The following glossary has been provided to globefund.com courtesy of IFIC, the Investment Funds Institute of Canada. IFIC is the national association of the Canadian investment funds industry. The goal of IFIC's public education is to continually improve the knowledge of all Canadians who invest in mutual funds by addressing the needs of investors with differing levels of sophistication, risk tolerance and investing experience in straightforward, non-technical language.
Interest that has been earned but not
An arrangement which enables an
purchase mutual fund
shares regularly in large or small amounts.
A financial report sent yearly to a
held firm's shareholders. This
report must be audited by independent auditors.
An individual who purchases an annuity and will
receive payments from that
A contract that guarantees a series of payments
exchange for a lump sum
A proposal to sell a specific quantity of
securities at a named price.
What a firm or individual owns.
A sales charge levied when mutual fund
A financial statement showing the nature
amount of a company's assets, liabilities and shareholders'
A mutual fund which has an investment
"balancing" its portfolio generally by including bonds and shares
in varying proportions
influenced by the fund's investment outlook.
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
Short-term bank paper with the
of principal and payment of interest guaranteed by the issuer's
A declining financial market.
A statistical term used to illustrate the
of the price of an individual security or mutual fund unit to
similar securities or financial
A proposal to buy a specific quantity of
at a named price.
A descriptive term usually applied to high
A standard number of shares for trading
transactions. The number of shares
in a board lot varies with the price level of the security,
in most cases a board lot is 100 shares.
Board of directors
A committee elected by the
a company, empowered to act on their behalf in the management of
Directors are normally elected each year at the annual meeting.
A long-term debt instrument with the promise to pay
specified amount of interest and to return the principal amount
on a specified maturity date.
A mutual fund whose portfolio consists
The value of net assets that belong to a
shareholders, as stated on
the balance sheet.
An agent who handles the public's orders to buy
sell securities, commodities, or other property. A commission is
generally charged for this
An advancing financial market.
Buying on margin
Purchasing a security partly with
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 issued each year by the
government. These bonds can be cashed in at any time for their
full face value.
Generally, the money or property used in a
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.
The loss that results when a capital asset
sold for less than its purchase price.
All ownership shares of a company, both
The total amount of all securities,
long-term debt, common and preferred stock, issued by a company.
Assets that can be quickly converted to
These include receivables, Treasury bills, short-term commercial
paper and short-term
municipal and corporate bonds
Cash surrender value
The amount of cash a person may
by voluntarily surrendering a life insurance policy.
A document providing evidence of ownership of
security such as a stock or bond.
A fund company that issues a fixed number
shares. Its shares are not redeemable, but are bought and sold on
stock exchanges or the
A negotiable corporate promissory note
a term of a few days to a
year. It is generally not secured by company assets.
A security representing ownership of a
corporation's assets. Voting rights are normally accorded to
holders of common stock.
The process by which income is earned on
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
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.
An arrangement whereby an investor
to purchase a given amount of a security by a certain date and
agrees to make partial
payments at specified intervals.
A security that can be exchanged for another.
Bonds or preferred shares are often convertible into common
shares of the same company.
A legal business entity created under federal
provincial statutes. Because the
corporation is a separate entity from its owners, shareholders
have no legal liability for its
The annual interest rate of a bond.
An asset that could be converted into cash
within 12 months.
A liability that has to be paid within
The annual rate of return that an investor
purchasing 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 known as
the return on investment.
A financial institution, usually a bank or
company, that holds a mutual fund's securities and cash in
A bond unsecured by any pledge of property. It
supported by the general credit of the issuing corporation.
An obligation to repay a sum of principal, plus
interest. In corporate terms, debt often refers to bonds or
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.
Deferred Profit Sharing Plan
A plan that allows an
to set aside a portion of company profits from 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
guarantees a specific income at retirement, based on earnings and
the number of years worked.
