Definitions Flashcards
A type of employer-sponsored pension plan that does not allow the employee to determine the amount of the eventual pension benefit in advance. The benefits received depends on how successfully the contributions have been invested over the years. Employers and employees both contribute.
Defined contribution plan
A decrease in the general price level of goods and services in a country. Deflation occurs when the inflation rate falls below 0%.
Deflation
A security whose value is determined by the value of some other security or asset. Example: option or future.
Derivative
A mutual fund company that has it’s own centralized order-taking department and sales staff is said to engage in this.
Direct distribution
Hedge fund strategies that bet on anticipated movements in the market prices of equities, debt securities, foreign currencies and commodities.
Directional strategies
Holds the ultimate responsibility for a mutual fund’s activities, ensuring that the investments are in keeping with the fund’s investments objectives. Also, a person elected by voting common shareholders at the annual meeting to direct company policies.
Director
Includes insider reports, regular corporate financial reports, timely disclosure of material changes in the affairs of a company and examination of all prospectuses to ensure that ________ is full and plain. This allows investors to make informed decisions.
Disclosure
Occurs when the price of a mutual fund is below its net asset value.
Discount
The amount of money coming in from employment and other sources minus the amount of money going out to pay bills.
Discretionary income
Any purchase or sale where the sales representative determines the timing and or price of a sale or purchase.
Discretionary trading
Profits of a company that are distributed to shareholders in direct proportion to the number of shares held.
Dividend
A type of fixed-income fund that holds dividend paying common shares and possibly preferred shares. These funds are distinguished from preferred dividend funds by the fact that they tend to hold mostly common shares.
Dividend fund
The dividends received from an investment in common and preferred shares
Dividend income
Refers to the preferential tax treatment granted to dividend income received from taxable Canadian Corporations. The dividend is grossed up by 38% and the tax credit of 15.02% is calculated on this amount.
Dividend tax credit (dtc)
A transfer of deposits from chartered banks to the Bank of Canada.
Drawdown
A measure of a bond or bond portfolio’s sensitivity to change in interest rates. The higher (lower) the duration, the greater (smaller) the change in the value of a bond in response to a given change in interest rates.
Duration
A legal obligation imposed on mutual funds representatives requiring that they adhere to a standard of care while performing acts that could foreseeably harm others.
Duty of care
For an individual it includes all income from employment but excludes income from investments and any pension or unemployment benefits received
Earned income
A shareholder ratio that is calculated by dividing net income by the number of common shares outstanding.
Earnings per common share (eps)
A summary of the firm’s business activities over a given time period. It outlines the revenues earned, and deducts all of the expenses incurred to earn those revenues to arrive at the net income.
Earnings statement
These are a group of statistics that provide information about the direction and level of activity of the economy.
Economic indicators
In the case of mutual funds, the benefits derived from paying a lower cost per unit when buying securities in larger volumes.
Economies of Scale
In the case of money market mutual funds, this calculation makes the assumption that the yield generated over the last 7 days will remain constant for one year in the future. It assumes weekly compounding of returns at that rate.
Effective yield
The prices of stocks or securities reflect all of the information that may exist about those stocks or securities.
Efficient market
Data recorded or stored in a computer system or other similar device and that can be read or perceived by a person or a computer system or other similar device. This includes displays, printouts and other output of that data.
Electronic document
The opposite illogical or distorted reasoning. Often involuntary, relating to feelings, perceptions or beliefs about elements, objects or relations between them, in reality or in the imagination.
Emotional bias
People who are subject to this bias place more value on an asset they hold property rights to than on an asset they do not hold property rights to.
Endowment bias
This type of fund seeks out smaller firms that are expected to pay little or no dividends and to produce significant capital gains as their share prices increase. Tend to have a lot of volatility and are suitable for investors with high risk tolerance.
Equity growth funds
Has the primary goal of earning capital gains by constructing a portfolio designed to mimic a particular stock market index – often the s&p tsx index in Canada
Equity index funds
An investment instrument that provides an ownership stake in a company
Equity instruments
Seeks to earn some combination of current dividend income and capital gains. It generally invests in common shares of larger firms with strong dividend records and limited capital gain potential.
Equity mutual fund
A type of specialized mutual fund that restricts its investments based on some ethical or moral issue
Ethical fund
Hedge fund strategies that seek to profit from unique events such as mergers, acquisitions, stock splits and stock buy backs.
Event-driven strategies
The possibility of returns above those needed to compensate for the risk of an investment. Undervalued stocks offer this possibility.
Excess returns
The risk that an unexpected change in exchange rates will alter the value of foreign assets or cash payments expected from a foreign source
Exchange rate risk
Baskets of securities traded like individual stocks on an exchange. Similar to index mutual funds on that they will primarily invest in the equities of companies that compose the target index, but the way this is structured allows it to be far more tax efficient than an index mutual fund
Exchange traded funds (etf)
The market for securities sold without prospectus
Exempt market
The phase of the economic cycle that follows the trough. During this phase economic activity increases.
Expansion
A monetary policy that seeks to increase the size of the money supply.
Expansionary policy
One of the two methods used to calculate gross domestic product. With this method GDP is obtained by totaling all spending in the economy.
