Aa
Absolute Return
The increase or decrease in the value of an asset over a given period of time. Absolute return is typically expressed as a percentage of the value of the asset at the beginning of the period. For example, if you buy one unit of a stock for $10 on January 1, 2013 and the price rises to $11 on Dec 31, 2013, your absolute return for that year is 10% {($11-$10)/$10}. This is different from relative return which refers to the performance of an investment over a given period in comparison to a specified benchmark.
Accrued Interest
The interest that has accumulated on a debt or deposit since the last interest payment date.
American Depositary Receipt (ADR)
A security issued by a U.S. bank in place of foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.
American Option
An option that can be exercised at any time before the expiry date. The majority of exchange-traded options are American. Conversely, a European Option can only be exercised at maturity
Amortization
The time period over which a debt, such as a mortgage, will be paid off based on current terms. Amortization also refers to the process of making regular payments to gradually pay off a debt.
Annual Report
A report issued by a company to its shareholders and other stakeholders on its activities for the past financial year. It typically includes reports from management, auditors and financial information about the assets, liabilities, revenues, expenses, earnings and cashflows of the company.
Any Part Order
An order placed by an investor to buy or sell a security in which the investor is willing to accept partial fills of the order up to the full order amount.
Arbitrage
A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock in New York and sell the same amount in London, making a profit of $.50 a share, less expenses. The profit is the difference between the buy and sell prices and is usually a very small amount per unit. Arbitrage is a sophisticated manoeuvre executed by professional traders.
Arrears
Due, but not yet paid. A payment made after its due date is said to be made in arrears. For example, a home owner's mortgage payment for the month of January in a given year will usually be withdrawn from the home owner's account in arrears on the first business day of the following month - February.
Ask Price
The price at which a security is offered for sale on a market exchange. Also called the offering price, this is the maximum price that a buyer will be required to pay for a given security.
Asset Allocation
The process of dividing investments among different types of assets, such as stocks, bonds, real estate and cash, to optimize the risk/reward trade-off based on an investor's goals and profile.
Asset Class
A specific category of assets or investments, such as stocks, bonds, cash, international securities and real estate. Assets within the same class generally exhibit similar characteristics, and behave similarly in the marketplace.
Assets
Everything a company or person owns or is owed, including such items as cash, equipment, buildings, accounts receivable, and inventory.
Auction Market
The system of trading securities through brokers or agents on an exchange such as the Toronto Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price.
Bb
Back-End Load
The redemption charge an investor pays when withdrawing money from certain mutual funds. The back-end load is designed to discourage withdrawals. Back-end load charges typically decline for each year a unitholder remains in a fund, this charge is also known as Deferred Sales Charge (DSC).
Balance Sheet
A statement of a company's financial position on a given date including assets, liabilities and shareholder's equity.
Balanced Fund
A fund that is a combination of two or more types of asset classes such as stocks, bonds, and money market securities offering investors a balance between risk and return as well as income and growth.
Bank of Canada
The central Bank of Canada was founded in the 1930s to facilitate the functioning of the financial system. The Bank of Canada issues and removes bank notes, acts as the federal government's financial advisor on debt management and foreign exchange, conducts monetary policy to regulate the growth of the country's money supply, and influences interest rates.
Bank Rate
The rate of interest the Bank of Canada charges on one-day loans to financial institutions, chartered banks, and money market dealers. The upward and downward trend of the bank rate affects the prime lending rates that chartered banks give to their most creditworthy borrowers, as well as rates on all types of bank deposits, short-term paper, bonds and mortgages.
Banker’s Acceptance (BAs)
BAs are short-term credit instruments created by a corporate borrower for payment on a specified future date. BAs are "accepted" or guaranteed at maturity by banks. A holder of the BA at maturity is entitled to receive the face value of the BA.The holder of may also sell it, typically at a discount, before its maturity date.
Bankrupt
The legal status of an individual or company that is unable to pay its creditors and whose assets are therefore administered for its creditors by a trustee. If a firm goes bankrupt, the bondholders’ claims will be met first. Shareholders are the last in line to get paid when a company goes bankrupt.
Barbell Strategy
A fixed-income strategy in which the maturities of debt instruments are concentrated at two extremes i.e. very short-term or extremely long-term maturities. For example, a portfolio may be designed to allocate 50% of its fixed-income securities to maturities of less than two years, while the remaining 50% is held in fixed-income securities with maturities of more than 20 years.
