Financial glossary

Any item of economic value owned by a person or entity. Examples are cash, securities, accounts receivable, inventory, office equipment, a house, a car and other property. On a balance sheet, assets are equal to the sum of liabilities and an owner's equity.

The process of spreading your assets among different types of investments such as stocks, bonds, cash, etc.

A type of investment, such as stocks, bonds, real estate or cash.

A market where stock prices are falling and many investors are pessimistic. Continued pessimism causes investors to sell causing further pessimism resulting in a long-term economic downturn.

An individual, institution, trustee or estate that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust or other contract, upon the death of a certain person.

Debt securities or investments essentially loan funds to a government or business for a certain period of time. Generally, the principal along with interest is paid back to the investor on a specified date(s). It's often secured and has priority over shareholders if the company becomes insolvent and assets are distributed.

The original cost of all the investments you hold in your plan plus any reinvested dividend and/or income, minus any withdrawals.

A market where stock prices are rising and investors are confident.

The Canada Deposit Insurance Corporation (CDIC) is a federal corporation designed to protect deposits made to member financial institutions. You don't have to pay for this insurance—it automatically covers all deposits made to member institutions up to $100,000 in the event the bank or trust company fails. It does not protect against scam or theft.

Through the Canada Education Savings Grant (CESG), eligible contributions to a Registered Education Savings Plan can qualify for a grant from the government. The CESG is available to Canadian children under the age of 18 based on some rules and restrictions.

The Canada Learning Bond (CLB) is designed to help families start saving for post-secondary education earlier. There are eligibility rules and restrictions which can be found on the Service Canada website.

Provides an income to people who have worked and payed into the plan. The amount of benefits depend on how much and for how long a person has contributed, and sometimes can be affected by when a person starts drawing on benefits.

The value of all of your assets. Some examples include your home, investments and savings.

Distributions (usually annually) paid to mutual fund shareholders from gains realized on the sale of portfolio securities.

The profit realized when a capital asset is sold for a higher price than the purchase price.

A tax that you pay on money that is made from investments.

Loss incurred when a capital asset is sold for a lower price than the purchase price.

Compound interest arises when interest is added to the principal, so you are essentially earning interest on interest. This way your principal amount grows faster and faster.

A monthly measurement of changes in consumer prices.

The total amount you can contribute to certain plans or accounts such as a Registered Retirement Savings Plan without tax penalties.

An account that is administered by a person or entity (the custodian) for the benefit of another person. Accounts are usually at a bank, mutual fund or brokerage.

A bank or trust company that oversees a mutual fund's assets, including its portfolio of securities or some record of them. The custodian has no role in portfolio management.

Obtaining funding by selling bonds, bills or notes to individuals or institutions.

An employer sponsored retirement plan that promises to pay a set income when an employee retires. The income amount is based on formula determined by the employer. The formula often accounts for the number of years worked and salary.

A plan where a company pays a set percentage or amount into a personal account for an employee’s retirement. There are restrictions and penalties for the employees if they wish to withdraw this money prior to retirement.

Payment in the form of dividends or capital gains of the portfolio. Distributions may be paid in cash or reinvested to purchase additional shares.

A method of portfolio asset allocation that spreads investments over a broad range of securities and/or asset classes. The goal of diversification is to reduce risk exposure to a specific security, sector or asset class by balancing the portfolio's risk and return potential.

A distribution of cash from a fund's net income to its shareowners. Dividends can be reinvested to purchase additional shares.

When you invest a fixed amount regularly, over a longer period of time, you may purchase more shares when prices are low and fewer shares when prices are high. This lessens the effects of a volatile market.

A company can use any 12-month period as a “year” for accounting purposes. It does not have to follow the calendar year starting on January 1.

An increase in the value of shares that results in a higher worth than the purchase price. A gain is not realized until shares are sold. Also known as capital gains, this should not be confused with the capital gains that are reinvesting into a shareholder's account or paid in cash to a shareholder at the fund level.

Provides a monthly benefit to low income Old Age Security recipients living in Canada.

The Home Buyers’ Plan allows you to withdraw up to $25,000 in a calendar year from your RRSP, without any tax penalties to build or purchase a qualifying home for yourself or a related person with a disability.

A measurement of the price performance of a group of securities that serves as a benchmark against which performance is measured. An index is not a mutual fund and you can't invest in an index.

The increase in the price of goods and services in an economy is usually measured by the Consumer Price Index and the Producer Price Index. Over time as the cost of goods and services increase, the value of a dollar falls because a person won't be able to purchase as much with that dollar as he or she previously could.

A grouping or portfolio of investments held by an individual or entity.