Expenditure approach
Costs that are directly borne by the investor. They fall into three categories, management fees, operating expenses, and sales charges
Explicit costs
A cost or benefit not taken into account when pricing a Good or service.
Externalities
All relevant information that might have an impact on an investor’s decision to buy or sell must be fully disclosed
Fairness
Bases the pension on an employee’s length of service and average earnings over a stated period of time. Often this is the average of the best five consecutive years of earnings in the last ten years of employment.
Final average plan
An inter-governmental body whose purpose is to develop and promote national and international policies to combat money laundering and terrorist financing
Financial action task force FAFT
Include the size if the clients investment portfolio, employment and investment income, whether the source of employment income is secure, and the level of periodic expenses incurred.
Financial circumstances
A client’s reasons for selecting a given investment. May be expressed in terms of the types of desired returns (growth, interest etc) or in terms of desires investment characteristics such as safety or liquidity
Financial goals and objectives
Suppliers and users of capital access the markets through the chartered banks, trust companies, life insurance companies, and investment dealers. Can be deposit-taking or non deposit-taking
Financial intermediaries
A visual aid that can be used to help build a financial plan and prioritize decision making around asset choices.
Financial planning pyramid
The process of examining and working with the firm’s financial accounting information in order to assess value and financial soundess.
Financial statement analysis
This encompasses all of the diverse financial activities that take place in the country. It refers to the process through which capital flows from the suppliers through the various financial intermediaries to the eventual users of capital, all under the surveillance of the regulatory bodies.
Financial system
Risks associated with the direction of interest rates, equities, currencies and commodities. Broadly speaking it refers to market-induces risk or systemic risk.
First order risks
A deliberate action by a government to influence the economy through changes either in spending or in taxation initiatives.
Fiscal policy
Assets that are expected to last longer than one year.
Fixed assets
A type of systemic withdrawal plan that allows investors to receive a periodic fixed amount of money through the redemption of units of their mutual fund.
Fixed-dollar (constant) withdrawal plan
Consists of fixed-income securities. Fixed-income funds share the goal of generating current income.
Fixed-income mutual funds
Securities that generate predetermined periodic interest or dividend income. They include government and corporate bonds, mortgages and preferred shares.
Fixed-income securities
A systemic withdrawal plan that allows the mutual fund investor to receive money such that over a specified Period the mutual fund will be completely paid out.
Fixed-period withdrawal plan
An unmanaged pool of debt securities that all mature at the same time. The pool is created by an investment dealer who then sells units of the pool to investors. Unlike a bond fund, this pool has a limited life
Fixed trust
An employee’s monthly pension is a specified number of dollars for each year of service.
Flat benefit plan
To estimate the cash flow to be earned during the year as well as the price you think you could sell a security for at the end of the year.
Forecast
The market for currencies of different countries. As with the OTC market, this market is an interconnected computer network.
Foreign exchange market
An agreement to buy or sell a currency, a commodity, an index, or a security at a specific price at some point in the future. Although delivery is not until the expiry date, the price is determined at initiation of the contract thereby guaranteeing a price for the underlying asset on a given date. Not standardized and not traded on organized exchanges.
Forward contract
The correct method of calculating the price that an investor will pay for a mutual fund unit. It involves using the unit price at the close of business in the day the order is placed.
Forward pricing
Individuals who buy and sell mutual fund units actively, sometimes holding positions for as little as one day.
Frequent trader
This is assessed by some mutual funds to discourage investors from redeeming their units shortly after purchase or from switching between funds.
Frequent trading charge
The result of the labour turnover in a normal, healthy, economy, where people enter and leave the workforce and jobs are created and terminated.
Frictional unemployment
The investment objectives that define both the fundamental nature of the mutual and the fundamental investment features of the mutual fund that distinguishes it from other mutual funds.
Fundamental investment objectives
Provides day to day supervision of the fund’s investment portfolio
Fund manager
The investor owns units of a pool of mutual funds.
Fund of funds
The mutual fund investment firm
Fund sponsor
A program that provides a series of portfolios with multiple mutual funds to reflect pre-selected asset allocation models.
Fund wrap
Security analysis that attempts to determine the true or intrinsic value of a security by examining the fundamentals such as sales, earnings, economic changes, competitive forces and management.
Fundamental analysis
Contracts in which investors agree to take delivery or deliver goods (or securities) at a particular future date at a predetermined price.
Futures
A transferable agreement to deliver or take delivery of a fixed quantity of an asset for a specific price by a specific future date.
Futures contract
A type of global mutual fund that earns dividends and capital gains.
Global equity funds
These funds offer international diversification by investing in the economies of specific countries or regions anywhere in the world, including Canada.
Global funds
Contracting to sell the underlying asset at the settlement date.
Going short
A debt security that is issued by the federal, provincial and municipal governments in order to finance public spending. These bonds trade OTC, they have wide range of maturities and little to no default risk.
Government bond
Mutual funds that specialize in investing in companies that produce technologies for alternative or renewable energy such as wind turbines and solar batteries.
Green investing
The market value, in current dollars, of all goods and services produced within a country in one year. Includes the value of all goods produced by Canadians and foreigners in Canada but not of Canadians abroad.
Gross domestic product
The market value in current dollars of all goods and services produced in a country in one year. Includes the goods and services produced by Canadians abroad but not foreigners in Canada.
