|
| Adjusted Basis
|
The cost of an asset or security that reflects any deductions taken on or improvements to the asset or security. It is used to compute the gain or loss for tax purposes when the asset or security is sold.
|
| Adjusted Book Value
|
The book value on a company's balance sheet after assets and liabilities are adjusted to market value.
|
| Aftermarket
|
The "aftermarket", which refers to trading in the shares after the IPO, is characterized by very high levels of trading initially. Some of the institutional investors who requested shares may have been cut back to so few shares that it would not be worth their time to continue to monitor the position, and so they sell. Others who were cut back to less than they need for a minimum-size position elect to buy more shares. Some institutional investors are dedicated "flippers". The underwriters may actually encourage them to "flip" as a way to assure that a market will develop, but in turn the underwriters may expect them to take shares of less popular deals. In the last few years, the aftermarket for Internet IPOs has been characterized by much larger initial jumps than has historically been the case. Prior to this phenomenon, the typical aftermarket gain was around 12% to 15%.
|
| All or None (AON)
|
An order type instructing the broker to execute the complete order, or else do nothing. If an order is not designated All or None, then a "partial fill" may result in which some of the shares are bought or sold.
|
| Annualizing
|
Converting an amount that applies to a period of less than a year into the amount that would correspond to the full year. For example, if a company has reported revenues for 8 months, the calculation is to multiply the results by (12/8).
|
| Antidilutive
|
Having the effect of increasing the earnings per share. (See dilutive).
|
| Arbitrage
|
Seeking a profit where a set of assets or cash flows has different prices in different markets, by buying the relatively undervalued asset and selling the relatively overvalued one.
|
| Arithmetic Mean Return
|
The arithmetic mean return is an average return for a period computed by summing the return in each subperiod and dividing by the number of subperiods. For example, the annual returns during a five year period were +80%, -20%, -50%, +15%, +5%. The sum of these five returns is 30%. The arithmetic average is 30% divided by 5 or +6%. For most purposes, a more correct method to compute the average return is the geometric mean return. The geometric mean return multiplies all the subperiod returns, expressed as (1+r), where r is the percentage return, and takes the root corresponding to the number of subperiods. In the example, 1.8 x 0.8 x 0.5 x 1.15 x 1.05 equals 0.8694. The fifth root of 0.8694 is 0.9724. This corresponds to a decline of 2.76%. If an investor started with $100, and the investment experienced the series of returns shown (the result would be the same regardless of the order), at the end of the 5 years the investment would be worth $86.94. This end result is the same as an investment returning a constant -2.76% each year for 5 years. As this example shows, the geometric mean and the arithmetic mean are different, with the geometric mean providing a more meaningful description of how an investment would fare over multiple periods.
|
| Ask Price
|
The lowest price a seller is willing to accept. And therefore the price a buyer will pay assuming no change in the bid and ask prices.
|
| Assets
|
Anything a company owns, including buildings, land, trucks, inventories, equipment, cash, trademarks, patents, and goodwill. They may be tangible, as in the case of buildings or equipment; or intangible, such as patents or goodwill.
|
| Annual Return |
The simple rate of return earned by an investment each year.
|
| Automatic Investor |
A powerful Investment tool that takes advantage of market volatility to provide
superior returns and minimize risk, automatically. Unparalleled ease of use and functionality make it the best software of its kind. Period.
|
| Average Annual Compound Return |
The annual rates of return, including reinvestment of distributions,
averaged over a specified time frame.
|
|
| Bank Rate |
The minimum rate at which the Central bank makes short term
advances to banks and other deposit taking institutions.
|
| Basis Point |
Often called a 'beep', it is used to describe the differences in
bond yields. One basis point is one one hundredth of a percentage
point i.e. 100 basis points = 1%. |
| Bear Market |
A declining stock market over a prolonged period, usually lasting
at least six months and normally not more than 18 months. Usually
caused by a strong conviction that a weak economy will produce
depressed corporate profits. |
| Bid Price |
Highest price a buyer is willing to pay, and therefore the price one would receive for selling, assuming no change in the bid and ask prices.