Basis Point
One basis point is equal to one hundredth of one percent. Therefore, 100 basis points are equal to 1%. Movements in the price or yields of securities are typically expressed in basis points. For example, a movement in the yield of a bond from 3.00% to 3.50% is expressed as a 50 basis points rise in yield.
Bear
A "bear" is a person who expects that the market or the price of a particular security will decline.
Bear Market
A market in which prices are declining. A "bear" is a person who expects that the market or the price of a particular security will decline.
Beneficial Owner
A person who receives the benefits arising from owning a security although title may be registered in the name of another person. An investor may have securities registered in the name of a broker, trustee or bank to facilitate transfer or to preserve anonymity, but the investor is the beneficial owner and will receive any dividends, interest, profits or losses from sales.
Beneficiary
A person who receives a benefit or gift under a will (and/or pension plan or registered account in provinces where such designations are allowed), or a person for whose benefit a trust is created.
Beta
The risk of a stock relative to the market over time, also referred to as the "systematic market risk." Beta uses regression analysis to compare the historical price volatility of a security relative to an appropriate benchmark.
Bid and Ask
Often referred to as a quotation or quote. The bid is the highest price anyone will pay for a security at a given time; the ask is the lowest price anyone will accept at the same time.
Bid Price
The maximum price that a buyer is willing to pay for a given security at a given time.
Block
A large holding or transaction, usually 10,000 shares (excluding penny stocks) or $200,000 worth of bonds.
Blue Chip Stock
The stock of a well-established company with stable earnings and an ability to pay dividends. These stocks are often seen as less volatile and better able to weather downturns in the face of adverse economic conditions.
Board Lot
A standard trading unit set by a stock exchange to facilitate trading. For instance, one board lot on the Toronto Stock Exchange is 1000 shares if the shares are priced under 10 cents each, 500 shares if the shares are priced between 10 cents and 99 cents, and 100 shares if the shares are $1.00 and over.
Board of Directors
A group of individuals elected by the shareholders of a company to act on their behalf in the management of the company. Directors are usually elected each year at the annual meeting.
Bond
An investment that pays interest (coupon) until its maturity date, when the issuing government or company repays the bond’s principal value. In the event of bankruptcy, bond holders will have a claim to the company's assets before shareholders.
Bond Mutual Fund
A mutual fund whose portfolio consists primarily of bond holdings and other debt securities.
Book Value
The value at which an asset is carried on the balance sheet of a company. The book value is also the price paid for an investment. When you sell a stock for example, the selling price minus the book value is the capital gain (or loss) from your investment.
Break-Even Price
The market price a stock must reach for option buyers to avoid a loss if they exercise. For a call, the break-even price is the strike price plus the premium paid. For a put option, it is the strike price minus the premium paid.
Broker
A securities firm or investment advisor associated with a firm. A broker acts as an agent of its clients in the purchase or sale of listed securities in return for a commission.
Bull Market
A market in which prices are rising. A "bull" is a person who expects that the market or the price of a particular security will rise.
Bullet Strategy
A fixed-income strategy in which a portfolio is designed to have securities with maturities that are concentrated at one point on the yield curve.
Business Trusts
Business trusts hold assets of an operating business and distribute a portion of their cash flow. Businesses suitable for this trust structure are generally businesses in mature industries who exhibit steady, predictable cash flows.
Cc
Call Option
A contract that gives an investor the right (but not the obligation) to buy a security at a specified price within a specific time period.
Callable
A bond issue that may be redeemed by the issuing corporation under specified conditions before maturity. The term also applies to preferred shares that may be redeemed by the issuing corporation.
Canadian Investor Protection Fund (CIPF)
An industry-sponsored fund that protects investors from losses resulting from the bankruptcy of a member firm of CIPF up to a specified amount.
Capital Gain or Capital Loss
Profit or loss from the sale of real estate, stocks, mutual funds, and other holdings classified as capital assets under the federal income tax legislation. The tax treatment of capital gains is different from other types of investment income such as dividends and interest income.
Capital Shares
An investment in a dual-purpose fund which entitles the investor to a share of capital appreciation but not income earned by the fund.
Capital Stock
All shares representing ownership of a business, including preferred and common share.
Cash Flow
Reported net income of a corporation plus accounting deductions such as depreciation, depletion, amortization, and extraordinary charges to reserves, which are not paid out in actual dollars and cents. Cash flow can provide a broader picture of a company's earning power than net earnings alone. Cash flow is important to investors as it represents the cash available to the company from which it can pay dividends and finance expansion.