Gross national product
The excess of sales revenues over the costs that were incurred to produce or acquire the goods that were sold.
Gross profit
A value approach to buying earnings growth. Like growth managers, these managers seek companies with projections of growing earnings and high increasing returns on equity relative to the industry average. They avoid stocks with high price/earning ratios and price to book ratios
Growth at a reasonable price GARP
A form of equity investing that is more concerned about the future prospects of a firm than it’s present price
Growth investing
A deposit instrument most commonly available from trust companies, requiring a minimum investment at a predetermined rate of interest for a stated term. Generally not redeemable prior to maturity.
Guaranteed investment certificate
Lightly regulated pools of capital rub by managers that have great flexibility in applying their investment strategies.
Hedge funds
The process of reducing the risk of loss from fluctuations in the market prices – effectively locking in the value of a portfolio. Derivative securities can be used for this purpose.
Hedging.
A fund manager is paid an incentive fee only on new net profits. It sets the bar above which a fund manager is paid incentive fees.
High water mark
Examines each stock in the portfolio and maps it to a specific style at a specific point in time.
Holdings-based style analysis
The rate that a hedge fund must earn before its manager receives an incentive fee. Usually based on short term interest rates to reflect the opportunity cost of holding risk-free assets such as t-bills.
Hurdle rate
Securities, usually preferred shares, that have features of both shares and common bonds.
Hybrid security
Trading costs which are measured by brokerage fees and turnover
Implicit cost
Fees that are usually calculated after the deduction of management expenses and fees and not on gross return earned by a manager.
Incentive fees
One of the two methods used to calculate GDP. With this method GDP is determined by totaling all income earned in the economy.
Income approach
An investment trust created to purchase and hold interests in the opportune assets of a company b
Income trust
The analysis of an industry including how products are produced, the critical cost factors of production, and whether new products are likely to have an impact on the current competitive structure of the industry.
Industry analysis
A generalized, sustained trend of rising prices.
Inflation
An issuing by a company that has never issued shares before. Requires an estimate of appropriate offering price off the shares.
Initial Public Offering IOP
An individual with inside information of material significance about his company that has not been made available to the public.
Insider
A financial leverage ratio that reveals the ability of a company to repay the interest charges on its debt and indicates how well these charges are covered based on earnings.
Interest coverage ratio
A fixed-income investment philosophy that involves moving between long term government bonds and very short term T-bills based on a forecast of interest rates over a certain time
Horizon. Price sensitivity to interest rates increases as the term to maturity increases and the coupon decreases.
Interest rate anticipation
Income earned on fixed-income securities.
Interest income
The basic feature is that as interest rates rise, the price of fixed-income securities falls.
Interest rate risk
An operating performer ratio that measures the number of times a company’s inventory is turned over in a year.
Inventory turnover ratio
Responsible for hiring investment managers and ongoing distribution of funds.
Investment company
Offers investors an interest in a pool of securities.
Investment fund
Their role is to ensure the suitability of an investment product and to suggest investment products that are suitable.
Investment guide
The length of time within which an investor expects a given investment to satisfy his investment or return objectives.
Investment horizon
The Canadian investment industry’s national self-regulatory organization. They set up and enforce rules regarding proficiency, business and financial conduct of dealer firms and their employees, setting and enforcing market integrity rules regarding trading activity.
Investment industry regulatory organization. IIROC
Is responsible for constructing and managing the investment portfolios that make up the various mutual funds managed by an investment company.
Portfolio manager/investment manager
The statement thAt guides the overall asset management of the mutual fund portfolios.
Investment policy statement
The fundamental characteristic is that it is a diversified collection of securities.
Investment portfolio
The price paid per unit of a mutual fund.
Unit fund
Stocks in general, and smaller stocks in particular move abnormally high in the month of January
January effect
The mutual fund advisor must do their due diligence to learn essential facts relevant to every client and every order. Information concerning a clients financial status, family and other commitments, as well as goals is required to make an appropriate investment recommendation.
Know your client
Understand the characteristics (risk, level, fees, type of income generated, tax consequences) of all the funds offered for sale.
Know your product
Type of investment fund sponsored by labour unions, that invest in unproved firms. Offer the possibility of tax reduction.
Labour-sponsored venture capital funds
An economic indicator that measures the change after an economy has passed through a phase of the business cycle.
Lagging indicators
The tendency of consumers to buy more of a good when it’s price decreases and less when it increases.
Law of demand
The tendency of suppliers to offer more of a good at a higher price and less of a good at a lower price.
Law of supply
An economic indicator that helps to determine which phase of the business cycle is likely to occur in the future.
Leading indicators
The responsibility of an advisor to ensure that each client buys only
Suitable investments.
Legal responsibility
The use of borrowed funds to invest.
Leverage
An annuity whose payments are guaranteed as long as the annuitant lives.
Life annuity
A termination option available to holders of locked-in pension funds such as LIRA. Similar to a RRIF but it has both a maximum and minimum
Withdrawal requirement. Funds from a standard RRSP cannot be transferred to this.
Life income fund LIF
Similar to the fixed-period plan except that the period selected is the expected remaining lifetime of the investor.
Life withdrawal plan
An order to buy or sell a security at a specific price or better.
Limit order
Refers to the readiness with which an asset can be sold without requiring the seller to make a large price concession.
