Advisory services
A relationship with an investment professional which allows the investor to receive information and advice concerning specific investment opportunities. Ultimate investment decisions are made by the individual.

Annuitant
The individual in whose name an annuity is registered and who receives the payments.

Annuity
A financial contract that provides an individual with income payments of a specified amount at regular intervals for life, or for a specific period of time. The principal remains tax-sheltered until it is paid out as income. Annuities may be purchased with either registered or non-registered assets. In the latter instance, only the interest component is taxable.

Asset
Anything of monetary value owned by an individual or a business. A potential source of collateral for a loan.

Asset mix
The relative proportions of cash, debt and equity instruments in a portfolio.

Balance sheet
A formal statement indicating the financial position of an individual or business at a specific point in time. Assets are usually listed on the left side, and liabilities on the right. Net worth, or the difference between total assets and total liabilities, is indicated at the bottom.

Bankers’ acceptance
A short-term debt instrument issued by a corporation, but guaranteed by a bank, and sold on a discounted basis.

Beneficiary
The person designated to receive tangible assets such as the proceeds or benefits from an estate or insurance policy.

Blue chip stock
Active, leading, well-known common stocks with a long record of profit growth and dividend payment, and a reputation for quality management, products and services.

Bond
A certificate of a debt on which the issuer (usually a government or large corporation) pays a specific amount of interest for a specified length of time and promises to repay the loan to the holder at its maturity. Specific assets are pledged by the issuer as security for the bond.

Book value
The original purchase price of a current investment or holding.

Branch-to-branch service
Also known as multi-branch banking, this service allows customers to access their funds and complete financial transactions at any branch of their bank across Canada.

Budget
A formal estimate of future income and expenses used for financial planning.

Bullion
Gold, silver and other precious metals in the form of ingots and bars, rather than coins with a monetary value stamped on them.

Canada Savings Bonds (CSBs)
A savings bond sold to the public in the fall and spring of each year. There are two types: those that pay interest each year (regular interest bonds) and those that accumulate interest and pay it when the bond matures (compound interest bonds). CSBs may be either registered or non-registered.

Capital appreciation (gain or loss)
The gain (or loss) realized on an equity investment when the asset is sold for more (less) than it was originally purchased.

Capital risk
The risk that an investor may be unable to recover the full value of the original investment when selling it. Most often related to equity investments.

Cash flow
The movement of cash into, through, and out of a particular entity, i.e. an individual’s deposit account.

Cash instruments
Low-risk interest-bearing investments that are highly liquid in nature. Includes instruments such as deposit accounts, government treasury bills, bankers’ acceptances and commercial paper.

Certificate
The actual document which is evidence of ownership of a stock or bond.

Codicil
A legal instrument made subsequently to a will, modifying it. It legally becomes a part of the original will it is amending.

Commission
The fee charged by an investment dealer or broker for buying or selling securities on behalf of a client.

Commodities
In investment terms, raw materials or semi-finished goods such as wheat, coffee, pork bellies, copper, etc.

Commodity market or commodity exchange
A market where commodities and futures contracts for commodities are bought and sold.

Common stock
Securities which represent ownership in a corporation and carry voting privileges.

Compound interest
Interest earned on both the principal and the interest it has previously earned.

Coupon
A portion of a bond certificate entitling the holder to an interest payment of a specified amount when clipped and presented at a bank on or after its due date.

Dealer or investment dealer
(see discount broker, full-service broker, stockbroker)

Debt instruments
Investments in which an investor loans money to a government, corporation or financial institution for a pre-determined period of time in exchange for earning a specified rate of interest on the investment. At maturity, the principal (or capital) is returned to the investor along with any unpaid interest owing.

Deduction limit
Federally legislated, the maximum allowable amount you can contribute each year to an RSP and claim as an income tax deduction.

Deferred Profit Sharing Plan (DPSP)
A tax-sheltered plan used by employers to build a retirement fund for employees based on a share of the company’s profits. Funds can be transferred to an RSP, or used to buy a RIF or an annuity.

Defined Benefit Plan
A company-sponsored pension plan that guarantees a certain level of pension income at retirement, calculated according to a pre-determined formula.

