Investment Glossary

Asset.
Something that is owned, a physical asset such as a car, house, savings, stocks or bonds.

Asset mix.
How you allocate your money among different investment options.

Bear/Bull markets.
When declines (bear) or increases (bull) are occurring or expected to occur in the markets.

Blue chip.
A descriptive term usually applied to high-grade securities.

Bonds.
A bond is an issuance of debt where the bond issuer agrees to pay the bondholder interest and/or repay the principal at a later date, known as maturity.

CDIC (Canadian Deposit Insurance Corp).
Canadians are covered up to $100,000 for savings and chequing accounts held in Canadian banks.

CUDIC (Credit Union Deposit Insurance Corp).
British Columbians are covered for the full amount of they hold in savings and chequing accounts in BC credit unions.

Canada Savings Bond.
A bond issued by the Government of Canada that can be cashed in for face value plus interest at any time.

Capital gain/loss.
Profit from selling an asset at a higher (gain) or lower (loss) price than what you bought it for.

Diversification.
Investing in a mix of securities, assets, industries, locations, etc. to reduce the risks associated with investing in only one thing or area.

Exchange traded fund.
A security that tracks an index, a commodity or a basket of assets similarly to an index fund, but trades on an exchange. Associated with lower MERs

Fixed income. An investment that generates a fixed amount of income that does not vary over the life of the investment.

Index fund.
A type of mutual fund created to replicate the movements of an index of a specific financial market. Associated with lower MERs

MER.
Management Expense Ratio, or how much you pay towards the annual management of a fund.

Money Market Fund. A mutual fund that invests solely in short-term debt instruments like bills, commercial paper, bankers’ acceptances, etc.

Mutual funds.
A class of funds, that are managed by a fund manager which can invest in a multitude of ways by country, industry, investment class, etc. Associated with higher MERs.

Portfolio management.
The development and implementation of a strategy in order to achieve the investor’s financial goals.

Preferred shares.
A type of stock with privileges not available to common shares like a priority for dividend payments.

REIT.
A Real Estate Investment Trust. A close-ended investment that focuses on real estate or mortgage investments.

Real Return Bonds.
A 30-year bond issued by the Canadian government with interest rates adjusted for inflation using a formula based on the consumer price index.
Rule of 72. A quick way to determine how long it will take money to double when the earned interest is reinvested. Divide 72 by the current interest rate to see how fast compound interest works.
Shareholder. The owner of a share or shares of a corporation.

Tax-deferred savings.
A type of investment that postpones the tax you have to pay on it until a later date, usually when you sell.

Tax shelter.
A form of investment that reduces or defers the taxes you must pay.

Will.
A legally enforceable declaration of a person’s wishes.

Yield.
The return on an investment, expressed as a percentage.