T

Question 1

Tactical asset allocation

Answer 1

The asset mix designed to take advantage of
perceived opportunities created by
short-term fluctuations in the relative
performance of asset classes. See also Asset
allocation, Asset class, and Strategic asset
allocation.

Question 2

Tactical trading

Answer 2

Trading that carries out a portfolio’s tactical
asset allocation. Tactical trading involves
the shifting of positions or portfolio
allocations in reaction to or in anticipation
of the day-to-day release of economic
information. See also Strategic trading.

Question 3

Tax Efficiency Ratio

Answer 3

The measure of how much of a pre-tax
return an investor keeps after paying tax
liabilities on realized or unrealized gains.

Question 4

Tax Loss Harvesting

Answer 4

The act of voluntarily taking losses for the
purpose of creating a current tax deduction
to offset realized gains. The purpose is to
minimize tax liabilities and keep the asset in
the portfolio, where it can benefit the most
from compounding

Question 5

Tax management

Answer 5

The use of investment accounts,
techniques, and strategies that aim to
reduce or limit the amount of tax paid by a
client. See also Marginal tax rate and Tax
situation.

Question 6

Tax situation

Answer 6

The complete set of information required
to manage a client’s portfolio on a
tax-efficient basis, including, among other
things, the client’s margin tax rate, RRSP
contribution status, and investment
income. See also Marginal tax rate and
Tax management.

Question 7

Technical analysis

Answer 7

The study of historical market action (price,
volume, and time) to determine probable
future price trends.

Question 8

Technical analyst

Answer 8

An analyst who studies historical market 
action (price, volume, and time) to 
determine probable future price trends. 
See also Economist, Equity analyst, 
Investment strategist, and Quantitative 
analyst.

Question 9

Technical anomaly

Answer 9

Is rooted in technical analysis. See

Technical analysis.

Question 10

Temporal re-balancing

Answer 10

Re-balancing a portfolio at regular intervals,
such as a monthly, quarterly, semi-annually,
or annually. See also Re-balancing

Question 11

Term structure

Answer 11

The relationship between interest rates and
time to maturity. The term structure is
normally represented in graphical form by
a yield curve. See also Yield curve.

Question 12

Terminal value

Answer 12

An estimate for the intrinsic value of a stock
on the last forecast dividend or cash flow
date in a dividend discount or discounted
cash flow model.

Question 13

Time diversification

Answer 13

A theory that says that, over the long term,
equities outperform all other asset classes,
and therefore the longer the time horizon,
the lower the risk of holding equities. A
belief in time diversification usually leads
to a recommendation that younger clients
hold a greater percentage of their portfolio
in equities than older clients would

Question 14

Time horizon

Answer 14

The length of time expected to elapse
before one of a client’s significant goals
must be met.

Question 15

Time value of money

Answer 15

The concept that money received today is
worth more than the same amount of
money to be received in the future, because
money received today can be invested to
earn interest up until that future date. The
time value of money concept is the primary
basis of debt securities valuation. See also
Present value and Future value.

Question 16

Time-weighted return

Answer 16

A measure of a portfolio’s return that
eliminates the effect of investor contributions and withdrawals. See also
Dollar-weighted return.

Question 17

Tolerance band

Answer 17

The percentage around which an asset class 
is allowed to vary from its strategic weight 
before it is rebalanced back. The tolerance 
band is also known as the Corridor.

Question 18

Top-down analysis

Answer 18

An active approach to equity investing that
begins with a study of broad macro factors
before narrowing the analysis to individual
stocks, some of which are chosen for
investment. See also Active investment
approach and Bottom-up analysis.

Question 19

Total asset turnover

Answer 19

A company’s total revenue divided by total

assets

Question 20

Total return

Answer 20

A measure of the return on a security or
portfolio that includes both the change in
the value of the security or portfolio and
the income generated by the security or
portfolio.

Question 21

Total return index

Answer 21

An index that measures the total return on
the securities that make up the index,
including price changes and the income
paid by the securities in the index. In most
cases, it is assumed that the income is
reinvested in the securities of the index.

Question 22

Tracking Error

Answer 22

The error to which an index fund manager

tracks the returns of his target benchmark.

Question 23

Traditional finance

Answer 23

The group of economic and investment
theories that form the theoretical
underpinnings for the investment-decision
making process. This includes an
assumption that investors are risk averse,
have rational expectations, and manage
their portfolios as a whole. See also Risk
aversion, Rational expectations, and
Behavioural finance.

Question 24

Tranche

Answer 24

A division of a mortgage pool that has a
different claim on the cash flows of the
underlying pool than other tranches. These
tranches determine how cash flows from the
mortgages are redirected to commercial
mortgage-backed securities based on the
pool. See also Comm

Question 25

Treasury bill

Answer 25

The shortest-term marketable debt security

issued by governments

Question 26

Trend reversal

Answer 26

Action that signals a possible end and
reversal of the current trend. See also
Reversal formation.

Question 27

Trend line

Answer 27

A line drawn on a chart that connects a
series of ascending lows (in the case of an
up trendline) or descending highs (in the
case of a down trendline). See also Up
trendline and Down trendline

Question 28

Treynor Ratio

Answer 28

A measure of the average excess return per
unit of risk. Risk is measured by the
portfolio’s beta.

Question 29

Triangle

Answer 29

A chart pattern that consists of a support 
and resistance line that meet–or are 
projected to meet–at a point called the 
apex. The slope of the support and 
resistance lines determines the type of 
triangle. Triangles can be reversal or 
continuation patterns. See also Ascending 
triangle, Descending triangle, and 
Symmetrical triangle.