|
| Blue Chip |
Usually a large capitalization, well known and actively traded
common stock with a record of continuous dividend payments and
other desirable investment attributes. |
| Bond |
A certificate of debt on which the issuer (corporation or government)
promises to pay the holder a specific rate of interest over the
life of the bond. At maturity, the principal is repaid in full to
the holder. |
Bull Market |
A rising stock market over a prolonged period, usually lasting at
least six months and normally not more than 18 months. Usually
caused by a strong conviction that a strong economy will produce
increased corporate profits. |
|
| Call Option |
An investment product that gives you the right to purchase shares
at a predetermined price for a limited period of time. |
| Capacity Utilization Rate |
Is the percentage of total available industrial capacity in the
economy (plant and equipment) that is being used to produce goods. |
| Capital Gains |
A capital gain arises when an investment is sold at a higher price
than originally paid. In a mutual fund, capital gains are created
when the fund buys and sells securities. These gains are then
distributed to unitholders at least annually. Unitholders can also
earn capital gains by redeeming their units at higher prices than
they originally paid. |
| Convertible Bond |
A bond that may be exchanged, usually for the common stock of the
same company as stipulated by the terms of the conversion privilege. |
| Correction |
A market correction is usually a sudden temporary decline in stock
or bond prices after a period of market strength. A 10% movement
on the downside that lasts no longer than six months is a normal
correction. |
| CPI Consumer Price Index |
is used to measure inflation. It monitors the price of a basket of
goods to establish the general direction of prices in an economy. |
| Currency Forward Contract |
An agreement for the future delivery of some amount of currency at a specified price and time. These contracts are traded over-the-counter by direct contact between a buyer and a seller. |
| Currency Futures Contract |
An agreement between a buyer or seller and a futures exchange in which the buyer or seller agrees to take or make delivery of a specified amount of currency at a specified price at a designated time. |
| Currency Options Contract |
A contract which gives the holder the right, but not the obligation, to buy or sell currency for a specified price for a stated period of time. These contracts are traded over-the-counter or on exchanges. |
| Currency Risk |
This refers to the possibility that the domestic currency will appreciate relative to the foreign currency in which investments are denominated and a loss will be incurred on exchange back into the domestic currency. |
| Current Account |
The record of all transactions with foreign nations that involve
the exchange of goods and services or unilateral gifts. |
| Cyclical Companies |
Those companies that tend to follow overall economic cycles. They
report strong earnings when the overall economy is doing well and
weaker earnings when the economy is in a recession. |
|
| Deflationary |
A term used to describe a situation where the general price level
of goods and services is declining. |
| Derivatives |
Derivatives are financial instruments whose value is based on the
market value of an underlying asset such as stocks, bonds or a
commodity. Examples of derivatives are futures contracts, options
and forward contracts. Only certain "permitted derivatives" may be
used by mutual funds in accordance with policies of the Canadian
securities regulatory authorities. |
| Distributions |
Payments to unitholders of income realized by the Fund. Distributions
can comprise interest, dividends or capital gains. The type and
frequency of the distribution is dependent on the fund. Generally,
distributions comprise only the "taxable income" of the fund. |
| Diversification |
The allocation of investment assets within an asset class, among
different asset classes - such as bonds, stocks and real estate,
or among geographical areas, to reduce risk. |
| Dividend |
An amount distributed from a company's net profits to its
shareholders. This amount is announced before it is paid and is
distributed to shareholders of record on a per share basis. |
| Dow Jones Industrial Average (DJIA) |
A key U.S. market indicator, the weighted average price of thirty
blue chip U.S. stocks listed on the New York Stock Exchange and Nasdaq. |
| Duration |
A measurement of the price volatility of bonds. Bonds with a longer duration are more sensitive to interest rate changes and are therefore more volatile than bonds with short durations. |
|
| Earnings Driven |
At certain points in the business cycle, the market concentrates
on earnings of companies as opposed to overall market conditions or
interest rate factors. At this stage, companies that exhibit strong
earnings potential are actively sought. (See Interest Rate Driven) |
| Emerging Markets |
Defined as any country that the International Bank for Reconstructions and Development, otherwise known as the World Bank, has determined to have a low or middle-income economy. |
| Ex-Dividend |
This is the opposite of Cum Dividend. If shares are quoted ex-dividend
(without dividend) you are not entitled to the declared dividend.
If you buy shares quoted cum dividend ie. before the ex-dividend
date, you will receive an upcoming already declared dividend. |
|
| Fiscal Drag |
A term used to describe a situation where there is little government
spending to encourage growth in an economy. This usually occurs as
a result of high deficits that require a reduction in government
spending. |
| Fiscal Policy |
Federal government policy of directing the economy through taxation
and government spending. |
| Fixed Income Security |
A preferred stock or debt instrument that has a stipulated interest
or dividend rate, e.g. a bond or GIC . This term is often used in
reference to an overall investment policy, e.g., fixed income
portion of a portfolio. |
| Fluctuation |
A variation in the market price of a security. |
| Free Floating Currency |
Not fixed or tied to any other currency. It is valued in open
markets based on that country's economic and political outlook. |
|
| GDP Gross Domestic Product |
measures a country's total output of goods and services. |
| GIC |
Guaranteed Investment Certificate. |
|
| Hedge |
A term used to describe protective manoeuvering by an investment
manager. It is intended to reduce the risk of a loss from a
specified event; e.g., hedging a currency to protect against
detrimental currency movements that would reduce the portfolio
return. In a currency hedge, for example, the fund manager who held
Yen-denominated stock would buy the Canadian Dollar and sell the
Yen exposure (through a forward exchange contract) if he/she
favoured the outlook for the Canadian Dollar against the Yen. This
in effect protects or "hedges" the currency, while maintaining the
Japanese stock market exposure. |
|
| IPO |
Initial Public Offering. |
| Index |
A statistical yardstick tracking the ups and downs of a particular
market by monitoring a certain group of securities over time. |
| Inflation |
Increases in the general price level of goods and services; i.e.,
your dollar won't buy as much as it used to. Inflation is commonly
reported using the Consumer Price Index (CPI) as a measure.
