The sum of money paid to a named beneficiary at the time of one’s death. On a term insurance policy, the death benefit amount is known in advance.
A type of bond with no pledged collateral. As no collateral is specifically pledged against debenture issues, the creditworthiness and reputation of the issuer are the security for these instruments.
An issuer’s promise to repay funds “borrowed” from investors. When investors purchase the debt instrument, they are lending money to the issuer in return for a promise to repay the principal with interest. Debt instruments are also called fixed-income securities; they include bonds, debentures, mortgages, treasury bills and commercial paper. See also "debt security."
A bond or other security based on a loan made by investors to the issuer. See also "debt instrument."
A financial ratio used to assess financial leverage by determining the amount of a company’s debt relative to its equity. Debt-to-equity ratio = total debt / shareholder’s equity
An amount that must be paid before an insurance company will pay a claim.
A notional sale of property that is said to have occurred even though a sale did not actually take place. This can occur from a transfer of assets in-kind or when a taxpayer leaves Canada permanently or dies.
The risk that a debt issuer will be unable to make its obligated interest or dividend payments, or that the principal amount will not be repaid upon maturity.
An employer-sponsored pension plan that defines the eventual size of an employee’s pension benefit. DB plans are typically calculated based on years of service and average or final years’ salary levels.
An employer-sponsored pension plan that bases the eventual size of an employee’s pension on the sum they contribute during years of service. Employee contributions are generally matched at some level by the employer.
Decline in the overall price of goods and services. Although it is rare, deflation happens if the inflation rate, as measured by the consumer price index, slips below 0%. See also “inflation.”
Consumer desire to purchase additional goods and/or services. See also “supply.”
Decrease in value of a fixed asset over time. See also “appreciation.”
A financial asset, such as an option or future, that is valued based on the performance of another security or asset.
The cost to purchase a derivative contract. See also “insurance premium” and “investment fund premium”.
Information reports from companies including information related to material changes to the company affairs. Disclosure is required to ensure investors are informed of any information they might need to make investment decisions. Disclosure is one of the main principles of securities regulation in Canada.
An investment value below its par value. See also “premium.”
An investment dealer that trades securities on an order-taking basis only. Discount brokers do not provide clients with advice. For this reason, trading fees for discount brokers are generally lower than for full-service brokers.
Money that is not needed for routine expenses and is available to spend on things that are not considered necessary.
Money left over after fixed expenses are subtracted from income from employment, pensions or investments.
A slowdown in the overall rate of inflation, or the rate at which prices rise.
Holding a variety of investments to reduce the risk they’ll all be affected simultaneously by a single economic event. A portfolio can be diversified based on the countries, economic sectors or companies in which it invests. The objective is to ensure some of the investments are increasing in value when others decrease.
A mutual fund that holds primarily dividend-paying common and preferred shares.
Income received from dividends of common and preferred shares.
A tax credit provided to dividend income earned by taxpayers, designed to avoid double taxation, given that the corporation paying the dividend has already paid taxes on its earnings. This preferential tax treatment is granted to dividend income received from both common and preferred shares of taxable Canadian corporations. The tax credit of 15.02% is calculated on dividend income after it has been “grossed up” by 38% (to account for its value before the corporation paid tax on it).
An annual dividend amount expressed as a percentage of the current price of the dividend-paying share.
A measure of the sensitivity of a bond or bond portfolio to interest rate changes. The higher (i.e., longer) the duration, the more the bond value will change when interest rates change; and vice versa. Duration is measured in years.
A person’s income from employment, minus any unemployment benefits, pension or investment receipts.
A ratio that represents company earnings on a per-share basis. The ratio is derived by dividing net income of a company by the number of outstanding common shares.
The total yield a person receives from a bond. It takes into account interest payments and the effects of compounding over a specific period of time. See also “seven-day effective yield” and “yield.”
Business activity, including purchase transactions, distributions and transfers, that takes place online.
Documents that are created or stored in a computer system and can be transferred using computer networks.
Digital signature used to sign an electronic document.
Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations and used to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how a company manages relationships with employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls and shareholder rights.
Shares issued by a company that represent an ownership stake in that company. See also “shares” and “stock.”
A type of investment fund that holds shares in smaller companies that are expected to grow and have an increase in share price. Investors with high risk tolerance are best suited for these high-growth funds.
A type of mutual fund designed to earn capital gains by mimicking a stock market index, such as the S&P/TSX Composite Index.
A type of mutual fund designed to earn a combination of capital gains and dividend income by investing in common shares of larger firms that don’t produce significant capital gains but do pay consistent dividends.
Returns produced by an undervalued security over and above what is needed to compensate for the risk of investing in that security.
Price at which one currency is bought or sold for another.
Risk that unexpected changes to exchange rates will negatively impact the value of cash payments from a foreign source or the worth of foreign assets. Global investments, or investments held in foreign currencies, are subject to this risk. (Also called foreign exchange risk.)
A marketable investment that tracks an index or basket of securities. An ETF is similar to an index mutual fund but trades like an individual stock on an exchange.
A variety of personal financial factors including a client’s employment and investment income, the security of those income sources, annual expenses, assets and liabilities.
A client’s desire or needs regarding investment returns (such as income, capital growth, etc.), their liquidity needs, and their risk tolerance, which combine to lead to their choice of investments.
Deposit-taking or non-deposit-taking trust companies, chartered banks, investment dealers and life insurance companies through which suppliers and users of capital access markets.
Transaction venues, physical or electronic, on which suppliers and users of capital are matched.
A multi-step process that includes helping individuals set financial goals, analyzing their financial circumstances, making recommendations and helping them implement the plan to attain the established goals. Financial planning involves custom recommendations on budgeting, investing, retirement planning, risk management, tax minimization and estate planning. It also involves monitoring these recommendations and periodically adjusting them.
Policy implemented by a government where changes are made to government spending or taxation to influence the behaviour of an economy.
A company’s accounting year, which is not necessarily the calendar year. Companies often start their fiscal years on their founding dates, or they may choose another date to ensure employees can manage to close the books at a time other than the holidays.
A company’s accounting year, which is necessarily the calendar year. Companies often start their fiscal years on their founding dates, or they may choose another date to ensure employees can manage to close the books at a time other than the holidays.
An insurance product that pays a fixed amount, based on contributions, at regular intervals. See also “annuity” and “variable annuity.”
Tangible assets expected to last longer than one year.
An investment fund made up primarily of fixed-income securities.
Securities that generate a fixed income, meaning they pay income or dividends at a predetermined rate. Examples include bonds, debentures, mortgages and preferred shares.
A defined-benefit pension plan that pays a set dollar amount in retirement based on the number of years an employee works for a company.
Estimate of what’s ahead. In financial terms, it can refer to cash flow to be earned during the coming year and/or sale price for a security at year’s end.
Investors who live outside a country in which they invest.
A short document, written in plain language and designed to communicate pertinent facts about a mutual fund to investors. Each fund must issue a fund facts, which cannot be longer than two pages and must be presented to a buyer at the time of purchase. Information in the document includes performance, the costs of investing and the fund’s investment mandate.
The party that oversees the daily investing activity of a mutual fund portfolio.
An agreement to deliver or take delivery of an asset at a set future date at a set future price, usually applied to commodities.