Key Terms
(See Below For Full Glossary Of Terms)
- Asset Mix
Identifies the percentage of the fund's assets invested in securities, bonds, debt instruments, etc. as provided by the fund. In some fund categories - such as international equities - this information represents the geographical distribution.
- Balance/Asset Allocation
Fund invests primarily in a portfolio which generally includes both equities and fixed income securities to provide income and capital appreciation.
- Canadian Bond
Fund invests primarily in Canadian dollar debt issues to provide income and to a lesser extent, capital appreciation through trading and interest rate movements.
- Canadian Equity
Fund invests primarily in common shares of Canadian corporations with capital growth over the long term as the investment objective.
- Canadian Money Market
Fund invests prinarily in treasury bills, government guaranteed or government issued debt securities, or commercial paper with a rating of at least A-1, with dollar weighted average term to maturity not exceeding 180 days.
- Distribution Dates
It is important for investors to be aware of distribution dates for tax reasons. For example, investors who buy units in a growth fund just before a capital gains distribution, will have to declare the gain.
- Dividend
Fund invests primarily in a portfolio of dividend paying preferred and common shares issues by Canadian corporations. The fund's primary objective is income with capital appreciation as a secondary goal.
- Dividends
Most funds distribute income to unitholders in two forms: from the dividends, interest and other income a fund earns on its holdings and from realized capital gains (the gains a fund makes in the selling of its assets.
- Foreign Bond
Fund invests primarily in a global bond portfolio tp provide income and the potential for capital appreciation through interest rate and currency movements.
- Foreign Money Market
Fund invests primarily in foreign currency short term investments. Objectives are to provide current income using low risk foreign currency short term investments and to provide hedge against a falling Canadian dollar.
- Fund Company
The fund company address, phone number, Fax and toll-free numbers are listed under this heading.
- Fund Inception Date
This item indicates when the fund was founded.
- Funds in Family
This item indicates the number of funds in the same Fund Group.
- International Equity
Fund invests in one or more equity markets outside North America seeking capital appreciation and acting as a hedge against the falling Canadian dollar.
- Investment Objective
This statement, provided by the fund, outlines the investment goals of the fund. It should indicate whether the fund is directed toward growth, protection of capital, interest income or some specialized area of the market.
- Investment Stategy
This statement, provided by the fund company, is intended to describe the strategy the manger has employed in order to achieve the fund objectives.
- Investment Style
In order to shed some more light on the performance of a fund, we have asked the funds to classify their investment styles according to certain strategies.
- Management Fee
Every fund has a management fee, charged by the manager for managing the fund assets. The fee is expressed as an annual percentage of assets. In practice, the fee is generally charged against the fund on a weekly, monthly or quarterly basis.
- MER (Management Expense Ratio)
All funds charge a management fee. This may be a flat percentage of fund assets, or it may be based on a tapered fee schedule. In some cases the management fee includes all fund expenses (trading costs excepted).
- Mortgage
Fund investments primarily in mortgages on Canadian property to provide high interest income.
- Net Asset Value (NAV)
The value of a mutual fund unit at any given time. It is calculated by subtracting the fund's liabilities from its assets and dividing by the number of units outstanding. Open-end mutual funds are bought or sold at their net asset value.
- PAC (Pre-Authorized Checking) Plan
This is an investment plan whereby individuals authorize direct withdrawals from their bank account.
- Previous Names
Some funds have changed their names because of mergers, management changes or marketing reasons. This item can help investors determine where they can redeem old fund certificates, or assist lawyers in settling estates.
- Real Estate
Fund invests primarily in a portfolio of commercial and industrial income producing properties to provide income and long term capital appreciation.
- Resource
Fund invests primarily in common shares of corporations operating in one or more segments of the resource industry with capital growth over the long term as the investment objective.
- Return
The amount of money earned by an investment. The rate of return is the percentage this represents. For example, a $1000 investment that produced a return of $150 over 12 months would have an annual rate of return of 15 percent.
- Segregated
This term indicates whether the fund is segregated or not. Insurance company segregated funds are similar to mutual funds in that they both have underlying portfolios of marketable securities.
- Specialty Equity
Fund invests primarily in one or more segments of the market, such as biotechnology, telecommunications, or the environment, with long term capital growth as its objective.
- Standard Deviation
This statistical measure indicates the amount a return is likely to diverge from its average monthly return. The most recent 36 months of data are used to calculate the standard deviation for a fund.
- Top Ten Holdings
The table indentifies the ten largest holdings in the fund's portfolio and the percentage of the portfolio represented by each holding.
- Trailer Fees
This is paid to brokers or salespeople by the fund company as compensation for servicing the fundholder.
- U.S. Equity
Fund invests primarily in common shares of U.S. corporations with capital growth over the long term as the investment objective.