Certificate
Proof of ownership of equity or debt in a corporation. Includes the details of the stock, bond or other security. For example, share certificate, bond certificate.
Closed-End Fund
A fund with a fixed number of shares outstanding. Shares in a closed-end fund are not redeemable, but are bought and sold on stock exchanges or the over-the-counter market. The price of a share in a closed-end fund is determined entirely by market demand, so shares can either trade below their net asset value (NAV) "at a discount" or above NAV "at a premium."
Collateral
Securities or other assets pledged by a borrower with a lender to secure repayment of a loan. If the borrower fails to meet his or her obligations under the terms of the debt, the lender may sell the collateral to recover the debt.
Commercial Paper
Debt instruments issued by companies to meet short-term financing needs. Commercial paper is sold at a discount and matures at face value.
Common Stock
Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through capital appreciation and dividends. In the event of liquidation, common stockholders have rights to a company's assets only after bondholders, other debt holders, and preferred stockholders.
Compounding
The process by which income is earned on income that has previously been earned. Essentially compound interest is interest paid on interest.
Conglomerate
A corporation that has diversified its operations usually by acquiring enterprises in different industries.
Consolidated Balance Sheet
A combined statement of the financial position of a corporation and its subsidiaries.
Convertible Preferred Stock
Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares."
Coupon
The coupon represents the interest the bondholder will receive annually and is stated as a percentage of the face value. Typically, bonds pay interest semi-annually. For instance if a bond pays a coupon of 5% on a face value of $1000, the bond holder will receive $50 annually or 2 coupon payments of $25 each, every six months.
Covered Call
An options strategy whereby an investor who owns an asset writes (sells) call options on that asset to generate additional income in the form of the premuim received.
Cumulative Preferred Share
A non-voting share on which a fixed dividend is payable and if the company is unable to pay the agreed dividend in any given period, it is carried over and paid in a subsequent period before dividends can be paid to the company's common stock holders.
Current Assets
Those assets of a company that are reasonably expected to be realized in cash, sold or consumed within a year. These include cash, inventories, receivables and money due usually within one year.
Current Liabilities
The portion of money and other obligations such as trade debts (accounts payables) owed by a company which will fall due within one year.
Current Yield
A measure of the dividend or interest income on an investment as a percentage of its current price. Current yield for a stock is calculated by dividing the annual dividend by the current market price of the stock. For example, a stock selling at $50 and with an annual dividend of $5.00 per share yields 10%. The current yield on a bond is the annual return on the dollar amount paid for the bond and is calculated by dividing the bond’s annual interest payment by its purchase price.
Dd
Day Order
An order to buy or sell securities that expires at market close on the day it is entered. All orders are considered day orders unless otherwise specified.
Debenture
A debt obligation that is secured solely by the general creditworthiness of the issuer. Unlike bonds, debentures do not pledge specific assets of the issuer as collateral, but may offer a general claim on any residual assets. Since investors are offered less protection, debentures carry a higher risk, and therefore a higher expected return than bonds.
Debit Balance
The amount by which an account has been overdrawn. If you take out more money than you have put into your account, that account will have a debit balance.
Debt
Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money.
Debt-Equity Ratio (D/E Ratio)
A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. The D/E Ratio indicates what proportion of equity and debt the company is using to finance its assets/operations.
Declaration Date
The date on which the next dividend payment is announced by a company’s Board of Directors.
Deficit
A financial situation where the expenses of an individual, company or government exceed their revenues.
Depreciation
The decline in value of a fixed asset, such as equipment, over its estimated useful life. Depreciation is a bookkeeping entry that recognizes the portion of a fixed asset that has been used in the production of goods and services in a given period. It does not represent any cash outflow.
Director
Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid.
Discount
The amount by which a preferred stock or bond may sell below its par or face value.
Discount Brokers
Firms that offer lower commission rates than full service brokers. These firms do not offer investment advice.
Discretionary Account
An account in which the customer authorizes a broker or another party to buy and sell securities or commodities. The broker is also responsible for selection, timing, amount, and price to be paid or received, among other services.
Distribution
Payment made by a fund to its unit holders periodically e.g. monthly, quarterly, annually.
Diversification
A method used to reduce risk by buying securities covering a variety of issuers, asset types, sectors, industries and geographies.
Dividend
Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends are often quoted in terms of the dollar amount each share receives (dividends per share or DPS).