Defined contribution pension plan
a registered pension
that does not promise an employee a specified benefit upon
retirement. Benefits depend on
the performance of investments made with contributions to the
The principal amount, or value at maturity,
debt obligation. Also known as the par value or face value.
Charges made against earnings to write off
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
The amount by which a bond sells on the
market at less than its par value or face value.
Payments to investors by a mutual fund from
income or from profit realized from sales of securities.
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 geographic locations.
A per-share payment designated by a company's
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.
A mutual fund that invests in common shares
senior Canadian corporations with a history of regular dividend
payments at above
average rates, as well as preferred shares.
Dividend tax credit
An income tax credit available to
investors who earn dividend income
through investments in the shares of Canadian Corporations.
Dollar cost averaging
A principle of investing which
the use of equal amounts for investment at regular intervals in
the hope of reducing average
share cost by acquiring more shares in periods of lower
securities prices and fewer shares in
periods of higher securities prices.
For tax purposes, earned income is
the money made by an individual from employment. It also includes
benefits. Earned income is used as the basis for calculating RRSP
maximum contribution limits.
A financial statement showing the
and expenses of a business over a period of time. Also known as
an income statement or
profit and loss statement.
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.
A mutual fund whose portfolio consists
of common stocks.
The principal amount, or value at maturity, of
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
An individual or institution occupying a
of trust. An executor, administrator or trustee. Hence,
The policy pursued by government to manage
economy through its spending and taxation powers.
Assets of a long-term nature, such as land
Fixed dollar withdrawal plan
A plan that provides the
fund investor with fixed-dollar payments at specified intervals,
usually monthly or
Any corporate liability that will not
within the following fiscal period. For example, long-term
mortgages or outstanding bonds.
Fixed income investments
Investments that generate a
amount of income that does not vary over the life of the
Fixed-period withdrawal plan
A plan through which the
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
A sales charge levied on the purchase of
A method of evaluating the future
prospects of a company by analyzing its financial statements. It
may also involve interviewing the management of the
Shares of companies whose earnings are
to increase at an above-average rate. Growth stocks are often
typified by their low
yields and relatively high price/earnings rations. Their prices
reflect investors' belief in
their future earnings in growth.
Guaranteed investment certificates
A deposit instrument
paying a predetermined rate of interest for a specified term,
available from banks, trust
companies and other financial institutions.
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.
A mutual fund that matches its portfolio to
of a specific financial market
index, with the objective of duplicating the general performance
of the market in which it invests.
A condition of increasing prices. In Canada,
inflation is generally measured by the Consumer Price Index.
Payments made by a borrower to a lender for the
of the lender's money. A corporation pays interest on bonds to
A mutual fund that invests in
of a number of countries.
The amount by which the price of a
call option exceeds the price at which the warrant or option may
Investment counsel to a mutual fund.
may be the manager of a mutual fund.
A corporation or trust whose primary
purpose is to invest the funds of its shareholders.
A firm or individual which furnishes
investment advice for a fee.
A securities firm.
A term generally interchangeable with
Investment Funds Institute of Canada (IFIC)
industry trade association set up to serve its members,
co-operate with regulatory bodies,
and protect the interests of the investing public that use mutual
funds as a medium for their
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
Letter of intent
An agreement whereby an investor agrees
make a series of purchases of mutual fund units.
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.
All debts or amounts owing by a company in
form of accounts payable, loans, mortgages and long-term debts.
An annuity under which payments are
for the life of the annuitant.
Life expectancy adjusted withdrawal plan
A plan through
a mutual fund investor's holdings are fully depleted while
providing maximum periodic
income over the investor's lifetime.
Refers to the ease with which an investment may
converted to cash at a reasonable price.
Commissions charged to holders of mutual fund units.
(See sales charge.)
A mutual fund that charges a commission
purchase its shares.
Debt that becomes due after more than one
The entity within a mutual fund
responsible for the investment of the fund's portfolio and/or the
administration of the fund. It is compensated on a percentage of
the fund's total assets.