Defined Contribution Plan
A company-sponsored pension plan, also known as a money purchase plan, that defines the contributions to be made by the employee and the employer. It does not, however, define the amount of pension income to be received at retirement. The accumulated value of the plan is used to purchase either a life annuity, or if the pension plan permits, a Life Income Fund (LIF).

Discount broker
Like the full-service broker, the discount broker executes orders to buy and sell securities. Commission rates are often significantly lower than those charged by a full-service broker. A discount broker does not provide research services or advice to clients.

Discretionary portfolio management
An investment service in which an investor’s portfolio is administered entirely by a professional manager and for which an annual fee is charged. The portfolio manager assumes responsibility for all investment decisions, executes transactions on behalf of the client, and reports back to the client on a regular basis.

Diversification
An investment strategy practised by both individual investors and mutual fund managers designed to minimize the risk of market fluctuations by investing in a variety of investment instruments in a variety of markets.

Dividend
A portion of the company’s profit that is distributed to shareholders in proportion to the number of shares they hold.

Earned income
Income eligible for consideration when calculating your annual RSP deduction limit.

Effective yield
Return on investment after adjusting for factors such as inflation, brokerage fees, or management/administration fees.

Equity
The ownership interest in any tangible asset including a company (in the form of common or preferred shares); mutual funds (in the form of units); and real estate, precious metals, artwork, etc.

Equity investments
Investments in which the investor is considered an “owner” in the asset. Usually considered higher risk than cash or debt instruments, the rate of return on an equity investment is never guaranteed.

Estate
All assets owned by an individual at the time of death.

Executor/Executrix
The person or corporation appointed by an individual and named in the will to administer the estate.

Expenses
The costs incurred to purchase specific goods or services.

Financial planning
The process of assessing your financial situation, determining your objectives and formulating a plan to achieve them.

Foreign content restrictions
Limitations on the amount of foreign investments you can hold in your RSP or RIF, currently restricted to 20% of the total book value of your plan.

Full-service broker
A broker who provides a wide range of services to investors including the execution of trades, advice on which securities to buy or sell, advice on financial planning and tax shelters and on new issues of stocks. Commissions are generally higher than those charged by discount brokers. Often referred to as a “stockbroker”, the term is gradually being redefined to reflect the wider range of services provided.

Futures contracts
An agreement to buy or sell a specific amount of a specific commodity or financial instrument at a stipulated price on a particular date in the future.

Futures market
A commodity exchange where futures contracts are traded. Different exchanges specialize in specific types of commodities.

Guaranteed Investment Certificate (GIC)
A debt security issued by a bank or trust company for a fixed sum of money, maturing after a fixed length of time and paying a fixed rate of interest, usually higher than that paid on a premium savings account. GICs are redeemable only at maturity.

Historical yield
Statistics published by a mutual fund company identifying the rates of return of specific funds in previous years. Designed only to provide investors with information on the historical performance of funds, historical yield is not an indication of future performance.

Income
Total revenue and/or funds received from all sources.

Income-splitting
A strategy which enables couples to reduce the income tax they pay at retirement. Instead of one person drawing a larger amount from a single RSP, both spouses draw smaller amounts from their respective plans.

Indexing
Payments or benefits which are periodically adjusted to reflect the effects of inflation.

Interest
Payments made by a borrower to an investor for the use of his or her money.

Interest rate
The rate of return a lender receives for permitting a borrower to use money for a specified term. The interest rate is usually expressed as an annual percentage.

Intestate
The condition of dying without leaving a valid will.

Investment advisor
(see full-service broker)

Investment certificate
A deposit issued by a bank or trust company that pays a fixed rate of interest.

Investment dealer
(see discount broker, full-service broker)

Investor
One whose principal concern in making an investment is to maximize return while minimizing risk, in contrast to the speculator who is prepared to accept greater risk in the hopes of making better-than-average profits.

Issuer
A legal entity including corporations, municipalities, governments and investment trusts with the power to issue and distribute a security.

Life Income Fund (LIF)
A retirement income option created for Locked-In RSPs and other registered pension plan savings to provide retirement income.

Lifetime carry-forward option
A provision that allows you to carry forward unused RSP contribution room to future years and make up for years in which you did not contribute the maximum.