Dollar-Cost-Averaging
A system of buying securities at regular intervals with a fixed dollar amount rather than buying a fixed number of shares. This helps the investor to spread out their purchases through different price levels that may achieve a lower average cost.
Ee
Earnings Per Share (EPS)
The amount of a company's residual profit available to each unit of common stock outstanding. EPS is generally a sign of a company's profitability. Calculated as: Net Income – Dividends on Preferred Stock divided by Average Shares Outstanding.
Earnings Report
A statement, also called an income statement, issued by a company showing its profits or losses over a given period. The earnings report shows the company's revenues, expenses and profit earned for the relevant period.
Estate Planning
The process through which a person considers and documents his or her wishes regarding the distribution of their assets, following their death, to their chosen beneficiaries. Estate planning typically includes drawing up a will and other strategies that will help ensure that a person's final wishes are carried out; minimize taxes and probate fees; and reduce anxiety for beneficiaries.
Ex-Dividend Date
Ex-dividend literally means "without dividend". Anyone who does not own a given stock before the ex-dividend date will not receive the impending dividend payment.
Exchange Traded Funds (ETF)
A basket of securities tracking a specific market index, sector group or commodity. Like stocks, ETFs trade on stock exchanges with price changes throughout the day as they are bought or sold.
Executor
The person(s) or institution named in a will to settle an estate in accordance with the terms of the will. If the will requires a trust to be established, rather than having the assets distributed outright to the beneficiaries, the executor will normally also be named as trustee.
Exercise Price
The price at which the underlying stock of a call option can be purchased, or the price at which the underlying stock of a put option can be sold. Also referred to as the strike price.
Ff
Face Value
Also referred to as the par value or principal. The amount of money a bond holder receives back from the issuer on the bond’s maturity date. A bond’s price will fluctuate throughout its life; therefore the face value and actual price of the bond will often differ.
Fallen Angel
A bond that has fallen from investment grade to junk bond status. Also, a stock which has seen a deep decline from its price highs.
Fee-Based Accounts
Client accounts in which the investment dealer does not charge commissions, but instead charges a fee based on the value of the investor's account.
Financial Planning
A process where an individual sets long-term financial goals. It includes investments and tax planning, asset allocation, risk management, retirement planning and estate planning.
Fiscal Year
A corporation's accounting year. Due to the nature of the particular business, some companies do not use the calendar year for their bookkeeping – therefore many companies' fiscal years end on dates other than December 31.
Fixed Income Securities
Securities that generate a predictable stream of interest or dividend income, such as bonds and debentures.
FTSE
FTSE Group is an independent company owned by The Financial Times and the London Stock Exchange. FTSE offers various indices which are used by investors world-wide for investment analysis, performance measurement, asset allocation, portfolio hedging and the creation of index tracking funds.
Fundamental Research
Analysis of the value of a security based on a variety of quantitative and qualitative factors such as sales, assets, earnings, products or services, markets and management.
Gg
General Mortgage Bond
A bond that is secured by a blanket mortgage on the company's property but may be outranked by one or more other mortgages.
Growth Stock
Stock of a company with a record of growth in earnings at a relatively rapid rate. These stocks do not typically pay dividends and have the potential for capital gains rather than income.
Guaranteed Investment Certificates (GICs)
A deposit instrument – most commonly available from trust companies or banks – requiring a minimum investment at a predetermined rate of interest for a stated term. These investments are generally non-redeemable and non-transferable prior to their maturity, however there are some exceptions (for example: cashable GICs).
Ii
Income Bond
Generally income bonds promise to repay principal, but only pay interest when earned. In some cases, unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. An income bond may also be issued in lieu of preferred stock.
Indenture
A written agreement under which bonds and debentures are issued, setting forth maturity date, interest rate, and other terms.
Index
An index is a composite of securities which gives investors points of reference for evaluating the performance of their investments. It is important to compare the performance of an investment to an index that comprises similar securities. Examples include the S&P/TSX Composite Index and the Montreal Exchange Market Portfolio Index.
Index-Linked
An investment linked to the performance of a specific index such as a stock market index or an inflation (consumer price) index. Where an investment is linked to the inflation index, for example, the purchasing power of future returns are protected from being eroded by inflation.
Institutional Investor
An investor, such as a bank, insurance company, retirement fund, hedge fund, or mutual fund, that is more financially sophisticated and usually controls larger investment portfolios than an individual or retail investor.
Interest
Money charged by a lender to a borrower for the use of the lender's money. A corporation pays interest on its bonds to its bondholders.
