Glossary
The following Glossary of Investment Terms is intended for
general information only. As some of the terms contained in the list have different
meanings depending on how the words are used, the reader should not rely on this list as a
legal interpretation of any of the terms. When receiving documents that are not
clear to you, ask your investment representative, or seek the advice of a lawyer or other
professional to explain what the document means and how your rights are affected.
A | B | C | D | E | F | G | H | I | J | K | L | M
| N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Alternative Trading System:
A privately operated computerized system that performs many of the functions of a stock
exchange by centralizing and matching buy and sell orders and providing post-trade
information. Also known as Proprietary Electronic Trading Systems (PETS)
Annual And Semi-Annual Reports:
Also known as financial statements. These are the reports a mutual fund company sends to
its unitholders which describe the fund’s performance over the past year or six-month
period and that identifies the securities held by the fund.
Assets:
What a firm or individual owns.
Top
Back-End Load:
A sales charge levied when mutual fund units are redeemed.
Balanced Funds:
A mutual fund that holds a mix of securities – usually money market, bonds and
equities. The relative balance of these securities can be changed to take advantage of
phases in the economic cycle.
Balance Sheet:
A financial statement showing the nature and amount of a company's assets, liabilities and
shareholders' equity.
Bear Market:
A market in which prices are generally falling.
Bid and Ask:
The bid price is the highest price anyone is willing to pay to buy a stock; while the ask
is the lowest anyone will accept to sell a stock. Together, the bid and ask prices are
referred to as a "quote".
Board Lot:
A unit of trading. The board lot on the Winnipeg Stock Exchange is one share for all
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/Order Book:
A record of all pending buy and sell orders for a particular stock.
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:
A market in which prices are generally rising.
Top
Call Market:
An auction market where orders are batched to accumulate critical mass, then executed
together at a pre-defined time.
Capital Gain Or Loss:
A income tax term referring to profit or loss resulting from the sale of an asset, such as
a security.
Capital Stock:
All classes or types of shares represent ownership of the capital stock.
Cash Equivalent:
Assets that can be quickly converted to cash. These include receivables, Treasury Bills,
short-term commercial paper and short-term government and corporate bonds and notes.
Closed-End Funds:
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.
Common Shares:
Securities which represent part ownership in a company and generally carry voting
privileges.
Compounding:
The process by which income is earned on income that has previously been earned.
b
A statistic that is a measure of 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 over a period of time.
Cum-Dividend:
A term applied to stock at a time when the purchaser will be entitles to a forthcoming
dividend.
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 a trust company, that holds a mutual
fund’s securities and cash in safekeeping.
Top
Day Order:
An order to buy or sell a security valid only for a limited period, normally less
than a day.
Day Trading:
Refers to establishing and liquidating the same position or positions within one day's
trading.
Debt:
An obligation to repay a sum of principal, plus interest. In corporate terms, debt often
refers to bonds or similar securities.
Deflation:
A condition of decreasing prices. In Canada, deflation is generally measured by the
Consumer Price Index.
Demutualization:
The act of moving from a non-profit, non-share capital corporation incorporated by special
statute to a shareowner based, for-profit corporation.
Distribution:
The sale of securities. Also refers to a sum payable to shareholders representing their
share of profits. A distribution of profits may be in cash or by additional shares.
Diversification:
The investment in a number of different securities. To reduce the risk of loss inherent in
investing. Diversification may be among types of securities, companies, industries or
geographic locations.
Dividend:
A portion of a company’s profit paid to the shareholders.
Dividend Fund:
A mutual fund that holds preferred and common stock that generally pay regular dividends.
Dividend Tax Credit:
An income tax credit available to investors who can earn dividend income through
investments in the shares of Canadian Corporations.
Dollar Cost Averaging:
A principle of investing where equal dollar amounts are invested in a share or unit at
regular intervals in the hope of reducing the average cost by acquiring more shares in
periods of lower securities prices and fewer shares in periods of higher securities
prices.
Drips (Dividend Reinvestment Plan):
A plan offered by some companies where the shareholder’s dividends are used to
purchase additional shares in the company. Many companies will absorb the commission
charge that would normally be paid by the investor for additional purchase and many
companies offer discounts on shares purchased through a DRIP plan.
Top
Equities:
Common and preferred stocks, which represent a share in the ownership of a company.
Equity Fund:
A mutual fund whose portfolio consists primarily of common and/or preferred stock.
Ex-Dividend:
Without dividend. The buyer of shares quoted ex-dividend will not receive an already
declared dividend. When shares are cum-dividended, the purchaser will receive the declared
dividend.
Expense Ratio:
A mutual fund company’s cost of doing business. It includes the fund’s
management fee as stated in the Simplified Prospectus. Price and performance is always
shown net of this percentage which is charged against assets held by the fund.