Liquidity
Sales commission charged to individual investors.
Load
When a registered pension plan is terminated prior to retirement plan funds may be transferred into this. The funds cannot be withdrawn until the investor reaches a certain age.
Locked-in retirement account
Refers to the market for securities with a remaining life or maturity of more than one year.
Long term capital market
Securities with a remaining maturity of more than one year.
Longer-term security
This involves buying a security when you are expecting the price to increase.
Long transactions
A strong impulse to avoid losses than to acquire gains.
Loss aversion
The field of assessing the performance, structure and behaviour of the economy as a whole.
Macroeconomics
Involves actively trading derivatives products and strategies on physical commodities, financial assets and currencies.
Managed funds
A calculation that is required under national instrument 81-102. It allows investors to compare the level of management fees and expenses from one fund to another.
Management expense ratio MER
The amount that an investor is requires to leave on deposit when using borrowed funds to purchase securities. Usually a fixed percentage of the value of the security.
Margin
This occurs when an investor who has purchased securities on a margins is required to deposit additional funds to his account usually the result of a decline in price.
Margin call
Refers to the rate of tax to be paid on the next dollar of income earned from any source.
Marginal tax rate
Bonds for which there is a ready market (i.e. Clients will buy them because the prices and features are attractive).
Marketable growth bond
The dollar value of a company based on the market price of its issued and outstanding common shares.
Current number of outstanding shares multiplied by current market price of shares.
Market capitalization
This hypothesis argues that all available information about the markets is reflected in market prices, which is to say it is impossible to earn excess returns based on publicly available information.
Market efficiency
The price at which the quantity supplied by producers exactly
Matches the quantity demanded by consumers.
Market equilibrium
Occurs when markets no longer organized production efficiently and thus no longer allocated goods and services to consumers.
Market failure
An order to buy or sell securities at the current market price
Market order
A section mutual fund financial statements where the fund manager explains what has happened to rates, and therefor performance of the fund over the recent past, and why. Also provides a forecast for the next few months.
Market review
Refers to the risk of fluctuations in the market as a whole.
Market risk
The act of shifting from one class of security to another based on expectations as to where the economy or the markets may be heading.
Market timing
The process of computing the value of a fund on a daily basis as market interest rates change.
Market to market
A fact, if correctly stated, would lead investors to change their purchase decision.
Material information
Refers to how individuals are affected by the changes to prices or income levels.
Microeconomics
Allows securities issuers to sell securities without a prospectus if investors make a prescribed minimum investment. 97,000 is the amount in Manitoba.
Minimum investment exemptions
A form of equity investing where proponents believe that strong gains in earnings or stock price will
Translate into stronger gains in earnings or stock prices.
Momentum investing
The regulation, by a government, of the money supply and available credit for the purpose of promoting sustained economic growth and price stability.
Monetary policy
This is the market for highly liquid, low risk securities which almost exclusively have maturities of less than one year. Transactions are carried out on the OTC market through a computer network.
Money market
Considered to be the lowest risk of all mutual fund investments. The fund invests in T-bills and commercial paper.
Money market mutual funds
The total amount of money available in an economy at a specific date.
Money supply
The control of a good or service by an individual or corporation who is in a position to dictate the price or terms of
access.
Monopoly
Essentially includes an obligation by the mortgagor to pay stipulated amounts on a debt that is secured by property.
Mortgage
Consists of a diversified portfolio of residential and some commercial mortgages.
Mortgage fund
An unlimited number of units are issued by the fund and they are bought and sold directly by the fund itself. The value of a unit is not determined by market demand but by the net asset value of the securities in the fund’s portfolio.
Mutual fund
The self-regulatory organization SRO that regulates the distribution (dealer) side of the mutual fund industry in Canada.
Mutual fund dealer association MFDA
A nation’s total production of goods and services.
National income
A law adopted by the Canadian Securities Administration CSA and followed throughout the country. It specifies the required structure and content of the mutual fund simplified prospectus.
National instrument 81-101
A law adopted by the Canadian Securities Administration CSA and followed throughout the country. It is a wide -ranging set of rules that deals with all aspects of the creation and management of mutual funds.
National instrument 81-102
Database for registration of applications for mutual fund salespeople.
National registration database
Specialized mutual fund that focuses on securities related to
National resources, such as lumber and water.
Natural resource fund
It is the net assets of the fund divided by the number of units outstanding.
Net asset value per unit NAVPU or net asset value per share NAVPS
That part of a company’s profits remaining after all expenses and taxes have been paid and out of which dividends can be paid.
Net earnings
Whatever an individual has accumulated to date is his net worth. Difference between total assets and total liabilities of an individual.
Net worth
A form that is filled out by the client at the opening of an account bit gives relevant information to make suitable investment recommendations. This must be completed and approved before any trades are put through on the account.
New account application form NAAF
This type of fund charges no sales fee and is predominantly offered by subsidiaries of financial
Institution.
No load funds
The dollar value of all goods and services produced in a given year at prices that prevailed in the same year.
Nominal GDP
The return on an investment that has not been adjusted for inflation. In the case of a bond it is simply the coupon rate.
Nominal return
An account registered in the name of a dealer or third party administrator on behalf of a beneficial owner of the mutual fund.
