An individual or institutional investor who meets certain minimum requirements relating to income, net worth, or investment knowledge.
An investment dealer operates as an agent when it acts on behalf of a buyer or seller of a security and does not itself own title to the securities at any time during the transaction. See also Principal.
The market where qualified or accredited, and institutional investors can invest directly into privately held companies and funds that are available through an Offering Memorandum. The Alternative Market is also known as the Private or Exempt Market.
Annual Percentage Rate (APR)
The annual rate charged for borrowing or earned through an investment. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction but does not take compounding into account.
Everything that an individual or corporation owns or has owed to it. A statement of financial position category.
The term given to how the spreading of investment funds among different categories of assets, such as cash, fixed income securities and equities. The allocation is built around the investor’s risk tolerance.
A term given to a type of assets usually grouped into three major categories: cash and equivalents, fixed income, and equities.
The percentage distribution of assets in a portfolio among the three major asset classes: cash and equivalents, fixed income, and equities.
Assets Under Management (AUM)
The total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
A general and prolonged declining trend in security prices, typically a period more than 3-6 months.
A bond is a debt issued by the company you are lending money to via a “bond” certificate where the issuing company agrees to pay a specified interest rate for a specific period of time (maturity) at which time the company will repay the loan. In layman terms, you become the lender and the company issuing the “bond” is the borrower.
The actual legal agreement between the bond issuer and the bondholder. These can also be called a a Bond Indenture or a Trust Deed.
Board of Directors
A group of individuals elected to represent shareholders. A board’s mandate is to establish policies for corporate management and oversight, making decisions on major company issues. Every public company must have a board of directors. Some private and non-profit organizations also have a board of directors.
An investment dealer or a duly registered individual that is registered to trade in securities and is a member of a Self-Regulatory Organization.
Broker of Record
The broker named as the official advisor to a corporation on financial matter; has the right of first refusal on any new issues.
A general and prolonged rising trend in security prices, typically a period more than 3-6 months.
A collection of stocks and bonds to provide a balanced mix of income and capital growth.
This refers to a category of stock or shares, Class A, Class B, Class C, etc., that sometimes have different rights including voting rights, dividends and claim rights.
The one-year period that begins on January 1 and ends on December 31, based on the commonly-used Gregorian calendar.
To an investor it may mean the total of financial assets invested in securities, a home or other fixed asset, or cash and cash equivalents whether they are held in an account or otherwise.
A form of business organization created under provincial or federal statutes which has a legal identity separate from its owners. The corporation’s owners (shareholders) have no personal liability for its debts.
Selling a security for more than its purchase price. For non-registered securities, 50% of the gain would be added to the income and taxed at the investor’s marginal rate.
Selling a security for less than its purchase price. Capital losses can only be applied against capital gains. Surplus losses can be carried forward indefinitely and used against future capital gains. Only 50% of the loss can be used to offset any taxable capital loss.
Monetary value issued by a recognized government that is considered legal tender in the jurisdiction the notes are issued. This is an extremely liquid asset as long as the monetary value is recognized in the open market.
Very liquid assets that can be easily converted into cash, these include bank accounts, marketable securities, commercial paper, GIC’s, short term government bonds with maturity dates of three months or less.
Any source of income for an investor that is produced from the investment including dividends, interest income, rental income and any other form of ongoing income up until the time of sale of the asset.
A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. Some traditional examples of commodities include grains, gold, beef, oil and natural gas.
A commission is a service charge assessed by a broker or investment advisor for providing investment advice or handling purchases and sales of securities for a client. There are important differences between commissions and fees, at least in the way these words are used to describe professional advisors in the financial services industry. A commission-based advisor or broker makes money by selling investment products such as mutual funds and annuities and conducting transactions with the client’s money. A fee-based advisor charges a flat rate fee for managing a client’s money and is usually a percentage of assets under management (AUM).
Cost of Goods Sold (COGS)
Cost of goods sold (COGS) refers to the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses, such as distribution costs and sales force costs.
Spreading investment risk by buying different types of securities in different companies, different industries, different business channels, different locations and different types of investments. Portfolio risk can be spread out by purchasing different allocations of securities by percentage of a asset type and/or by representative risk determining the percentage of the asset allocation. Truly diverse portfolios will include an asset allocation including public, private and bond markets as well as cash or cash equivalents.