Intrinsic Value
An estimate of the actual value of a company/security based on the present value of future income flows. Intrinsic value may differ from market or book value.
Investment
The purchase or ownership of a security to make money by gaining income, increasing capital, or both. Investments may also include artwork, antiques and real estate.
Investment Advisor
This is a person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products. Investment advisors must attain set educational qualifications, follow certain rules and regulations, and be registered by the securities commission in the province in which they work and in any province in which they have clients.
Investment Banker
Also known as an underwriter, an investment banker is the middleman between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy a new issue of stocks or bonds from the corporation. The group forms a syndicate to sell the securities to individuals and institutions.
Investment Horizon
The time period over which an investor intends to achieve his or her investment objective. Investors with shorter time horizons typically choose assets with lower risk profiles.
Investment Objective
The purpose for which a person invests. Your investment objective should guide your investment plan - the types of securities you include in your portfolio, how long you invest for, the level of returns you seek etc. Having a clear objective or goal will keep you focused and enable you to measure the success of your investment over time against your goals.
Investment Policy Statement (IPS)
An important document that sets out an investor's goals, profile (e.g. attitude towards risk, financial situation) and strategy to achieve the stated goals. Where an investor employs the services of a portfolio manager, the portfolio manager will follow the strategies agreed to in the investment policy statement. Investment policy statements are generally updated annually and upon the occurrence of relevant life events such as marriage or the birth of a child.
Investment Services Representative
An investment services representative is licensed to receive and act upon clients’ trading instructions but does not provide advice or investment recommendations.
Investor Profile
An individual's preferences in investment decisions based on goals, risk tolerance, current financial situation, and investment experience.
IPO (Initial Public Offering)
The first sale of stock by a private company to the public. In an IPO, the issuer obtains the assistance of an investment bank which helps it determine what type of security to issue (common or preferred), best offering price, and time to bring it to market.
Ll
Labour Sponsored Investment Funds (LSIFs)
Sponsored by labour organizations, LAIFs are designed to invest in small- and mid-size Canadian businesses. They are defined by provincial and federal statutes.
Leverage
The use of borrowed funds with the intention of increasing investment returns. Leverage comes with greater risk and should be used with caution as losses may also be amplified.
Liabilities
Your liabilities are what you owe. Current liabilities are debts due and payable within one year. Long-term liabilities are those payable in over one year. A company's liabilities are found on its balance sheet.
Life Annuity
A contract that guarantees the plan holder a regular income for life in exchange for an amount of money (contributed at one time or over a period of time).
Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller.
Liquidation
The process of converting securities or other property into cash. It also refers to the closing down or bankruptcy of a company.
Long
Signifies ownership of securities. "I am long 100 shares of XYZ" means "I own 100 shares of XYZ".
Long Term Debt
Debt obligations maturing in longer than one year including bonds, debentures, bank loans.
Mm
Manipulation
The buying or selling of a security to create a false appearance of trading activity or raise/depress the price to induce purchase or sale by others.
Margin
The amount borrowed by an investor from his or her broker to buy or sell securities.
Margin Account
A brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities. If the value of the stock drops sufficiently, the account holder has to deposit more cash or sell a portion of the stock.
Margin Call
A demand upon a customer to put up money or securities with the broker. The call is made if the value of an investor's account declines below a minimum standard set by the exchange or firm.
Market Capitalization (Market Cap)
A measure of a company's equity value. Market Cap is calculated by multiplying the number of shares outstanding by the current market price of one share.
Market Maker
A broker - dealer firm which holds a position in a given security and commits to providing bid (buy)/ ask (sell) quotes to buyers and sellers of that security.
Market Order
An order to buy or sell a specified number of shares at the best available price at the time the exchange receives the order. Orders that do not bear a specific price are usually considered "at the market."
Money Manager
The person in charge of a portfolio of securities. This individual has the fiduciary responsibility to manage the assets properly and choose which asset types are most appropriate over time.
Money Market
Short-term fixed-income products that are sold at a discount and later mature at face value. These include federal government treasury bills, short term Government of Canada bonds, commercial paper, bankers' acceptances, and guaranteed investment certificates.
Money Market Fund
A mutual fund whose investments are in money market instruments such as treasury bills (T-bills), Bankers' Acceptances (BAs) and commercial paper.
Mortgage Bond
A bond secured by a mortgage on a property. The value of the property may or may not be equal to the value of the bonds issued against it.