Nominee account
A person or firm in whose name securities are registered. The shareholder however retains the true ownership of securities.
Nominee owner
A mortgage that exceeds 80% of the appraised value of the property. This type of mortgage requires mortgage insurance under the “national housing act”.
Non-conventional mortgage
Companies such as life insurance companies, that acquire capital by pooling the premiums from policies they issue to individuals and then invest those premiums in capital market securities. In this way they provide sufficient funds to satisfy the claims of policy holders.
Non-deposit taking institutions
A document that provides detailed disclosure, similar to a prospectus, but this is not reviewed by any regulatory agency and that does not provide investors with legal remedies.
Offering memorandum
Pension is payable at age 65 to all Canadian citizens and legal residents including landed immigrants and those with visitor permits.
Old age security OAS
A trust structure enables the fund to avoid taxation. Any interest, dividends or capital gains income, net of fees and expenses, is passed on directly to the unit holders. The fund does not incur tax liability.
Open-end trust
A type of mortgage that, at any time before the end of term, can be repaid by the mortgagor without penalty.
Open mortgage
In the case of a mutual fund it refers to expenses that arise from day to day activities of the fund.
Operating expenses
Ratios that illustrate how well management is making use of the company’s resources. The ratios include profitability and efficiency measures.
Operating performance ratios
All expenses not directly attributed to each item sold (such as management salaries, advertising expenses, and depreciation) are deducted from
Gross profit.
Operating profit
An operating performance ratio that measures the company’s ability to manage it’s resources as it takes into account the sales, general, and administrative expenses incurred in producing earnings.
Operating profit margin ratio
A derivative security which gives the holder the right, but not the obligation, to buy or sell the underlying asset within a fixed period for a fixed price.
Option
This is the price an investor pays for an option.
Option premium
The location, either physical or electronic, where buyers and sellers of securities are systematically matched.
Organized exchange
The difference between real GDP and potential GDP. Economists use this as an indicator to measure inflationary pressures.
Output gap
Unwarranted faith is one’s intuitive reasoning, judgement, and cognitive abilities.
Overconfidence.
This market has no physical location. It is really a large computer network through which investment dealers negotiate transactions amount themselves. Most bonds trade here, as well as the shares of small and large companies.
The over the counter market OTC
Holders of this type of share receive an additional dividend if, after paying a dividend to common shareholders, profits still remain.
Participating preferred share
The share of working-age population in the labour force. The participation rate shows the willingness or people to enter the workforce and take jobs.
Participation rate
This is the value or the stated value of a bond or a preferred share.
Par value
An investment management style employed by managers who believe that financial markets are efficient and therefore present no opportunity to earn significant excess returns. Proponents of this approach will seek to match the performance of a market segment or index by mimicking its risk and return characteristics. Managers do not try to add value through strategies.
Passive portfolio management
The highest point of an economic cycle. It occurs at the end of an expansion and is followed by a contraction.
Peak
A group of managed products with a similar investment mandate.
Peer group
A calculation that is used to reduce the basic annual limit on RRSP contributions of individuals who benefit from employer-sponsored pension plans. The basic limit is reduced by the PA in order to ensure all contributors are on equal footing with respect to their ability to benefit from tax-deferred savings plans.
Pension adjustment PA
The patterns of returns of different classes of securities are mirror images of each other, with the peaks of one security corresponding with the troughs of the other.
Perfect negative correlation
The patterns of returns of different classes of securities match each other, with the peaks of one securities corresponding to the peaks of the other.
Perfect positive correlation
The process of comparing mutual fund manager’s results with those of an established and reliable benchmark to determine if there has been a comparatively good return on investment.
Performance assessment
A top-down approach, where the analyst looks at the broad issue first, and then progresses by narrowing her investigation.
Performance attribution
The method by which a PPN’s final payoff is based not on the value of the underlying asset at maturity but on some average performance of the underlying asset over the life of the note.
Performance averaging formulas
A principal protected note with ____________ promises to pay the return earned by some particular asset up to a maximum amount.
Performance participation cap
A large net of other mutual funds with similar characteristics against which a mutual fund can be compared.
Performance universe.
A unique type of preferred security that has no maturity date.
Perpetual preferred
The act that provides protection for personal information grants legal status to electronic documents.
Personal information protection and electronic documents act PIPEDA
The return on the portfolio based on the fund manager’s strategic asset allocation decision.
Policy return
Clarify the position of the securities commissioned on various issues. They may be issued as national policies and instruments, provincial policies or uniform policies ie. NI 81-101
Policy statements
An investment fund similar to mutual fund but constructed and managed by an investment dealer or portfolio manager and sold only to it’s clients.
Pooled fund
A group of financial assets such as stocks, bonds, and other investment securities.
Portfolio
A type of fund wrap where the client owns units of several mutual funds in the proportions established through the allocation service.
Portfolio allocation service
Most often presented in terms of the type of return that the portfolio should generate and indirectly, the level of risk that will be assumed in order to earn those returns.
Portfolio investment objectives
A professional investor who selects the securities that belong to the portfolio.
Portfolio manager
The actual return of a fund, which is the sum of policy returns, allocation effect and selection effect.
Portfolio return
It is computed as the total amount of purchases and sales of the fund divided by the average assets of the fund. It provides an indication of how often securities are bought and sold.