A certificate in indebtedness of a government or company backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset. In other words, no specific asset has been pledged as collateral against the certificate.
A market in which securities are bought and sold over-the-counter in which dealers act as principals when buying and selling securities for clients. Also referred as the unlisted market.
A stock brokerage firm or investment dealer which is a member of a stock exchange or the Investment Industry Regulatory Organization of Canada (IIROC).
An individual who has successfully passed a recognized securities course and completed registration, as required under securities legislation, to be registered to act on behalf of a registered firm. A dealing representative may act as a dealer or an underwriter in respect of a security that the individuals sponsoring firm is permitted to trade or underwrite.
Money borrowed from lenders for a variety of purposes. The borrower typically pays interest for the use of the money and is obliged to repay it at a set date or dates.
Duty of Care
The responsibility to conduct due diligence before providing advice or recommending products.
A dividend is the distribution of reward from a portion of the company’s earnings and is paid to a class of its shareholders. Dividends are decided and managed by the company’s board of directors, though they must be approved by the shareholders through their voting rights. Dividends can be issued as cash payments, as shares of stock, or other property, though cash dividends are the most common.
In the financial world, this usually refers to the payment of assets from a fund, account or individual security to an investor. Registered Retirement Savings Plan account distributions are among the most common and are required after the account holder reaches a certain age when they must be converted to a Registered Retirement Income Fund. A distribution also refers to a company’s or a mutual fund’s payment of stock, cash, and other payouts to its shareholders.
The market where qualified or accredited, and institutional investors can invest directly into privately held companies and funds that are available through an Offering Memorandum. The Exempt Market is also known as the Private or Alternate Market.
Exempt Market Dealer (EMD)
EMDs are exempt market dealers registered with the provincial securities regulators to sell Exempt Market products. To be registered as an Exempt Market Dealer, a firm must meet minimum solvency, integrity and proficiency requirements. In other words, they are required to have enough money to operate the firm, they have to have a clean conduct record and they have to have the right education, experience, and compliance structure to meet their regulatory duties. EMDs select exempt market investments to sell to clients through Dealing Representatives (DRs). The products are selected through a due diligence process that is specific to the EMD. The sales of the investment product to clients by DRs are called subscriptions. Each subscription is approved by a Chief Compliance Officer (CCO) at the dealership for suitability.
Equity is typically referred to as shareholder equity (also known as shareholders’ equity) which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off.
An exchange is a marketplace where securities, commodities, derivatives and other financial instruments are traded (bought and sold). The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments, and other groups a platform from which to sell securities to the investing public. Examples would include the Toronto Stock Exchange (TSX), the New York Stock Exchange (NYSE) and the NASDAQ to name a few of the more common exchanges.
Exchange Traded Fund (ETF)
These funds offer investors the ability to diversify over an entire sector or market segment in a single investment.
Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law, a financial planner and an accountant.
A fiduciary is a person or organization that acts on behalf of another person or persons to manage assets. Essentially, a fiduciary owes to that other entity the duties of good faith and trust. The highest legal duty of one party to another, being a fiduciary requires being bound ethically to act in the other’s best interests.
A fund is a pool of money that is allocated for a specific purpose. Individual and institutional investors can also place money in different types of funds with the goal of earning money. Examples include mutual funds, which gather money from numerous investors and invest it in a diversified portfolio of assets.
A financial plan is a comprehensive evaluation of an investor’s current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans. Most individuals work in conjunction with a financial planner and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing financial plans.
Fiscal Year (FY)
A period that a company or government uses for accounting purposes and preparing financial statements. A fiscal year may not be the same as a calendar year, and for tax purposes, the Canada Revenue Agency (CRA) allows companies to be either calendar-year taxpayers or fiscal-year taxpayers. Fiscal years are commonly referred to when discussing budgets and are often a convenient period to reference when comparing a government’s or a company’s financial performance over time.
Foreign Exchange Market
A marketplace that determines the exchange rate for global currencies. Participants can buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, forex dealers, commercial companies, central banks, investment management firms, hedge funds, retail forex dealers and investors.
An increase in the value of an asset or property. A gain arises if the selling price of the asset is higher than the original purchase price. A gain can occur anytime in the life of an asset. A gain only matters when the asset is sold, and the gains are then realized as profit. An asset may see many unrealized gains and losses between purchase and sale because the market is constantly reassessing the value of assets.