Moving Average
An indicator frequently used in technical analysis showing the average value of a security's price over a set period.
Nn
Naked Option
An option position where the buyer or seller does not hold underlying security.
NASDAQ
NASDAQ is an acronym for National Association of Securities Dealers Automated Quotations. A computerized trading system that provides brokers and dealers with price quotations on securities traded over-the-counter.
Net asset value (NAV)
Generally used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily by totalling the market value of all securities owned. All liabilities are deducted, and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share.
Net Worth
A company's total assets less its total liabilities. Also referred to as shareholders' equity.
New Issue
A stock or bond sold by a corporation for the first time. It can be either a new offering (Initial Public Offer) or secondary offering. Proceeds may be used to retire outstanding obligations of the company, acquire new plant or equipment, and/or finance additional working capital.
Noncumulative
A type of preferred stock on which unpaid or omitted dividends will not be paid in the future.
Oo
Odd Lot
An order to buy or sell a security that is outside the standard trading unit for that security. E.g. any purchase or sale order of less than 100 shares, if the share price is greater than $1 on the Toronto Stock Exchange.
Open-End Fund
A mutual fund that continuously issues and redeems units, so the number of units outstanding varies from day to day. Open-end funds also buy back shares when investors wish to sell. Each share or unit represents a portion of the underlying portfolio.
Option
An investor who purchases an option has the right, but not the obligation, to buy or sell certain securities at a specified price within a specified time. A put option gives the holder the right to sell the security; a call option gives the right to buy the security.
Over-the-Counter (OTC)
A market for securities made up of dealers who make trades over the telephone and/or computer outside of an exchange. The OTC market is the principal market for bonds of all types, and also deals with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. OTC dealers may act either as principals or as brokers for customers.
Overbought
A situation where the demand for a certain asset has pushed the price of an underlying asset to new levels that fundamental valuations do not support.
Oversold
An asset which is believed to have declined to an unreasonable level following a high volume of sales.
Pp
Paper Profit (Loss)
An unrealized profit or loss accumulated on a security still held. Paper profits and losses are only realized when the security is sold.
Par Value
The face value of a bond or dollar amount assigned to a share by the company's charter. Par value has little relationship to the market value of common stock. Many companies issue no-par stock but give a stated per share value on the balance sheet.
Penny Stocks
Low-priced, often highly speculative, shares of companies with low market capitalization. There is no universally accepted threshold for penny stocks. Some define them as stocks selling at less than $1 per share while others categorize them as stocks with a unit price under $5 dollars.
Portfolio
The entire combination of securities or investments an individual or institution holds.
Portfolio Management
The process of managing investments, including tasks such as asset allocation and security selection.
Preferred Stocks or Shares
A class of stock that entitles the owners to a stated dollar value per share in liquidation (paid after bondholders), and a fixed dividend paid ahead of the company's common shares. Preferred shares usually only have voting rights when a stated number of dividends have been missed.
Premium
The amount by which a bond or preferred stock may sell above its par/face value. It may also refer to the redemption price of a bond or preferred stock if it is higher than face value.
Price-to-Book Ratio (P/B Ratio)
A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the book value per share.
Price-to-Cash-Flow Ratio
The current closing price of a company's stock divided by the company's annualized cash flow per share. Since this measure deals with cash flow, the effects of depreciation and other non-cash factors are removed.
Price-to-Earnings Ratio (P/E Ratio)
A popular way to compare stocks selling at various price levels, The P/E ratio is the price of a share or stock divided by earnings per share for a (future or trailing) 12-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-to-earnings ratio of 10.
Price/Earnings To Growth (PEG Ratio)
A ratio used to scale a company's Price to Earnings ratio to its projected growth rate and facilitate comparison to other companies. The PEG ratio is calculated by dividing the Price/Earnings ratio by the annual Earnings Per Share (EPS) growth rate.
Prime Rate
The lowest interest rate charged by commercial banks to their most credit-worthy customers. Other interest rates, such as personal, automobile, commercial and financing loans are often tied to the prime rate.
Private Placement
Raising of capital by selling securities to a relatively small number of investors. Investors involved in private placements are usually large banks, mutual funds, insurance companies, and pension funds.
Profit-Taking
Selling a stock that has appreciated in value since its purchase in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices.
Protective Put
A put option purchased for an underlying security already owned by the client. It protects the buyer to some extent (depending on strike price) against a drop in the share price of the underlying security.