Top
Fixed Income Investments:
Investments that generate a fixed amount of income that does not vary over the life of the
investment.
Forward Pricing:
The accepted method of enacting purchase, transfers and redemption transactions on the
next close of business.
Front-End Load:
A sales charge levied on the purchase of mutual fund units.
Futures:
Contracts to buy or sell specific quantities of a commodity or financial instrument at a
specified price with delivery set at a specified time in the future.
Top
Growth Fund:
A growth fund is a type of mutual fund that usually focuses on the purchase of equities
likely to have superior growth potential. These funds take higher investment risks and
invest in more volatile stocks to achieve above average growth. Stock values may
appreciate or depreciate depending on the success of the companies invested in and other
market factors.
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.
Top
Income Fund:
Alternatively called a bond fund. Income funds are a type of mutual fund that holds debt
instruments such as government bonds and corporate debentures. Its return is based on both
interest earnings and capital gains.
Index:
Statistical measure of the state of the stock market or economy based on the performance
of stocks or other components.
Index Fund:
A mutual fund that matches its portfolio to that of a specific financial market index,
with the objective of tracking 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.
Instalment Receipts
This allows the buyer to pay for the stock in installments instead of one lump sum.
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.
Interlisted:
A stock which is listed on more that one exchanges.
International Fund:
A mutual fund that invests in securities from a number of countries.
Investment Advisor:
An individual who furnishes investment advice.
Investment Company:
A corporation or trust whose primary purpose is to invest the funds of its shareholders.
Investment Counsel:
A firm or individual which furnishes investment advice for a fee.
Investment Fund:
A term generally interchangeable with "mutual fund."
Investment Manager:
Investment counsel to a mutual fund.
Top
Leveraging:
The borrowing of money for investment purposes.
Limit Order:
An order to buy or sell securities in which the client has specified the price. The order
can be executed only at the specified price or a better one.
Liquidity:
The ability of the market for a security to absorb a reasonable amount of buying or
selling without major price changes.
Load:
Commissions charged on the purchase or sale of mutual fund units.
Long:
A term signifying ownership of securities. "I am long 100 XYZ," means that the
speaker owns 100 shares of XYZ.
Top
Management Company:
The business entity that establishes, promotes and manages a fund or funds.
Management Expense Fee:
The sum paid to the investment company's advisor or manager for supervising its portfolio
and administering its operations.
Management Expense Ratio:
A measure of the total cost of operating a fund as a percentage of average total assets.
Margin:
The amount paid by clients when they use credit to buy a security. The remainder is loaned
by their brokers.
Marginal Tax Rate:
The rate of tax on the last dollar of taxable income.
Market Capitalization:
Value of a corporation as determined by the market price of its issued and outstanding
securities. It is calculated by multiplying the number of outstanding shares by the
current market price of a share.
Market Index:
A statistic which measures trends in securities markets.
Market Maker:
A trader employed by a securities firm who is authorized and required by applicable
self-regulatory organizations to maintain reasonable liquidity in securities by making
firm bids or offers for one or more designated securities up to a specified minimum
guaranteed fill.
Market Order:
An order to buy or sell a security immediately at the best possible price.
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.
Market Value:
The price that the market – any market – sets at a particular time as the price
at which an asset can be bought or sold.
Market Visibility:
"Visible" liquidity provided by investors' limit orders (bid or ask) that are
declared or entered in the Exchange's Order Book.
Maturity:
The date on 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 mutual fund made up of government Treasury-Bills and other short-term paper such as a
Promissory Note and Banker’s Acceptances. Interest yield fluctuates and is
generallypaid monthly.
Mortgage Fund:
A mutual fund that holds mortgages.
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 less liabilities establishes the current price
of units.
Top
Net Asset Value:
Net asset value is the price set on a fund’s units by deducting liabilities from
assets and dividing by outstanding units.
Net Asset Value Per Share:
Net asset value of a mutual fund divided by the number of shares or units outstanding.
This represents the value of a share of unit of a fund and is commonly abbreviated to
NAVPS.
No-Load Fund:
A mutual fund that does not charge a fee for buying or selling its shares.
Top
Odd Lot:
A number of shares which is less than a board lot.
Open-Ended Fund:
An open-ended mutual fund continuously issues and redeems units, so the number of units
outstanding varies from day to day. Most mutual funds are open-ended.
Open Order:
An order to buy of sell a security at a specified price. The order is valid until executed
or cancelled.
Options:
Contracts which give the holder the right to buy (call options) or sell (put option) a
fixed amount of a certain stock at a specified price within a specified time.
Over-The-Counter:
The over-the-counter (OTC) or unlisted market maintained by securities dealers for issues
not listed on a stock exchange.