- Valuation
Most funds are valued daily, but some are valued weekly, monthly or quarterly. It is important to know when a fund is valued, because that determines when you can buy or redeem a fund.
- Volatility
A measure of volatility looks at the variations in a fund's monthly rate of return. To arrive at this, the fund's standard deviation is ranked against all other funds and classified into one of 10 percentile.
Glossary of Investment Terms
Accrued interest
Accumulation Plan
Annual report
Annuitant
Annuity
Ask price
Assets
Back-end load
Balance sheet
Balance fund
Bank Rate
Bankers' Acceptance
Bear Market
Beta
Bid price
Blue chip
Board lot
Board of directors
Bond
Bond fund
Book value
Broker
Bull market
Buying on margin
Callable
Canadian Savings Bond
Capital
Capital cost allowance
Capital gain
Capital loss
Capital stock
Capitalization
Cash equivalent
Cash surrender value
Certificate
Closed-end fund
Commercial paper
Common stock
Compounding
Consumer Price Index
Contractual plan
Convertible
Corporation
Coupon rate
Corporation
Coupon rate
Current asset
Current liability
Current yield
Custodian
Debenture
Debt
Deferral
Deferred Profit Sharing Plan
Defined benefit pension plan
Defined contribution pension plan
Denomination
Depreciation
Discount
Distributions
Diversification
Dividend
Dividend fund
Dividend tax credit
Dollar cost averaging
Earned income
Earnings statement
Equity
Equity fund
Face value
Fair market value
Fiduciary
Fiscal policy
Fixed assets
Fixed dollar withdrawal plan
Fixed liability
Fixed-income investments
Fixed-period withdrawal plan
Front-end load
Fundamental analysis
Growth stocks
Guaranteed investment certificate
Income funds
Index fund
Inflation
Interest
International fund
Intrinsic value
Investment adviser
Investment company
Investment counsel
Investment dealer
Investment fund
Investment Funds Institute of Canada (IFIC)
Issued shares
Letter of intent
Leverage
Liabilities
Life annuity
Life expectancy adjusted withdrawal plan
Liquidity
Load
Load fund
Long-term asset
Long-term debt
Management company
Management expense ratio
Management fee
Margin
Marginal tax rate
Market index
Market price
Maturity
Money market
Money market fund
Money purchase pension plan
Mortgage fund
Mortgage-backed securities
Mutual fund
Net asset value
Net asset value per share
No-load fund
Odd lot
Open-end fund
Option
Over-the-counter market
Par value
Pension adjustment
Pension plan
Permanent life insurance
Portfolio
Preferred share
Premium
Present value
Price earnings ratio
Primary distribution
Principal
Prospectus
Ratio withdrawal plan
Real estate fund
Real estate investment trust
Redeemable
Registered Education Savings Plan (RESP)
Registered Retirement Income Plan (RRIP)
Registered Retirement Savings Plan (RRSP)
Retained earnings
Retractable
Rights
Risk
Sales charge
Securities Act
Share
Shareholders' equity
Short selling
Simplified prospectus
Specialty fund
Spread
Stock options
Strip bonds
Systematic withdrawal plan
Tax credit
Tax deduction
Technical analysis
Team insurance
Term to 90 annuity
Trade
Treasury bill (T-bill)
Trust
Trustee
Underwriter
Unit trust
Universal life insurance
Variable life annuity
Vesting
Voluntary accumulation plan
Warrant
Wrap account
Yield
Yield curve
Yield to maturity
Zero coupon bond
Accrued interest:
Interest that has been earned but not received.Accumulation plan:
An arrangement which enables an investor to purchase mutual fund shares regularly in large amounts.Annual report:
A financial report sent yearly to a publicly held firm's shareholders. This report must be audited by independent auditors.Annuitant:
An individual who purchases an annuity and will receive payments from that annuity.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.
Back-end load:
A sales charge levied when mutual fund units are redeemed.Balance sheet:
A financial statement showing he nature and amount of a company's assets, liabilities shareholders equity.Balance 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.Bank rate:
The rate at which the Bank of Canada makes short-term loans to chartered banks and other financial institutions, and the benchmark for prime rates set by financial institutions.Bankers' Acceptance:
Short-term bank paper with the repayment of principal and payment of interest guaranteed by the issuer's bank.Bear market:
A declining 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.Board lot:
A standard number of shares for trading transactions. The number of shares in a board lot varies with the price level of the security. Although in most cases a board lot is 100 shares.Board of directors:
A committee elected by the shareholders of a company, empowered to act on their behalf in the management of company affairs. Directors are normally elected each year at the annual meeting.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 of 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 partially with borrowed money.