Inflation is one of the major risks to investors over the long
term as savings may actually buy less in the future if they are not
invested with inflation as a consideration. |
| Interest Rate Driven |
Refers to a point in the business cycle when interest rates are
declining and bond prices are rising. This is usually enough to
inspire a stock market rally as money shifts from interest rate
instruments to equity based instruments. (See Earnings Driven) |
| International Finance Corporation Investable Index (IFCI) |
A benchmark against which portfolios invested in emerging markets
can be compared. "Investable" means it accounts for foreign
ownership restrictions that are in place in various countries. |
| Inverted Yield Curve |
A situation where short term interest rates are higher than long
term rates. Normally, lenders earn higher yields when committing
money for longer periods; this is a positive yield curve. Inverted
yield curves occur when surging demand for short term credit drives
up short term rates. Usually a sign of increased inflation
accompanied by low levels of confidence in the economy.
Historically, this has preceded a recessionary period. |
|
| Leveraging |
A strategy that uses borrowed monies to purchase financial assets
with the objective of increasing returns. |
| Liquidity |
The ability to sell securities at a reasonable price with relative
ease in order to raise cash. This is a major and often overlooked
aspect of an individual's investment strategy. Liquidity is a
concern for any monies that may be required on short notice,
whether for emergencies or for planned purchases. |
| Load |
Term used in the mutual fund industry to identify the sales charge
or commission on a particular fund. Common types of loads are
front-end loads, or back-end loads (deferred sales charges). |
| Local Currency Terms |
Refers to market or currency returns expressed in the denomination
of that country. |
| Long term Bond |
A bond maturing in 10 or more years. |
|
| Management Expense Ratio (MER) |
This figure comprises the management fee plus all other expenses
(excluding government taxes) that are charged directly to the
mutual fund (as set out in each fund's prospectus), stated as a
percentage of the Net Asset Value of the Fund. |
| Management Fee |
The fee paid to the manager for its services. Usually paid by the
mutual fund itself, the management fee is generally stated as a
percentage of the Net Asset Value of the fund. |
| Marginal Tax Rate |
The highest tax rate applied to your last dollar of income. |
| Market weighted |
When a portfolio sector- or stock- weighting matches the weighting
held by a market index, we say that the Fund is "market weighted"
in that sector or stock. For example, at December 31, 1994, the
Equity Fund was "market weighted" in Financial Services, in
comparison to the TSE 300. |
| Monetary Policy |
Federal government policy pursued by the Bank of Canada to control
interest rates and the supply of money. |
| Money Market Instruments |
Debt instruments such as Treasury bills or corporate paper with a
maturity of less than one year, that are easily converted to cash. |
| Morgan Stanley Capital International Index (MSCI) |
Provides a list of indices measuring international performance
(such as the World Index, Far East) and national performance
(including Australia, Canada and US) based on the share prices of
over 1600 companies. It also provides performance measurement for
emerging markets and international industry groups. |
| Mortgage Backed Securities |
Like a bond, $5,000 units with five year maturities backed by a
share in a pool of home mortgages insured under the National
Housing Act. The securities pay interest and a small portion of
principal on a monthly basis. |
| Moving Averages |
As the name implies, the Moving Average is the average of a given amount of data. For example, a 14 day average of closing prices is calculated by adding the last 14 closes and dividing by 14. The result is noted on a chart. The next day the same calculations are performed with the new result being connected (using a solid or dotted line) to yesterday's. And so forth. Variations of the basic Moving Average are the Weighted and Exponential moving averages. The Moving Average is probably the best known, and most versatile, indicator in the analysts tool chest. It can be used with the price of your choice (highs, closes or whatever) and can also be applied to other indicators, helping to smooth out volatility. |
| Mutual Fund Prospectus |
A legal document which describes the investment objective of the
fund, the manner in which the fund is administered and operated,
the fees and other pertinent information. The prospectus should be
read thoroughly before making an investment decision. |
|
| NAFTA |
North American Free Trade Agreement. |
| NASDAQ |
The National Association of Security Dealers Automated Quotation
System, an index of US Over The Counter issues. |
| NATO |
North Atlantic Treaty Organization. |
| Net Asset Value per Share (NAVPS) |
The market value of the securities and assets held by the mutual