Proxy
Written authorization given by a shareholder for someone else to represent him or her and vote his or her shares at a shareholders' meeting.
Put Option
An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.
Quote
The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you request a "quote" on a stock, you will receive a set of two numbers like "45.25 to 45.50." This means that $45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $45.50 was the lowest price that any seller would take at the same time.
Rr
Rally
A brisk rise following a decline in the general price level of the market or in an individual stock.
Rate of Return
The percentage increase or decrease in the value of an investment over the initial investment amount for a given period of time.
Real Estate Investment Trust (REIT)
An investment entity with holdings primarily in real estate investments such as buildings and mortgages. REITs trade like stocks on exchanges.
Real Return Bond
A bond in which coupon payments are linked to the Consumer Price Index (CPI). This feature provides purchasing power protection to investors by adjusting coupon payments for inflation as reflected by the CPI.
Record Date
The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.
Red Herring
A registration statement filed with the Securities and Exchange Commission (SEC) ahead of a prospectus for an issue of securities. It may be amended several times before the final prospectus is filed.
Redemption Price
The price at which a bond may be repaid before maturity by the issuer. Redemption value may also refer to the price a company must pay to call in certain types of preferred stock.
Refinancing
The selling of new securities to raise money to retire existing liabilities. The objective may be to save interest costs, extend the maturity of the loan, change the financing structure or a combination of any of these reasons.
Registered Bond
A bond that is registered on the books of the issuing company in the name of the holder. It can be transferred only when endorsed by the registered owner.
Registered Pension Plan (RPP)
A RPP is a contractual arrangement registered with the Canada Revenue Agency and established by an employer to provide lifetime pension benefits for its employees when they retire. Both employee and employer contributions to the plan are tax deductible within limits.
Registered Retirement Income Fund (RRIF)
A RRIF is a tax deferral vehicle available to Registered Retirement Savings Plan (RRSP) annuitants who wish to start receiving a retirement income. An RRSP annuitant may transfer part or all of their RRSP into a RRIF at any time before the end of the year in which the plan holder turns 71. If you choose to set up a RRIF, you will need to make your first withdrawal no later than the year after you set it up, and receive no less than a minimum amount each year.
Registered Retirement Savings Plan (RRSP)
A vehicle available to individuals to defer tax on allowable contributions to encourage saving for retirement. The annuitant invests money in one or more of a variety of approved investments which are held in trust under the plan. Income tax is deferred until withdrawals are made from the plan. Within certain constraints, funds may be withdrawn to help purchase a home or for educational purposes without being taxed provided they are repaid to one of the annuitant's non-spousal RRSPs within a specified period. The funds within an RRSP must be transferred to a Registered Retirement Income Fund (RRIF), used to purchase a fixed-term or life annuity, and/or be paid out and taxed by December 31 of the year in which the annuitant turns 71.
Registrar
An organization charged with the responsibility of keeping record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount.
Retractable Preferred Shares
Retractable preferred shares allow the owner to sell the shares back to the company at a predetermined price and date. This allows the shareholder to set a maturity date for the investment, as would be the case with a fixed income instrument.
Rights
A stock issue that gives existing shareholders the opportunity, ahead of others, to increase their shareholding in the issuing company in proportion to the number of shares they own. Rights are typically offered to stockholders below the current share price.
Rising Star
A bond whose rating has been increased because of the issuing company's improving credit quality. A rising star may still be a high-yield bond, but is on its way to being investment-quality.
Round Lot
A unit of trading or a multiple thereof. On the NYSE, for instance, the unit of trading is generally 100 shares in stocks and $1,000 or $5,000 par value in the case of bonds.
Ss
Secondary Market
A market for the resale of securities among investors following the original sale of the securities by the issuing corporation. A stock exchange is an example of a secondary market.
Securities
Investment products such as notes, bonds, stocks, options, and futures contracts.
Self Directed Investor
A person who manages his or her own brokerage account with no professional advice.
Sell Side
The portion of the investment services industry which sells investment services to investors. Such firms as retail brokers, investment bankers and research providers are said to be on the sell side.
Settlement
Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale. Depending on the type of security, settlement may occur on or after the trade date.
Shares or Stocks
These two terms are used interchangeably to refer to units of ownership interest in a company.
Short Covering
Buying stock to return stock previously borrowed to make delivery on a short sale.
Short Sale
The borrowing of a security from a broker and selling it, with the understanding that it must later be bought back and returned to the broker. Short selling (or "selling short") is a technique used by investors who try to profit from the falling price of a stock.