Gross Domestic Product (GDP)
A broad measurement of a nation’s overall economic activity. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
For an individual, the gross income metric, also known as gross pay, is the individual’s total pay from his employer before taxes or other deductions. This includes income from all sources and is not limited to income received in cash, but it can also include property or services received.
For companies, the gross income terminology is interchangeable with gross margin or gross profit. A company’s gross income, found on the income statement, is the revenue from all sources minus the firm’s cost of goods sold (COGS).
Hedge funds are alternative investments using pooled funds that employ different strategies to earn active return, or alpha, for their investors. Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns(either in an absolute sense or over a specified market benchmark). It is important to note that hedge funds are generally only accessible to accredited investors as they require less SEC regulations than other funds. One aspect that has set the hedge fund industry apart is the fact that hedge funds face less regulation than mutual funds and other investment vehicles.
A person who is legally entitled to inherit some or all of the estate of another person who has died without legal will and testament. If a person dies intestate, without a valid will, their heir receives property according to the laws of the state in which the property is probated.
A holding company is a parent corporation, limited liability company, or limited partnership that owns enough voting stock in another company, that it can control that company’s policies and oversee its management decisions. Holding companies may own property, such as real estate, patents, trademarks, stocks, and other assets.
A holding period is the amount of time the investment is held by an investor, or the period between the purchase and sale of a security.
Home is the place of permanent residency where a person lives, or intends to return to live at least 6 months plus a day each. A home is also a physical domicile or residence where a person resides.
A hybrid fund is an investment fund that is characterized by diversification among two or more asset classes. These funds typically invest in a mix of stocks and bonds. They may also be known as asset allocation funds.
Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time.
All or part of a person’s estate and/or assets that is given to an heir once the person is deceased. An inheritance is typically a cash endowment given to younger heirs; however, any assets can be considered as part of an inheritance, such as stock certificates or real estate.
An individual or organization that puts money into securities, properties or businesses with the expectation of achieving a profit.
Investing is the act of allocating funds to an asset or committing capital to an endeavor (a business, project, real estate, etc.), with the expectation of generating an income or profit.
Internal Rate of Return (IRR)
A metric used in capital budgeting to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same formula as NPV does.
An institutional investor is a nonbank person or organization that trades securities in large enough share quantities or dollar amounts that it qualifies for preferential treatment and lower commissions.
International Monetary Fund
The International Monetary Fund (IMF) is an international organization that aims to promote global economic growth and financial stability, encourage international trade, and reduce poverty.
Investment Industry Regulatory Organization of Canada (IIROC)
Is a self-regulatory organization which oversees investment dealers, brokers and trading activity in debt and equity markets in Canada and protects investors.
The interest rate is the amount a lender charges for the use of assets expressed as a percentage of the principal. The interest rate is typically noted on an annual basis known as the annual percentage rate (APR).
Interest – Compounded
Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all the accumulated interest of previous periods of a deposit or loan.
Interest – Simple
Simple interest is a quick and easy method of calculating the interest charge on a loan. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
A legal arrangement in which two or more people own a property together, each with equal rights and obligations. When one of the owners in a joint tenancy dies, that owner’s interest in the property passes to the survivors without the property having to go through probate.
Joint Venture (JV)
A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a JV, each of the participants is responsible for profits, losses, and costs associated with it.
Know Your Client (KYC)
All dealers and their representatives have a duty to know their clients. Your DR will ask you questions about your financial situation and attitude towards investing. To invest in mid to higher risk investments, as are commonly found in the Exempt Market, you must have a willingness and ability to provide such information. Financial ability is measured by things like net worth, income and other personal details like upcoming life changes (divorce, a baby). Your financial willingness to invest is more subjective and is often referred to as Risk Tolerance. This is a culmination of personal attributes such as experience with investing, knowledge of finance, and how accepting you are of potential losses. Your financial goals and intentions are incorporated into your risk tolerance and investment suitability.
- The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable prices changes.
- A corporation’s current assets relative to its current liabilities; its cash position.
The risk that an investor will not be able to buy or sell a security quickly enough because buying or selling opportunities are limited.