Portfolio turnover rate
Right of first refusal
Pre-emotive right
An operating performance ratio that calculates net earnings before income taxes as a percentage of sales over several years.
Pre-tax profit margin ratio
Specialized mutual fund that focus on securities related to precious metal, such as gold and silver.
Precious metals fund
A type of fixed income fund that holds primarily dividend paying preferred shares and possibly common shares. These are distinguished from dividend funds by the fact that they tend to hold mostly preferred shares.
Preferred dividend fund
These shareholders will receive a fixed dividend before common shareholders. They are granted voting rights only under special circumstances, and will receive a predetermined dollar amount should the company dissolve.
Preferred shares (preferred stock)
The price of a fund is above the net asset value.
Premium
A shareholder ratio that shows how much investors are willing to pay for the current earnings of a firm and what they believe the firm’s growth prospects are. It is calculated by dividing the current price per common share by the current EPS.
Price-earning ratio P/E
This is the market for newly issued and underwritten securities that have never been offered to the public.
Primary market
A debt instrument. It has a maturity date date upon which the issuer agrees to repay investors their principal. In addition to the principal, these provide interest paid either at maturity or as regular payments linked to the positive performance of the underlying asset (common stocks, mutual funds, stock indices, commodity or hedge funds).
Principal protected notes PPN
An oversight mechanism. Consumers have the right to file a complaint with any aspect of compliance with PIPIDA. Clients are entitled to file a complaint against a financial institution’s apparent breach of compliance with measures adopted in the federal law for the protection of their personal information.
Privacy commissioner
Factors used and the way they are coordinated to manage and grow assets.
Process elements
The conduct, standards, qualities and behaviors that characterize a professional person.
Professionalism
The fundamental service offered by mutual funds. It is the role of highly qualified portfolio managers to select investments that are likely to generate returns that reach certain performance targets.
Professional management
The responsibility of the investment guide to provide the best client service possible and to refuse to sell a product that is felt to be unsuitable.
Professional responsibility
Measures the extend to which a firm is able to generate earnings from its asset base.
Profitability ratio
Practices that are illegal or otherwise unacceptable to securities regulators.
Prohibited practices
A legal document which must accompany all new security issues. It primarily outlines the financial condition of the issuer, the use to which the fund raised will be put and the risk associated with the securities.
Prospectus
The total cost per unit an investor pays including any acquisition fees. It is calculating by dividing the NAVPU by 1 minus the acquisition fee percentage.
Purchase price per unit
The ability of a dollar to buy goods and services. As purchasing power decreases, an individual is able to purchase fewer goods and services for the same amount of money.
Purchasing power
A derivative security that gives the holder the right but not the obligation to sell a security at a given price by a specific date.
Put option
An auditor’s report that contains questions with respect to a company’s statements.
Qualified report
A ranking system that shows how well an individual security or mutual fund has performed compared to peers.
Quartile (quartile ranking)
A more stringent measure of liquidity compared with the current ratio. Calculated as current assets less inventory divided by current liabilities. By excluding inventory, the ratio focuses on the company’s more liquid assets.
Quick ratio
A method of using various ratios to evaluate financial statements.
Ratio analysis
A systemic withdrawal plan that allows mutual fund investors to regularly receive a fixed percentage of the fund value.
Ratio withdrawal plan
A pool of investments in either real estate properties, mortgages, or both. All expenses and income pass through to the holders of the REIT units for tax purposes
Real estate investment term REIT
Consists of participating units in commercial reap estate developments and may hold some mortgages.
Real estate mutual funds
The dollar value of all goods and services produced in a given year valued at prices that prevailed in some base year.
Real GDP
This refers to the return on an investment over a given period after adjusting for inflation for the same period.
Real rate of return
This refers to the return on an investment over a given period after adjusting for inflation for the same period.
Real rate of return
A downturn in the economy that lasts longer than two consecutive quarters.
Recession
The phase of the business cycle following a recession, during which an economy regains and exceeds peak employment and output levels achieved prior to the downturn.
Recovery
A feature that allows the issuing corporation to redeem or pay back the bond holders before the stated maturity date.
Redemption
The amount the investor will receive when redeeming units net of any redemption fee. Calculated by multiplying the NAVPU by 1, minus the percent redemption charge.
Redemption price per unit
A transfer of funds from the bank of Canada to the chartered banks
Redeposits
An arrangement where a member is paid (or pays) a fee, including fees based on commissions for the referral of a client to or from another person.
Referral arrangement
A type of tax deferred savings plan that allows usually parents or grandparents to save for a child’s education. Contributions are not tax deductible.
Registered education savings plan RESP
An RRSP termination option that allows the investor to retain the same investments as were held in the RRPS. It requires minimum annual withdrawals which must begin by the end of the second calendar year following the plan’s initiation. They are transferable between financial institutions and an investor may have more than one.
Registered retirement income fund RRIF
Allows contributors to save some of their annual earned income, up to allowable limits, while deferring income taxes on the contribution. Any earnings held within the plan are sheltered from taxes but, upon withdrawal, are taxed as regular income regardless of their source.
Registered retirement savings plan RRPS
Usually a trust company appointed by a company to monitor the issuing of common and preferred shares.
