back-end Load
A sales charge levied when mutual fund units are redeemed.

Balance Sheet
A financial statement showing the nature and amount of a company's assets, liabilities and shareholders' equity.

Balanced Fund
A mutual fund which has an investment policy of "balancing" its portfolio generally by including bonds and shares in varying proportions influenced by the fund's investment outlook.

Basis Point
1/100th of 1% (One one-hundredth of a percent). A measure normally used in the statement of interest rates; e.g. a change from 5.75% to 5.81% is a change of six basis points.

Bear Market
A declining financial market.

Beta
A statistical term used to illustrate the relationship of the price of an individual security or mutual fund unit to similar securities or financial market indexes.

Bid Price
A proposal to buy a specific quantity of securities at a named price.

Blue Chip
A descriptive term usually applied to high grade equity securities.

Bond
A long-term debt instrument with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.

Bond Fund
A mutual fund whose portfolio consists primarily of bonds.

Book Value
The value of net assets that belong to a company's shareholders, as stated on the balance sheet.

Broker
An agent who handles the public's orders to buy and sell securities, commodities, or other property. A commission is generally charged for this service.

Bull Market
An advancing financial market.

Buying on Margin
Purchasing a security partly with borrowed money.

C

Capital
Generally, the money or property used in a business. The term is also used to apply to cash in reserve, savings, or other property of value.

Capital Gain
The gain on the disposal of an asset calculated by deducting the cost of the asset from the proceeds received on its disposal.

Capital Loss
The loss that results when a capital asset is sold for less than its purchase price.

Capital Stock
All ownership shares of a company, both common and preferred.

Cash Equivalent
Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.

Closed-end Fund
A fund company that issues a fixed number of shares. Its shares are not redeemable, but are bought and sold on stock exchanges or the over-the-counter market.

Commercial Paper
A negotiable corporate promissory note with a term of a few days to a year. It is generally not secured by company assets.

Common stock
A security representing ownership of a corporation's assets. Voting rights are normally accorded to holders of common stock.

Compounding
When interest is earned on both the principal amount and any interest already earned. Because of compound interest, money grows much faster if the income from an investment is left in the account.

Consumer Price Index
A statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.

Convertible
A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.

Corporation
A legal business entity created under federal or provincial statutes. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts.

Coupon Rate
The annual interest rate of a bond.

Current Asset
An asset that could be converted into cash within 12 months.

Current Liability
A liability that has to be paid within 12 months.

Current Yield
The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.

Custodian
A financial institution, usually a bank or trust company, which holds a mutual fund's securities and cash in safekeeping.

D

Debenture
A bond unsecured by any pledge of property. It is supported by the general credit of the issuing corporation.

Debt
An obligation to repay a sum of principal, plus interest. In corporate terms, debt often refers to bonds or similar securities.

Discount
The amount by which a bond sells on the secondary market at less than its par value or face value.

Distributions
Payments to investors by a mutual fund from income or from profit realized from sales of securities.

Diversification
The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.

Dividend
A per-share payment designated by a company's board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.

Dividend Fund
A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.

Dollar Cost Averaging
Investment of a fixed amount of money at regular intervals, usually each month. This process results in the purchase of extra shares during market downturns and fewer shares during market upturns. Dollar-cost averaging is based on the belief that the market or a over the long term and that it is not worthwhile (or even possible) to identify intermediate highs and lows.

E

Emerging Market
Markets in securities in newly industrialized countries and in countries in Central and Eastern Europe and elsewhere, in transition from planned economies to free-market economies and in developing countries with capital markets at an early stage of development. Examples are the stock exchanges in Mexico, Thailand and Malaysia.

Equity
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares are often known as equities.

Equity Fund
A mutual fund whose portfolio consists primarily of common stocks.

ETF (Exchange-traded Fund)
An exchange-traded fund, or ETF, is a basket of stocks traded on a stock exchange. Each ETF typically represents a particular sector of the economy or of a country at large. For instance, the iUnits traded on the TSE are a bundle of 60 large Canadian stocks that track the performance of the S&P 60 Index. To acquire these 60 stocks you can either buy each one individually or buy an iUnit that represents all 60 stocks through one purchase.

F

Face Value
The principal amount, or value at maturity, of a debt obligation. Also known as the par value or denomination.

Fair Market Value
The price a willing buyer would pay a willing seller if neither was under any compulsion to buy or sell. The standard at which property is valued for a deemed disposition.

Fixed Assets
Assets of a long-term nature, such as land and buildings.

Fixed Income Investments
Investments that generate a fixed amount of income that does not vary over the life of the investment.

Front-end load
A sales charge levied on the purchase o mutual fund units.

Fundamental Analysis
A method of evaluating the future prospects of a company by analyzing its financial statements. It may also involve interviewing the management of the company.

G

Growth Stocks
Shares of companies whose earnings are expected to increase at an above-average rate. Growth stocks are often typified by their low yields and relatively high price/earnings rations. Their prices reflect investors' belief in their future earnings in growth.

Guaranteed Investment Certificates
A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.

I

Income Funds
Mutual funds that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.

Index Fund
A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.

Inflation
A condition of increasing prices. In Canada, inflation is generally measured by the Consumer Price Index.

Interest
Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.

International Fund
A mutual fund that invests in securities of a number of countries.