Locked-In Retirement Account (LIRA)
Canadian investment accounts designed specifically to hold lock-in pension funds for former Registered Pension Plan (RRP) members, former spouses, or common-law partners, or surviving spouses/partners. Also see (Locked-in Retirement Savings Plan (LRSP)).
Any arrangement whereby securities, cash and cash equivalents, fixed income securities, products and services are bought and sold; either directly or through intermediaries.
The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization of a publicly traded company and is obtained by multiplying the number of its outstanding shares by the current share price.
Mortgage Investment Corporation (MIC)
An investment and lending company designed specifically for mortgage lending (primarily residential mortgage lending) in Canada. Owning shares in a mortgage investment corporation enables you to invest in a company which manages a diversified and secured pool of mortgages.
A mutual fund is a type of financial vehicle made up of a pool of money collected from multiple investors to buy and sell securities such as stocks, bonds, money market instruments, and other assets under one fund. Mutual funds are operated by professional money managers, often called portfolio managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors that outperform market indexes. 93%+ of mutual funds do not outperform their indexes over a five-year period and 97%+ do not outperform their indexes over a 10+ year period. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
A money manager is a person or financial firm that manages the securities portfolio of an individual or institutional investor. Typically, a money manager employs people with various expertise ranging from research and selection of investment options to monitoring the assets and deciding when to sell them.
Mutual Fund Dealers Association (MFDA)
A self-regulatory organization that oversees the Canadian mutual fund industry as it relates to the sale of mutual funds and exempt fixed-income products to retail investors. The Mutual Fund Dealer’s Association (MFDA) was created in 1998, in response to the rapid growth of the mutual fund industry in Canada.
Nasdaq is a global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. Nasdaq was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971.
As a result of the harmonization efforts of the Canadian Securities Administrators, securities markets are governed by several largely aligned national or multi-lateral instruments. The national instruments that apply to investment funds include:
- NI 31-103 Registration and Exemptions
- NI 81-101 Mutual Fund Prospectus Disclosure
- NI 81-102 Mutual Funds
- NI 81-106 Investment Fund Continuous Disclosure
A nest egg is a substantial sum of money or other assets that have been saved or invested for a specific purpose. Such assets are generally earmarked for longer-term objectives, the most common being retirement, buying a home and education.
Net Asset Value (NAV)
This represents the net value of an entity and is calculated as the total value of the entity’s assets minus the total value of its liabilities. Most commonly used in the context of a mutual fund or an exchange traded fund (ETF), the NAV represents the per share/unit price of the fund on a specific date or time.
Net Present Value (NPV)
The difference between the present value of cash inflows and the present value of cash outflows over a period. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
An offering memorandum is a legal document that states the objectives, risks, and terms of an investment involved with a private placement. This document includes items such as a company’s financial statements, management biographies, a detailed description of the business operations and more.
An offering memorandum serves to provide buyers with information on the offering and to protect the sellers from the liability associated with selling unregistered securities.
Financial instruments that are derivatives or based on underlying securities such as stocks. An options contract offers the trader the opportunity to buy or sell an underlying asset in a leveraged scenario.
- Call options allow the holder to buy the asset at a stated price within a specific timeframe
- Put options allow the holder to sell the asset at a stated price within a specific timeframe.
The process of how securities are traded for companies that are not listed on a formal exchange such as the Toronto Stock Exchange (TSX) or the New York Stock Exchange (NYSE). Securities that are traded over-the-counter are traded via a broker-dealer network as opposed to on a centralized exchange. These securities do not meet the requirements to have a listing on a standard market exchange.
A legal document that describes securities being offered for sale to the public. Must be prepared in conformity with requirements of applicable securities commissions.
A pension fund is a pool of assets managed with the goal of supplying its beneficiaries with income during their retirement years.
A generic term for a portfolio of money from many individual investors that are aggregated for the purposes of investment. Mutual funds, hedge funds, exchange-traded funds, pension funds, and unit investment trusts are all examples of professionally managed pooled funds. Investors in pooled funds, benefit from economies of scale, which allow for lower trading costs per dollar of investment, and diversification.
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly tradable securities, like real estate, art, and private investments. Portfolios are held directly by investors and/or managed by financial professionals and money managers.
An individual or individuals responsible for investing a mutual fund, exchange-traded fund or closed-end fund’s assets, implementing its investment strategy and managing day-to-day portfolio trading.