Registrar
People who are subject to this bias avoid making decisions because they fear, in hindsight, that whatever they decided to do will result in a bad decision.
Regret aversion
Their role is to define the limits of activity for the participants in the financial system and to ensure that financial market transactions are fair and in compliance with regulations.
Regulators
Provincial and territorial securities administrators that are responsible for the administration of the provincial securities acts.
Regulatory bodies
Hedge fund strategies that attempt to profit by exploiting inefficiencies or differences in the pricing of related stocks, bonds or derivatives in different markets.
Relative value strategies
An internal system for classifying objects and thoughts.
Representativeness
Allows the contract holder to protect profits inside a segregated fund.
Reset option
Net income that is not paid out in the form of dividends but kept by the firm, usually to finance growth.
Retained earnings
A financial statement that shows the profit or loss in a company’s most recent year.
Retained earnings statement
The ________ on a security includes any change in value of the security over the holding period plus any cash flows received, all divided by the original price.
Return/yield
An operating performance ratio that indicates management’s effectiveness in maintaining or increasing profitability in relation to the company’s common equity capital.
Return on common equity ROE ratio
Comparing the fund’s return (usually 36-60 months of data) to the return of a number of selected passive style indicators.
Returns-based style analysis
Provides an indication of how successful a fund is at earning a return given the level of risk it assumes to earn that return. It is calculated by dividing the fund’s return by a standard deviation of returns.
Reward-to-risk ratio
A type of derivative security that is issued to existing shareholders in the ratio of one right per common share held. These allow the holders to purchase new shares for a specific price plus a predetermined number of rights.
Right
A mutual fund’s shareholders have a continuing right to withdraw their investment in the fund simply by submitting their shares to the fund itself and receiving in return the dollar amount of their net asset value. This characteristic is a hallmark of mutual funds. Payment from the fund must be made in 3 business days from the determination of net asset value.
Right of redemption
Ratios that show how well the company can deal with debt obligation.
Risk analysis ratios
Description used for an investor unable or unwilling to accept the probability or chance of losing capital.
Risk averse
A trust that purchases the right to royalties on the production and sales of a natural resource company. Intended to provide monthly income with the potential for capital gains.
Royalty or resource trust
An investment that is not likely to erode the capital of the investor will provide this. Example: money market mutual fund.
Safety of capital
A type of explicit cost paid to mutual fund sales representatives and financial advisors who recommend a company’s funds to their clients.
Sales charge
The shares of a company that produces goods whose demand varies with the seasons n
Seasonal common share
Risks that are not related to the market but to other aspects of trading such as dealing, implementing arbitrage structure. These risks include liquidity, leverage, deal-break, default, etc b
Second order risks
A type of equity investing philosophy that believes that different industry sectors will perform well during different stages of the economic cycle.
Sector rotation
A fixed income philosophy for bonds that involves varying the weights of different types of bonds held within the portfolio.
Sector trading
Bonds that include a promise to turn over an asset to the bondholders for liquidation if the corporation fails to make its coupon payments or pay the par value at maturity.
Secured bond
A ___________ evidences a claim
On the asset and/or the future earnings of the issuer. They can be bought or sold with relative ease and offer various combinations of risk and return.
Security
Essentially the life insurance company’s version of a mutual fund.
Segregated fund
The portfolio manager’s ability to select individual securities. It is the difference between the actual return and the allocated return.
Selection effect
Associations that regulate the companies and employees within a specific industry. For example the MFDA.
Self-regulatory organizations. SRO’s
The date on which the delivery of the commodity is made.
Settlement date.
A one-time charge that is charged by some mutual funds the first time an investor purchase units.
Set-up fee
Calculated by dividing the ending net asset value by the fund’s initial net asset value and then subtracting 1.
Seven day yield
Also known as net worth, this is what is left when liabilities are subtracted from
Assets.
Shareholder’a equity
Similar to the reward-to-risk ratio, but it subtracts the T-bill rate from the return before calculating.
Sharpe ratio
This occurs when an investor sells a security that he does not own. This is undertaken in order to benefit from a fall in the price of the security.
Short sale (short selling)
A type of fixed-income bond fund that combines the characteristics of a bond fund and a money market fund. This fund invests primarily in government bonds with maturities up to five years and money market securities.
Short-term security
It is the return earned by an investment over a given period without considering the effects of compounding. Useful when looking at the consistency rates on returns.
Simple rate of return
For mutual funds, provides all of the information required under national instrument 81-101 ( risk factors, method of distribution, fees, investment objectives).
Simplified prospectus
Small capitalization funds, which means that the market value of the equity of the firm is relatively low, probably because the firm is small.
Small cap
A business cycle please when economic growth slows sharply but does not turn negative, while inflation falls or remains low.
Soft landing
A category of mutual funds that specializes in a particular industry or distinctive type of security. Lower level of diversification.
Specialty mutual funds
The difference between the futures price and the market price.
Spot price
This type of plan allows a couple to divide the ultimate retirement income between them.
Spousal RRSP
The difference between the bid price and the ask price.
Spread
The opposite of volatility. This refers to the amount of change in an investment over time.
Stability
There are five stages, early earning years, family commitment years, mature earning years, nearing retirement, retirement. Each stage corresponds to certain financial objectives.