Sinking Fund
Money set aside by a company at regular intervals for the redemption of its debt obligations such as bond and debenture holders.
Spin Off
The creation of a separate entity out of an existing company. Shareowners in the original company are allotted shares in the new entity in proportion to their holdings in the original company without necessarily changing the total value of their holdings.
Split
An increase in the number of units of shares which a company has outstanding such that each shareholder's proportionate equity holding is unchanged. Companies typically split their shares when the stock price has risen significantly. The most common split multiple is 2 for 1.
Stock Dividend
A dividend paid in securities rather than in cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company.
Stock Exchange
An organized market where investors buy and sell stocks and other equity securities.
Stock Index Futures
Futures contracts on stock indices, e.g. S&P 500 Index futures contracts.
Stock Ticker Symbol
A unique identifier, characteristically comprising letters, assigned to a listed company to facilitate trading on a stock exchange. These symbols often abbreviate the complete corporate name of the company e.g. GM is the ticker symbol for General Motors shares.
Stockholder of Record
A stockholder whose name is registered on the books of the issuing corporation.
Stop Limit Order
A stop order that becomes a limit order after the specified stop price has been reached.
Tt
T-Bill
Common term for a government treasury bill, which is a short-term government debt issue.
Tax Credit
A tax benefit that reduce taxes payable to the same extent for all taxpayers, regardless of their income level and marginal tax rate. The government uses tax credits to encourage certain types of tax payer expenditures.
Tax Shelter
This is an investment that offers tax savings in some form, such as immediate deductions, credits or income deferral. Investment accounts like Registered Plans and Tax Free Savings Accounts (TFSA) offer tax shelters through tax deferral and exemption respectively.
Technical Analysis or Technical Research
The forecasting of price direction of securities or markets using past price and volume trends.
Tender Offer
A type of acquisition bid in which the acquiring company publicly offers shareholders of the acquiree a premium on market price for their shares, over a specified period. The objective is usually to induce enough shareholders of the acquiree to sell their shares to the acquirer to enable the acquirer to reach a target percentage holding.
Trader
An employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients.
Treasury Stock
Stock issued by a company and subsequently bought back. It may be held in the company's treasury indefinitely, reissued to the public at a later date or retired. Treasury stocks have no voting rights and receive no dividends.
Trust
A legal arrangement which gives a person (the trustee) the right to manage the property of another person (the settlor) for the benefit of a third person(s) (the beneficiary of beneficiaries).
Trustee
The person or corporate trustee who takes legal title to the trust property and who is required to follow the terms of the trust. The trustee may be a trust company or an individual. Often, the person who creates a trust will name joint or co-trustees, with a trust company managing the property and dealing with the various legal requirements, while an individual advises on discretionary matters on the distribution of funds. Co-trustees have equal authority.
Uu
Underwriter
Also known as an “Investment banker.” The middleman between the corporation issuing new securities and the public.
Underwriting
The purchase for resale of a security issue by one or more investment dealers or "underwriters." The formal agreements pertaining to such a transaction are called "underwriting agreements."
Unlisted Stock
A security not listed on a stock exchange. Such securities are said to trade over-the-counter.
Vv
Variable Annuity
A life insurance policy where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid according to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to preserve, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation.
Variable-Rate Preferred Shares
Preferred shares which offer dividend rates that fluctuate according to the performance of a specified benchmark. Some variable rate preferred shares may offer a minimum dividend rate.
Venture Capital
Money provided by large investors to new businesses in which the investors see the potential for significant long-term growth. The investors are allotted shares of the company in exchange for their money.
Volume
The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.
Ww
Warrants
Certificates giving the holder the right to purchase securities at a stipulated price with or without a time limit. Warrants are often offered to make a security more attractive to buyers.
Will
A legal document which sets out a person's wishes with respect to the distribution of his or her assets following his or her death.
Yy
Yield
The income (such as interest and dividends) received on an investment in a given period (usually a year) expressed as percentage of its price. For example, a stock selling at $10 and with an annual dividend of 50 cents per share is said to have a dividend yield of 5%.
Yield Curve
A graphical representation of the relationship between yield and maturities of similar bonds (usually government issued) at a given point in time.
Yield to Maturity
The rate of return on a bond if it is held until the repayment (maturity) date.
Zz
Zero Coupon Bond
A bond that pays no interest but is priced, at issue, at a discount from its redemption price.