Management expense ratio
A measure of the total costs of
operating a fund as a percentage of average total assets.
The sum paid to the investment company's
adviser or manager for supervising its portfolio and
administering its operations.
An investor's equity in the securities in his or
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
A vehicle used to denote trends in
markets. The most popular in Canada is the Toronto Stock Exchange
300 Composite Index (TSE
In the case of a security, market price is
usually considered the last reported price at which the stock or
bond is sold.
The date at which a loan or bond or debenture
due and must be redeemed or paid off.
A sector of the capital market where short
obligations such as Treasury bills, commercial paper and bankers'
acceptances are bought and
Money market fund
A type of mutual fund that invests
primarily in treasury bills and other low-risk, short-term
Money purchase pension plan
Another term for defined
contribution pension plan.
A mutual fund that invests in mortgages.
Portfolios of mortgage funds usually consist of first mortgages
on Canadian residential
property, although some funds alsoinvest in commercial mortgages.
Certificates that represent
ownership in a pool of mortgages. The holders of these
securities receive regular payments of
principal and interest.
An investment entity that pools shareholder
unitholder funds and invests in various securities. The units or
shares are redeemable by the fund on demand by the investor. The
value of the underlying assets of the fund influences the current
price of units.
Net asset value
The value of all the holdings of a mutual
fund, less the fund's liabilities.
Net asset value per share
Net asset value of a mutual
divided by the number of shares or units outstanding. This
represents the base value of a share
of unit of a fund and is commonly abbreviated to NAVPS.
A mutual fund that does not charge a fee for
buying or selling its shares.
Any number of securities that represents less
An open-end mutual fund continuously issues
redeems units, so the number of units outstanding varies from day
to day. Most mutual
funds are open-ended.
The right or obligation to buy or sell a specific
quantity of a security at a specific price within a stipulated
period of time.
A securities market that exists
securities not listed on stock exchanges. Bonds, money market
securities and many stocks are
traded on the over-the-counter market.
The principal amount, or value at maturity, of
debt obligation. It is also known as the denomination or face
value. Preferred shares may also
have par value, which indicates the value of assets each share
would be entitled to if a company
An amount that reduces the allowable
contribution limit to an RRSP based on the benefits earned from
the employee's pension plan or
deferred profit sharing plan.
A formal arrangement through which the
and in most cases the employee, contribute to a fund to provide
the employee with a
lifetime income after retirement.
Permanent life insurance
Life insurance coverage for
the policyholder pays an annual premium, generally for the life
of the insured. This type
of policy features a savings component, known as the cash
All the securities which an investment company
an individual investor owns.
An ownership security, senior to the
stock of a corporation, with preferred claim on assets in case of
liquidation and a specified
The amount by which a bond's selling price
its face value. Also, the amounts paid to keep an insurance
policy in force.
The current worth of an amount to be
in the future. In the case of an annuity, present value is the
current worth of a series of equal
payments to be made in the future.
Price earnings ratio
The market price of a common share
divided by its earnings per share for 12 months.
A new security issue, or one that is
made available to investors for the first time.
The person for whom a broker executes an order,
a dealer buying or selling for his or her own account. Also, an
individual's capital or the
face amount of a bond.
The document by which a corporation or other
entity offers a new issue of securities to the public.
Ratio withdrawal plan
A type of mutual fund withdrawal
that provides investors with an income based on a percentage of
the value of units held.
Real estate fund
A mutual fund that invests primarily in
residential and/or commercial real estate to produce income and
capital gains for its unitholders.
Real estate investment trust
A closed-end investment
that specializes in real estate or mortgage investments.
Preferred shares or bonds that giver the
corporation an option to repurchase securities at a stated price.
These are also known as
Registered Education Savings Plan (RESP)
A plan that
a contributor, on a tax deferral basis, to accumulate assets on
behalf of a beneficiary
to pay for a post secondary education.