Stages in the life cycle
A common measure of volatility in investment returns. It shows how spread out the returns are with respect to the average return. The higher this is, the more risky the investment.
Standard deviation
The compounded average annual rate of return of the fund. Aka the total return.
Standard performance data
The code of conduct that mutual fund sales reps should apply to their relationships with their clients.
Standards of conduct
A fixed number of shares that constitutes a trading unit. Commonly 100 shares.
Standard trading unit
Under National Instrument 81-102, mutual funds must set these and clearly state the type of investments the fund will make in order to achieve them. Must appear on the prospectus.
Statement of investment objectives
The goal of this statement is to show the changes in the retained earnings account from period to period. It is the link between the income statement and the balance sheet.
Statement of retained earnings
The predisposition of people, when faced with a wide variety of options, to choose to keep things the same.
Status quo
Also called a share or equity. Represents an ownership interest in a corporation.
Stock
A marketplace where buyers and sellers of securities meet to trade and where prices are established according to supply and demand.
Stock exchange
An investor’s mix of specific mutual funds or asset classes consistent with the investor’s characteristics.
Strategic asset allocation
A form of unemployment resulting from a mismatch between demand in the labour market and the skills and location of workers seeking employment.
Structural unemployment
The study of style drift in a funds holdings or returns over time.
Style analysis
Partitions of comparison universes that more closely represent a fund manager’s specific style.
Sub-universes
A registrant’s major concern in making investment recommendations. All info about a client and a security must be analyzed to determine this.
Suitability
A form of bias that affects comparison universes. As defunct portfolios drop out, they are excluded from the rankings in subsequent quarters, therefore a performance universe is a universe of survivors.
Survivorship bias
The risk with mutual fund shares or units that can suffer in falling markets where unit values are subject to market swings.
Systemic risk
Allows a mutual fund investor to automatically redeem units on a regular basis.
Systemic withdrawal plan
A web site containing all Canadian mutual fund documents including the simplified prospectus, annual reports and annual information forms.
System for electronic document analysis and retrieval SEDAR
Security analysis that is based on the premise that the only things that affects stock prices are supply and demand.
Technical analysis
The period during which a particular rate of interest on a mortgage stays in effect.
Term
Provides death benefits should the individual die before the policy matures or expires.
Term life insurance
Aka geometric mean return, it involves adding 1 to each of the observed annual returns, finding the nth root of their product (where n is the number of annual returns) and finally subtracting 1.
Time weighted return. TWR
Includes the estimated market value of real estate, the value of all investments and the value of all other assets held by the client.
Total assets
Includes all amounts shown on the mutual fund’s income statement. These will automatically include management fees.
Total fees and expenses
The degree to which ETFs fail to mirror the index returns
Tracking errors
Is paid by the mutual funds to compensate distributors for providing ongoing services to the mutual funds client.
Trailer fee
A short term debt security issued by the government. They do not pay interest, instead they are sold at a discount and are redeemed at par value.
T-bills
This is a formal document that outlines the agreement between the bond issuer and the bondholders. Outlines coupon rate, when interest is paid and other terms and conditions.
Trust deed
The proportion of a total fund’s assets traded in a year.
Turnover rate
Patterns if returns between different classes of securities that do not match.
Uncorrelated returns
Occurs when a new issue is purchased by an investment dealer and the dealer bears the risk that the issue will be sold at the desired price.
Underwriting
It is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.
Unemployment rate
A risk that is particular to a certain firm or industry , regardless of the market as a whole n
Unique risk
An insurance policy that offers both insurance and a savings component.
Universal life insurance
An equity investment philosophy that promotes a conservative approach to money management. These investors want to buy a firm for less than what the assets in place are worth.
Value investing
Ratios that show the investor what the company’s shares are worth or the return on owning them.
Value ratios.
The amount of change in returns of an investment over a period of time.
Variability
An annuity where payments to the annuitant will fluctuate in keeping with the changes in the value of the mutual fund from
Which the payments are made.
Variable annuity
Measures the extent to which the possible returns on a security differ from the expected return.
Variance
The accumulated contributions in an employer-sponsored pension plan belong to the employee.
Vested
This measures the periodic change in returns in relation to the average or mean return. The greater the change the more volatile the investment.
Volatility
A standard measure used in some mutual fund tables that simply expresses the relative volatility of a fund.
Volatility rating
Allows the investor to specify the amount and timing of the regular investments they are willing to make.
Voluntary accumulation plan
A derivative security that allows the holder to buy a certain number of shares of the issuing company for a specified price by a specific date. Usually comes attached to a new security to make it more marketable.
Warrant
Rapid intraday or inter day price swings on the market that may result in many short term trading losses.
Whipsaws
A company’s total current assets minus it’s liabilities.
Working capital
It is an investment portfolio that is tailored to meet the investment needs of an individual investor.
Wrap account
A graph showing the relationship between yields of bonds of the same quality but different maturities.
Yield curve
Shows the return expected over the life of a bond assuming the periodic coupon payments are reinvested. Takes into account current market pricing, the time to maturity, the par value and the coupon rate.
Yield to maturity
A type of bond that makes no periodic coup payments. It is sold at a discount and redeemed at par value.
Zero coupon bond/strip bond
Countermeasures and recommendations against money laundering and terrorist financing that were developed and published by the financial action task force.
40+9 recommendations.