A position is the amount of a security, commodity or currency which is owned by an individual, dealer, institution, or other fiscal entity. They come in two types: Short positions, which are borrowed and then sold, and long positions, which are owned and then sold.
In investment planning a plan refers to the actions, analysis, asset allocation breakdown, risk tolerance, goals and targets written down to form the guiding direction of an individual’s investments. A plan should be customized to specific goals and be dynamic as a person ages, income changes and portfolio grows.
The person for whom a broker executes an order, or a dealer buying or selling for its own account. The term may refer to a person’s capital or the face amount of a bond.
The sale of securities to a relatively small number of select investors. Investors targeted include high-net-worth-individuals, accredited investors and institution investors.
The market where investors can buy directly into privately held companies and funds that are available through an Offering Memorandum. The Private Market is also known as the Alternate or Exempt Market. Although, the private market has been limited to accredited and institutional investors in the past, its offerings are becoming more accessible to the average Canadian investor all the time.
The public market, also know as the secondary market, is where investors go to trade stocks or shares in publicly traded companies. Stocks or shares are also known as securities. The underlying company does not receive any of the money exchanged for stocks or shares in this market, hence why the public market is called the secondary market. Examples of public markets include the Toronto Stock Exchange, New York Stock Exchange and the NASDAQ to name a few.
The market for new issues of securities. The proceeds of the sale of securities in a primary market go directly to the company issuing the securities. Once the offering is completed in the primary market, any future trading (buying and selling) of the security is handled in the Secondary Market (on the exchange the security is lists) and the funds do not go to the company, but are exchanged between the buyer and seller.
A legal process in which a Will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person’s Will or the estate of a deceased person without a Will.
For a company the revenue remaining after all the expenses and taxes have been paid and out of which dividends may be paid. For an investor the profit is the increase in the asset above and beyond return of capital.
A technique that seeks to understand behavior by using mathematical and statistical modeling, measurement, and research. Quantitative analysts aim to represent a given reality in terms of a numerical value.
When individuals stop working or sell a business and transition to relying on investments and/or pensions to derive income.
In investment terms risk is the chance and outcome or investment’s actual return will differ from the expected outcome or return. Risk can range from the losing all of particular investment all the way to unlimited growth on the upside. Time an investment is held, liquidity or ability to sell the investment, historical returns, company or fund management and the economy all can affect investment risk up or down.
Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand. Risk tolerance is an important component in investing. You should have a realistic understanding of your ability and willingness to deal with large swings in the value of your investments; if you take on too much risk, you might panic and sell at the wrong time.
Real Estate Investment Trust (REIT)
An investment trust that specializes in real estate related investments that can include all or some of the following: land, real estate securities, mortgages, construction loans. A REIT invests and manages a diversified portfolio of real estate and can be in both the public and private markets.
Is tangible property that is made of up of land, land and buildings, as well as the natural resources of the land.
Registered Retirement Savings Plan (RRSP)
A retirement savings and investing vehicle for employees and the self-employed individuals. Pre-tax money is placed into an RRSP and grows tax free until withdrawal, at which time it is taxed at the marginal rate.
Registered Education Savings Plans (RESP)
A savings plan sponsored by the Canadian government that encourages investing in a child’s future post-secondary education. Subscribers to a RESP make contributions that build up tax-free earnings. The government contributes a certain amount to these plans for children under age 18. Contributors do not receive a tax deduction for investments in an RESP.
Provincial governments are responsible for supervising securities dealers, mutual fund and investment advisors, credit unions, and provincially incorporated trust, loan, and insurance companies.
Return on Investment (ROI)
A performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
Return of Investment Capital (ROIC)
Return on invested capital is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments. The return on invested capital ratio gives a sense of how well a company is using its money to generate returns.
Reinvestment is using dividends, interest and any other form of distribution earned in an investment to purchase additional shares or units, rather than receiving the distributions in cash.
Negotiable financial instrument that holds some type of monetary value. Securities can be broadly categorized into two distinct types, equities and debts. However, you will also see hybrid securities that combine elements of both equities and debts.
A share class is a designation applied to a specified type of security such as common stock or mutual fund unit.
A type of security (also known as “shares” or “equity) that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the corporation’s assets and earnings.
A sector is an area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics.