fund less its current liabilities, divided by the total number of
shares outstanding. |
| New Issue |
An offering of stocks or bonds sold by a company for the first time. |
| No Load |
A term used to describe a mutual fund that does not have a
commission or sales charge. |
|
| OECD |
Organization for Economic Cooperation and Development. |
|
| Portfolio |
A collection of investments owned by an investor, an institution
or a mutual fund. |
| Preferred Shares |
Shares that carry a fixed dividend rate which the company is
obliged to pay before it distributes dividends to common
shareholders. Such shares rank ahead of common stock, and after
the debenture holders, on the dissolution of a company. |
| Prime Rate |
The interest rate charged by a bank to its most
creditworthy borrowers. |
| Private Placement |
The underwriting of a security and its sale to a few buyers,
usually institutional, and in larger amounts. |
| Put Option |
An investment product that gives you the right to sell shares at
a predetermined price for a limited period of time. |
|
| Real Yield |
The nominal yield received minus the percentage change in the
Consumer Price Index (i.e., the rate of inflation). |
| Recession |
Two consecutive quarters with a decrease in economic output. |
| Record date |
This is the date, that all unitholders on a companies books
are entitled to receive the dividend to be declared. If you
become a unitholder after the record date, you are not
entitled to the recent dividend. |
| Return |
The income earned by an investment. This income may consist of interest, dividends or capital gains. |
| Rights Issues |
A security which allows the owner to purchase additional units of
that security directly from the company concerned. |
| Russell 3000 Index |
An index of 3,000 large U.S. securites, as determined by total market capitalization. The index represents approximately 98% of the U.S. equity market. |
| Russell 2500 Index |
An index of small to medium-small U.S. securities, composed of the bottom 500 stocks listed on the Russell 1000 Index, all securities in the Russell 2000 Index, and representing 23% of the Russell 3000 total market capitalization. |
| Russell 2000 Index |
An index of 2,000 of the smallest securities in the Russell 3000 Index, as measured by market capitalization. |
|
| Salomon Brothers World Bond Index |
Measures the performance of over 800 bonds representing 14 global
bond markets. The bonds are weighted by market capitalization and
include maturities of over 1 year. |
| Secondary Offering |
The redistribution of a block of stock sometime after it has been
sold by the issuing company. |
| Simple Rates of Return |
The percentage change in the net asset value of a fund over a
certain period of time, usually in terms of 1 month to 1 year
periods. |
| Short Term Investment Horizon |
An investment period of one year or less. An investor in this
time frame should be most concerned about capital preservation as
the monies will be required shortly. |
| Standard and Poors 500 (S&P 500) |
A benchmark of U.S. common stock performance, it includes 500 of
the largest stocks (by market value) listed in the U.S. |
|
| Tax-Loss Carry-Forward |
Any losses incurred on a security transaction may be carried
forward indefinitely and be used to offset any future capital gains. |
| Tokyo Stock Exchange Second Section Index (TS2) |
Tokyo Stock Exchange Second Section Index is the smaller company
index for Japan. |
| Toronto 35 Index (TSE 35) |
An index of 35 liquid Canadian stocks, including stocks from most
subgroups, but excluding Real Estate & Construction. |
| Toronto 100 Index (TSE 100) |
An index of the top 100 companies in the Toronto 300 Index, ranked
by quoted market value. |
| Toronto 200 Index (TSE 200) |
An index of 200 of the smallest securities in the TSE 300 Index, as measured by market capitalization. |
| Toronto 300 Index (TSE 300) |
An index of 300 Canadian stocks, in fourteen subgroups, designed to
represent the Canadian equity market. |
| Total Return Index |
Measures the performance of a stated index assuming reinvestment
of all dividends and distributions over a period of time. |
| Treasury Bills |
Short term government debt, issued in large denominations by the
Bank of Canada usually to institutional investors. |
|
| Warrant |
A certificate that allows the owner to purchase securities at a set
price within a specified time frame. Warrants are usually attached
to a new issue of securities as an inducement to investors to buy
the new issue. |
|
| Yield Curve |
A curve on a graph that plots the interest rate (yield) of a bond
on the vertical axis and the length of time until maturity on the
horizontal axis. Their relationship is frequently referred to as
the yield curve. Three basic types of curves exist. A normal curve
is when interest yields are higher for longer term bonds and lower
for shorter term bonds. A flat curve is when yields are about the
same for longer term and shorter term bonds. Finally, an inverted
curve is when the short term yields are higher than the yields on
longer term bonds. |