A bond with a much higher yield than a typical investment bond, but also with a much greater risk of default.

A legal obligation, debt, claim or potential loss.

The Life Long Learning Plan (LLLP) allows you to withdraw funds from your RRSP to finance qualifying full-time training or education for yourself, your spouse or your common-law partner. There are applicable limitations and restrictions.

Being easily converted to cash.

Money that has been moved from one pension plan to another, usually when you are changing jobs and companies. The money is locked in and cannot be used until retirement.

When you leave a company or retire, you open a Locked-in Retirement Income Fund (LRIF) with the money from your vested pension plan. It provides you with a regular income, but there are withdrawal restrictions.

This type of account works much like a regular Registered Retirement Savings Plan (RRSP), but you cannot withdraw the money until retirement. You will use a Locked-in RRSP if you are changing jobs and are vested in your company's pension plan.

A decrease in the value of shares that results in a lower worth than the purchase price. A loss is not realized until shares are sold. Also known as capital losses.

The yearly cost of a fund investment. It covers investment management, marketing, administrative costs and advisor fees.

The risk that share prices may fluctuate widely over time in response to company, market or economic news. Markets also tend to move in cycles of rising and falling prices.

An investment that pools the money of many investors with similar investment goals and invests that money in a number of securities on their behalf.

The current price of a share, calculated daily by taking the value of the fund's total assets, subtracting liabilities and then dividing the balance by the number of outstanding shares.

The total value of all of your assets, minus your liabilities or what you owe.

Provides residents who have lived in Canada for at least 10 years with a pension starting at age 65. Lower income seniors may be entitled to receive benefits as early as 60.

A steady income that you receive during retirement. Sources can be a company pension, government pension and/or personal savings.

A group of securities managed by a professional money manager who decides which securities to buy and sell in order to achieve the investment goal of the portfolio.

The return on an investment calculated as a percentage of the total amount invested.

In general, a capital gain (or loss) is realized when the shareowner sells or exchanges shares from his or her account for more (or less) than the purchase price. Unrealized gains (or losses) are reflected in the net asset value of the unredeemed shares in the account.

The sale of mutual fund shares.

A fee that is charged when you sell a mutual fund. The fee does not go to the broker, it goes to the fund to cover the cost of the sale.

A Registered Education Savings Plan (RESP) is an account that is registered with the Canadian government that allows you to save for a child's or grandchild's post-secondary education. Contributions grow tax deferred and may qualify for a match from the government up to certain lifetime and annual limits.

A plan that holds your retirement savings and provides an income after you retire. There are restrictions as to how much you can withdraw each year.

A Registered Retirement Savings Plan (RRSP) is an account that you use to save for retirement. This account is registered with the federal government and has provisions for maximum contributions per year. In order to encourage savings, the Canadian government has mandated that contributions are tax deductible, meaning they reduce your taxable income.

Any investment vehicle including stocks, bonds, derivatives and money market instruments.

A portion of ownership in a company. This does not represent any control in a company, however, if a company declares a profit and dividends to be paid, shareholders may receive a portion of that profit.

A type of RRSP where generally a higher income individual will contribute to an RRSP in their spouse's name. The individual contributing receives the tax deduction, but the spouse receives the contributed funds in retirement.

A security that denotes ownership called equity in a corporation and represents a claim in its dividends and net assets. In a corporation with a single class of stock, ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example if a company has 1,000 shares of stock outstanding and a person owns 50 of them, then he or she owns 5 per cent of the company.

To encourage Canadian citizens to save more for long-term needs such as retirement, the federal government introduced the Tax-Free Savings Account (TFSA) in 2009. TFSA contributions are not tax deductible, but any interest and growth is sheltered from tax, even upon withdrawal. Money can be withdrawn from the account at any time for any purpose completely tax free. There are annual contribution limits which can be found on Canada Revenue Agency’s website.

The annualized rate of return for a mutual fund including reinvested income from dividends and capital gains and the capital appreciation/depreciation of the securities within the fund's portfolio.

These are fees paid by a mutual fund manager to salespeople who sell to investors. Fees are paid on a monthly or quarterly basis for giving investment advice.

A tax-free movement of funds from a registered account such as a Registered Retirement Savings Plan to another registered account. The shareowner does not receive the money since the cheque is made payable to the bank for the benefit of the shareowner. In most cases the cheque is mailed directly to the receiving custodian.

A means for one person, called the trustee, to own and control property for the benefit of him/herself or another person, the beneficiary.

The legal owner of trust assets who has authority over the assets and the investments and must exercise that authority for the benefit of the beneficiary.

You have a right to your employer-sponsored pension savings even if you leave the company or plan.

Tax that the government takes from your income before you get paid.