Callable:
Preferred shares or bonds that give the issuing corporation an option to repurchase, or "call" those securities at a stated price. These are also known as redeemable securities.Canada Savings Bond:
A bond issue each year by the federal government. These bonds can be cashed in at any time for their full face value.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 cost allowance:
A taxation term, equivalent to depreciation, that makes allowance for the wearing away of a fixed asset.Capital gain:
Profit that is gained from the sale of real estate, securities, or another capital asset.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.Capitalization:
The total amount of all securities, including the long-term debt, common and preferred stock, issued by a company.Cash equivalent:
Assets that can be quickly converted to cash. These include receivable, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.Cash surrender value:
The amount of cash a person may obtain by voluntarily surrendering a life insurance policy.Certificate:
A document providing evidence of ownership of a security such as a stock or bond.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.Comercial 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 holders of common stock.Compounding:
The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.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.Contractual plan:
An arrangement whereby an investor contracts to purchase a given a amount of security by a certain date and agrees to make partial payments at specified intervals.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 monthsCurrent liability:
A liability that has to be paid within 12 months.Current yield:
The annual rate of return that an investor purchasing in 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 is known as the return on investment.Custodian:
A financial institution, usually a bank or trust company, that holds a mutual fund's securities and cash for safekeeping.
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 principle, plus interest. In corporate terms, debt often refers to bonds or similar securities.Deferral:
A form of tax sheltering that results from an investment that offers deductions during the investor's high-income years, and/or postpones capital gains or other income until after retirement or during another period when the income level is expected to change.Defferal Profit Sharing Plan:
A plan that allows an employer to set aside a portion of company profits for the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.Defined benefit pension plan:
A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.Defined contribution pension plan:
A registered pension plan that does not promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan.Denomination:
The principle amount, or value at maturity, of a debt obligation. Also known as the par value or face value.Depreciation:
Charges made against earnings to writs off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.Discount:
The amount by which a bond sells on the secondary market at less than its par 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 geographical 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 as well as preferred shares.Dividend tax credit:
An income tax credit available to investors who earn dividend income through investment in the shares of Canadian corporations.Dollar cost averaging:
A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.
Earned income:
For tax purposes, earned income is generally the money made by an individual from employment. It is also includes some taxable benefits. Earned income is used as the basis for calculating RRSP maximum contribution limits.Earnings statement:
A financial statement showing the income and expenses of a business over a period of time. Also known as an income statement or profit and loss statement.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 of which consists primarily of common stocks.
Face value:
The principle 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.Fiduciary:
An individual of institution occupying a position of trust. An executor, administrator, or trustee. Hence, "fiduciary" duties.Fiscal policy:
The policy pursued by government to manage the economy through its spending an taxation powers.Fixed assets:
Assets of a long-term nature, such as land and buildings.Fixed dollar withdrawal plan:
A plan that provides the mutual fund investor with fixed-dollar payments at specified intervals, usually monthly or quarterly.Fixed liability:
Any corporate liabilities that will not mature within the following fiscal period. For example, long-term mortgagees or outstanding bonds.Fixed-income investments:
Investments that generate a fixed amount of income that does not vary over the life of the investment.Fixed-period withdrawal plan:
A plan through which the mutual fund investor's holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital, together with accrued income, is systematically exhausted.Front-end load:
A sales charge lived on the purchase of 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.
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 ratios. Their prices reflect investors' belief in their future earnings growth.Guaranteed investment certificate:
A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.
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 pay interest on bonds to its bondholders.International fund:
A mutual fund that invests in securities of other countries.Intrinsic value:
The amount by which the price of a warrant or call option may be exercised.Investment adviser:
Investment counsel to a mutual fund. Also may be the manager of a mutual fund.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 dealer:
A securities firm.Investment fund:
A term generally interchangeable with "mutual fund."Investment Funds Institute of Canada (IFIC):
The mutual fund industry trade association set up to serve its members, cooperate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.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.
Letter of intent:
An agreement whereby an investor agrees to make series of purchases of mutual fund units.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.Life annuity:
An annuity under which payments are guaranteed for the life of the annuitant.Life expectancy adjusted withdrawal plan:
A plan through which a mutual fund investor's holdings are fully depleted while providing maximum periodic income over the investor's lifetime.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. (See sales charge.)Load fund:
A mutual fund that charges a commission to purchase its shares.Long-term asset:
An asset that is expected to last (or to be held) for more than one year.Long-term debt:
Debt that becomes due after more than one year.
Management company:
The entity within a mutual fund complex responsible for the investment of the fund's portfolio and/or the administration of the fund. I is compensated on a percentage of the fund's total assets.Management expense ratio:
A measures of the total costs of operating a fund as a percentage of average total assets.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.Marginal tax rate:
The rate of tax on the last dollar of taxable income.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.