Top
Portfolio:
All the securities which an investment company or an individual investor owns.
Preferred Shares:
Shares that carry dividends at fixed rates which must be paid before any dividends are
paid to common shareholders.
Price Discovery:
The interactive process through which the execution price for a trade is established. In
an effective market, a security is priced at the value which the supply and demand of
well-informed investors place on the security.
Price/Earnings Ratio:
A common stock’s current market price divided by the company’s annual per share
earnings.
Prospectus:
A legal document describing securities being offered for sale to the public. It must be
prepared in accordance with provincial securities commissions regulations.
Top
Real Estate Fund:
Amutual fund that owns real estate, often commercial properties.
Real Return:
Real Return is the net return of an investment, adjusted for inflation during the time you
have held that investment but prior to tax considerations.
Realized Earnings:
Realized Earnings is investment income as earned by a fund and considered part of you
income.
Redemption:
A redemption is the right given to a security holder to sell, at anytime, some or all of
his/her units back to the fund for cash.
Registered Representative:
An investment salesperson or broker who is registered with the provincial securities
commission.
RESP:
A Registered Education Savings Plan is a plan that enables the contributor, on a tax
deferral basis, to accumulate assets on behalf of a beneficiary to pay for post secondary
education. There is no tax deduction given on contributions and certain limits and
qualifications apply.
Right:
A temporary privilege granted to existing common shareholders to purchase additional
shares directly from the company at a stated price.
Risk:
The possibility of loss; the uncertainty of future returns.
RRIF:
A Registered Retirement Income Fund is a fund that is commonly used to "store"
your accumulated RRSP capital while it is still growing on a tax-deferred basis. However,
there are minimum requirements for how much you can take out of a RRIF and all income
taken out becomes part of your taxable income.
RRSP:
A Registered Retirement Savings Plan is a retirement savings vehicle in which growth is
protected from tax until taken into the RRSP owner’s income.
Top
Sales Charge:
In the case of mutual funds, these are commissions charged to purchasers of fund units,
usually based on the purchase or redemption price. Sales charges are also known as
"loads."
Securities Act:
Provincial legislation regulating the underwriting, distribution and sale of securities.
Settlement Date:
The date on which a securities buyer must pay for a purchase or a seller must deliver the
securities sold. In general, settlement must be made on or before the third business day
following the transaction date.
Shares:
A document signifying part ownership in a company. The terms "share" and
"stock" are often used interchangeable.
Short Sales:
The sale of shares which the seller does not own. The seller is speculating that the price
will fall, in the hope of later purchasing the same number of securities at a lower price,
thereby making a profit. Sellers must advise their brokers when they are selling short.
Simplified Prospectus:
An abbreviated and simplified prospectus distributed by mutual funds to purchasers and
potential purchasers of unit or shares (see prospectus).
Small Cap Fund:
A small Cap Fund is a mutual fund that holds the stocks of small capitalized companies as
opposed to large "blue chip" companies.
Specialty Fund:
A Specialty Fund is a mutual fund that focuses its holdings in specific types or
geographic areas.
Stock Yield:
The annual dividend as a percentage of the price of the stock. For example, a stock
selling at $40 a share with an annual dividend of $2 a share yields five percent.
Systematic Withdrawal Plans:
A withdrawal feature offered by companies whereby unitholders can receive regular payment
from their investments.
Top
Total Return:
Total Return is the change in value of the fund plus any distribution (i.e. capital gain,
interest, and dividends) divided by the value of the fund at the beginning of the period
(i.e. cost).
Transfer Agent:
A trust company appointed by a company to keep a record of the names, addresses and
numbers of shares held by its shareholders. Transfer agents are often responsible for
distributing dividend cheques.
Treasury Bills (T-Bills):
Treasury Bills are short-term government issued debt instruments whose return is
determined by prevailing market rates of return.
Top
Underwriting:
The purchase for resale of a new issue of securities by an investment dealer or group of
dealers.
Upstairs Trading:
The matching of customers' buy or sell orders within a member firm's organization against
other client orders or against the dealer's own inventory or capital account. Trades are
subsequently reported to the exchange as a "cross" or "put through"
at, or within, the auction market's bid/ask spread. In these cases the bid/ask spread
serves as a reference point, but does not always dictate the actual price at which such
trades may be negotiated and executed.
Top
Warrant:
A certificate giving the holder the right to purchase a security (such as a stock) at a
set price within a specified period of time.
Top
Yield:
Yield is most commonly associated with a money market fund’s return. "Current
Yield" is based on daily return, "Effective Yield" on the annual compounded
return.
Yield to Maturity:
The annual rate of return an investor would receive if a bond were held until maturity.
Top
|