The market where securities are traded (bought and sold) through an exchange following the initial sale in the primary market initial offering. Examples of secondary market exchanges are
Also known as a Segregated Fund or SEG Fund is a type of investment fund administered by Canadian insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death.
A suitable investment meets a firm’s, and often legal, criteria that an investment strategy is appropriate for an investor’s or client’s objectives of risk tolerance and means.
Tax-Free Savings Account (TFSA)
An account that does not apply taxes on any contributions, interest earned, dividends, or capital gains, and can be withdrawn tax free. This savings account is available to individuals aged 18 and older in Canada and can be used for any purpose and does have limitations on how much can be contributed annually. The contribution limited is cumulative for years where no contributions were made.
In financial markets, trading refers to the buying and selling of securities, such as the purchase of stock on the floor of the Toronto Stock Exchange (TSX) or the New York Stock Exchange (NYSE).
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. Trusts are established to provide legal protection for the trustor’s assets, to make sure those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes. In finance, a trust can also be a type of closed-end fund built as a public limited company.
Underlying asset are the financial assets upon which a derivative’s price is based. Options are an example of a derivative. A derivative is a financial instrument with a price that is based on a different asset.
An underwriter is any party that evaluates and assumes another party’s risk for a fee. The fee is often a commission, premium, spread, or interest. Underwriters are critical to the financial world including the mortgage industry, insurance industry, equity markets, and common types of debt security trading.
Universal life insurance is permanent life insurance with an investment savings element and low premiums like term life insurance. Most universal life insurance policies contain a flexible premium option.
Upside refers to the potential increase in value, measured in monetary or percentage terms, of an investment. A higher upside means that the stock has more value than is currently reflected in the stock price.
Another measure of risk often used interchangeably with volatility. The greater the variance of possible outcomes the greater the risk.
A vendor is a general term used to describe any supplier of goods or services.
A measure of change in the daily price of a security over a specified period. Usually given as the standard deviation of the daily price changes of that security on an annual basis. The higher the volatility generally means the higher the risk of the security, and vice versa.
A business start-up or entity established with the goal of profiting financially. A product or service that an entrepreneur and investors will take from idea conception, development and then to market for sale.
Financing that investors provide to start-up companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions. However, it does not always take a monetary form; it can also be provided in the form of technical or managerial expertise.
The right of shareholders to vote on matters of corporate policy, including decisions on the makeup of the board of directors, issuing securities, initiating corporate actions and making substantial changes in the corporation’s operations.
The shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors.
An investment advisory service that combines other financial services to address the needs of affluent clients. It is a consultative process whereby the advisor gleans information about the client’s wants and tailors a bespoke strategy utilizing appropriate financial products and services.
A strategy that incorporates a combination of investment, insurance, finance and accounting principals to significantly increase the accumulation and transfer of wealth for business owners, self-employed and professionals and to provide tax-advantageous income streams in retirement.
Wealth measures the value of all the assets of worth owned by a person, community, company or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts.
Removing funds from a bank account, savings plan, pension, investment account or trust. In some cases, conditions must be met to withdraw funds without penalization, and penalization for early withdrawal usually arises when a clause in an investment contract is broken.
An amount that an employer withholds from employees’ wages and pays directly to the government. The amount withheld is a credit against the income taxes the employee must pay during the year. It also is a tax levied on income (interest and dividends) from securities owned by a non-resident as well as other income paid to non-residents of a country.
A deduction in the value of earnings by the amount of an expense or loss. When businesses file their income tax return, they can write off expenses incurred to run the business and subtract them from their revenue to determine their taxable income.
A currency that circulates or trades in markets outside of its domestic borders. The name derives from the Greek prefix “xeno,” meaning foreign or strange.
Year to date (YTD)
Refers to the period beginning the first day of the current calendar year or fiscal year up to the current date.
A frequently used financial comparison is the year-over-year (YOY) method. Using YOY, an analyst can compare two or more measurable events on an annualized basis.
Refers to the earnings generated and realized on an investment over a particular period of time and is expressed in terms of percentage based on the invested amount or on the current market value or on the face value of the security. It includes the interest earned or dividends received from holding a particular security.
Zone of Support
Refers to a price zone reached when a security is price has fallen to a predicted low, known as a support level. A zone of support is typically identified from technical analysis charting. The zone of support is seen as a lower boundary which the stock has not broken through in previous trading sessions.