Registered Retirement Income Fund (RRIF)
available for RRSP assets to provide a stream of income at
Registered Retirement Savings Plan (RRSP)
A retirement savings plan to hold amounts deducted from taxable income, within certain limits, in a tax deferred state. There are various investment options and a tax deferral on investment income and gains. Available to individuals to and including 69 years of age, but must be collapsed by the end of the year in which the holder turns 69 years of age.
The accumulated profits of a company.
may or may not be reinvested in the business.
Bonds or preferred shares that allow the
to require the issuer to redeem the security before the maturity
Options granted to shareholders to purchase
shares directly from the company concerned. Rights are issued to
proportion to the securities they may hold in a company.
The possibility of loss; the uncertainty of future
In the case of mutual funds, these are
commissions charged to holder of fund units, usually based on the
purchase or redemption price.
Sales charges are also known as "loads."
Provincial legislation regulating the
underwriting, distribution and sale of securities.
A document signifying part ownership in a company.
terms "share" and "stock" are often used interchangeably.
The amount of a corporation's assets
belonging to its shareholders (both common and preferred) after
allowance for any prior claim.
The sale of a security made by an investor
does not own the security. The short sale is made in expectation
of a decline in the price
of a security, which would allow the investor to then purchase
the shares at a lower price
in order to deliver the securities earlier sold short.
An abbreviated and simplified
prospectus distributed by mutual
funds to purchasers and potential purchasers of units or shares
A mutual fund that concentrates its
investments on a specific industrial
or economic sector or a defined geographical area.
The difference between the rates at which money is
deposited in a financial institution and the higher rates at
which the money is lent out.
Also, the difference between the bid and ask price for a
Rights to purchase a corporation's stock at
The capital portion of a bond from which the
coupons have been stripped. The holder of the strip bond is
entitled to its par value at
maturity, but not the annual interest payments.
Systematic withdrawal plan
Plans offered by mutual fund
companies that allow unitholders to receive payment from their
investment at regular intervals.
An income tax credit that directly reduces
theamount of income tax paid by
offsetting other income tax liabilities.
A reduction of total income before the
of income tax payable is
A method of evaluating future security
prices and market directions based on statistical analysis of
variables such as trading
volume, price changes, etc., to identify patterns.
Temporary life insurance that covers the
policyholder for a specific time.
Term to 90 annuity
An annuity that pays a fixed amount
year until it is exhausted in the year that the annuitant turns
A securities transaction.
Treasury bill (T-bill)
Short-term government debt.
bills bear no interest, but are sold at a discount. The
difference between the discount price and
par value is the return to be received by the investor.
An instrument placing ownership of property in the
of one person, called a trustee, to be held by the trustee for
the use and benefit of
some other person.
An investment firm that purchases a security
directly from its issuer for resale to other investment firms or
the public or sells for such issuer
to the public.
An unincorporated fund whose organizational
structure permits the conduit treatment of income realized by the
Universal life insurance
A life insurance term policy
renewed each year and which has both an insurance component and
an investment component.
The investment component invests excess premiums and generates
returns to the
Variable life annuity
An annuity providing a fluctuating
level of payments, depending on the performance of its underlying
In pension terms, the right of an employee to all
part of the employer's contributions, whether in the form of cash
or as a deferred
Voluntary accumulation plan
A plan offered by mutual fund
companies whereby an investor agrees to invest a predetermined
amount on a regular
Certificates allowing the holder the opportunity
buy shares in a company at a stated price over a specified
period. Warrants are usually issued
in conjunction with a new issue of bonds, preferred shares or
An account offered by investment dealers
investors are charged an annual management fee based on the value
of invested assets.
Annual rate of return received on investments,
expressed as a percentage of the market price of the security.
A graphic representation of the relationship
among yields of similar bonds of differing maturities.
Yield to maturity
The annual rate of return an investor
receive if a bond were held until maturity.
Zero coupon bond
A bond that pays no interest and is
initially sold at a discount.