Investment Fund
A term generally interchangeable with "mutual fund."

Issued shares
The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to issue.

L

Leverage
The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.

Liabilities
All debts or amounts owing by a company in the form of accounts payable, loans, mortgages and long-term debts.

Liquidity
Refers to the ease with which an investment may be converted to cash at a reasonable price.

Load
Commissions charged to holders of mutual fund units.

M

Management Fee
The sum paid to the investment company's adviser or manager for supervising its portfolio and administering its operations.

Margin
An investor's equity in the securities in his or her account. The margin purchaser puts up a portion of the value of the securities, borrowing the remainder from the investment dealer.

Market Index
A vehicle used to denote trends in securities markets. The most popular in Canada is the Toronto Stock Exchange 300 Composite Index (TSE 300).

Market Price
In the case of a security, market price is usually considered the last reported price at which the stock or bond is sold.

Maturity
The date at which a loan or bond or debenture comes due and must be redeemed or paid off.

Money Market
A sector of the capital market where short term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold.

Money Market Fund
A type of mutual fund that invests primarily in treasury bills and other low-risk, short-term investments.

Money Purchase Pension Plan
Another term for defined contribution pension plan.

Mortgage Fund
A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds also invest in commercial mortgages.

Mortgage-backed Securities
Certificates that represent ownership in a pool of mortgages. The holders of these securities receive regular payments of principal and interest.

Mutual Fund
An investment entity that pools shareholder or unit holder funds and invests in various securities. The units or shares are redeemable by the fund on demand by the investor. The value of the underlying assets of the fund influences the current price of units.

N

Net Asset Value
The value of all the holdings of a mutual fund, less the fund's liabilities.

No-load Fund
A mutual fund that does not charge a fee for buying or selling its shares.

O

Open-end Fund
An open-end mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.

Option
The right or obligation to buy or sell a specific quantity of a security at a specific price within a stipulated period of time.

Over-the-counter Market
A securities market that exists for securities not listed on stock exchanges. Bonds, money market securities and many stocks are traded on the over-the-counter market.

P

Par Value
The principal amount, or value at maturity, of a debt obligation. It is also known as the denomination or face value. Preferred shares may also have par value, which indicates the value of assets each share would be entitled to if a company were liquidated.

Pension Plan
A formal arrangement through which the employer, and in most cases the employee, contribute to a fund to provide the employee with a lifetime income after retirement.

Portfolio
All the securities which an investment company or an individual investor owns.

Preferred Share
An ownership security, senior to the common stock of a corporation, with preferred claim on assets in case of liquidation and a specified annual dividend.

Premium
The amount by which a bond's selling price exceeds its face value. Also, the amounts paid to keep an insurance policy in force.

Present Value
The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.

Price Earnings Ratio
The market price of a common share divided by its earnings per share for 12 months.

R

Real Estate Investment Trust
A closed-end investment company that specializes in real estate or mortgage investments.

Redeemable
Preferred shares or bonds that giver the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities.

Risk
The uncertainty of future returns.

S

S&P 500 Index
A share index measuring price changes in 500 securities quoted on the New York Stock Exchange (NYSE); 400 company stocks, 40 financial, 20 transportation and 40 public utility issues are included, each weighted in accordance with the number of stocks at issue.

Sales Charge
In the case of mutual funds, these are commissions charged to holder of fund units, usually based on the purchase or redemption price. Sales charges are also known as "loads."

Shares
A document signifying part ownership in a company. The terms "share" and "stock" are often used interchangeably.

Short Selling
The sale of a security made by an investor who does not own the security. The short sale is made in expectation of a decline in the price of a security, which would allow the investor to then purchase the shares at a lower price in order to deliver the securities earlier sold short.

Specialty Fund
A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.

Spread
The difference between the rates at which money is deposited in a financial institution and the higher rates at which the money is lent out. Also, the difference between the bid and ask price for a security.

Stock Options
Rights to purchase a corporation's stock at a specified price.

Strip Bonds
The capital portion of a bond from which the coupons have been stripped. The holder of the strip bond is entitled to its par value at maturity, but not the annual interest payments.

T

Technical Analysis
A method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.

Total Assets Under Management
The total value of all mutual funds held and managed by a mutual fund company.

Treasury Bill (T-bill)
Short-term government debt. Treasury bills bear no interest, but are sold at a discount. The difference between the discount price and par value is the return to be received by the investor.

Trust
An instrument placing ownership of property in the name of one person, called a trustee, to be held by the trustee for the use and benefit of some other person.

U

Underwriter
An investment firm that purchases a security directly from its issuer for resale to other investment firms or the public or sells for such issuer to the public.

Unit Trust
An unincorporated fund whose organizational structure permits the conduit treatment of income realized by the fund.

V

Volatility
The market fluctuations in the price of a security.

W

Warrant
Certificates allowing the holder the opportunity to buy shares in a company at a stated price over a specified period. Warrants are usually issued in conjunction with a new issue of bonds, preferred shares or common shares.

Y

Yield
Annual rate of return received on investments, usually expressed as a percentage of the market price of the security.

Yield to Maturity
The annual rate of return an investor would receive if a bond were held until maturity.

Z

Zero Coupon Bond
A bond that pays no interest and is initially sold at a discount.