Lifetime over-contribution limit
A non-tax-deductible contribution to an RSP which exceeds the maximum annual allowable limit set by government. Current legislation allows for a lifetime maximum over-contribution of $2,000.

Liquidity
The degree of ease with which an investor can gain short-term access to funds held in an investment vehicle.

Liquidity risk
The ease with which an investor can convert an investment to cash without negative impact on either capital or return.

Locked-In Retirement Account (LIRA)
An account created from pension credits held with a former employer and transferred when the employee leaves the organization. These funds can be used to purchase a Life Income Fund (LIF), a Life Retirement Income Fund (LRIF) in Alberta, Saskatchewan and Manitoba only, or a life annuity.

Margin account
A brokerage account which permits investors to buy securities with money borrowed from the broker. The brokerage firm has the right to demand settlement of the account at any time and, if it deems necessary, can sell other securities held in the investor’s account to repay the balance.

Maturity
The date on which a loan, bond or debenture becomes due and on which the principal is repayable.

Money market instruments
A collective term that refers to the full range of interest-bearing, short-term investments with maturities of less than one year.

Mutual fund
A fund operated by a professional investment firm that raises money from shareholders and invests it in a variety of stocks, bonds, money market instruments, futures or commodities that meet the investment objectives of the fund. Mutual funds allow investors to benefit from professional management and asset diversification, for which a fee is charged.

Net worth
The difference between an individual’s total assets (what they own) and their total liabilities (what they owe).

Non-registered investments
Non-tax-sheltered investments, or those on which earnings are recognized as income in the year they are earned and taxed according to Revenue Canada regulations.

Option
The right to buy or sell a specific security or property at a specified price within a specified period of time.

Par value
The stated face value of a bond or stock (as assigned by the company’s charter) expressed as a dollar amount per share.

Pension adjustment (PA)
The amount contributed annually to a registered pension plan, either by an employer or employee.

Portability
In pension plans, the ability to take the benefits promised by a company’s pension plan when changing jobs and move them to another company plan, or to another approved plan such as a Locked-in Retirement Account. In mortgages, the ability to transfer the terms and conditions of an existing mortgage to a new home when moving.

Portfolio
Holdings of securities or investments by an individual or institution.

Portfolio manager
A professional investment counsellor who personally manages a client’s portfolio, making the investment decisions on behalf of the client (see also discretionary portfolio management).

Posted rate
Publicly announced rate of interest guaranteed by a financial institution and paid on personal bank accounts and on specific debt instruments such as term deposits and GICs.

Power of attorney
A legal designation which permits an individual (the attorney) to act on behalf of another individual (the principal) and to conduct the principal’s financial affairs while he or she is still alive.

Preferred stock
A class of share capital that entitles its owners to certain preferences over common stock such as a fixed rate of dividend or the return of the stock’s par value in a liquidation.

Prescribed annuity
Purchased with non-registered assets, a prescribed annuity provides the annuitant with a regular stream of pre-specified income payments throughout the term of the annuity. Because income tax would have been previously assessed on the original principal, only the interest portion of the payments are taxable.

Probatable assets
Assets which form part of a deceased’s estate as named in the will including personal investments, RSPs, RIFs, insurance and real estate.

Prospectus
A legal document constituting a formal written offer to sell securities. The prospectus includes relevant information and facts concerning the security, enabling investors to make informed decisions.

Rate of return risk
Risk that returns may not meet an investor’s expectations. Most often relates to equity investments where the return is never guaranteed and can only be measured once the investment is sold.

Real rate of return
The adjusted after-inflation return, calculated by subtracting the current rate of inflation from the rate of return earned on a specific investment.

Registered Education Savings Program (RESP)
A registered investment vehicle that allows an individual to save for a child’s (or children’s) higher education on a tax-sheltered basis.

Registered investments
Investments recognized by Revenue Canada which allow individuals to defer paying income tax on principal and earnings until the income is removed from the account. A general term that includes plans such as Registered Retirement Savings Plans (RSPs), Locked-in Retirement Accounts (LIRAs), Registered Retirement Income Funds (RIFs), Registered Educational Savings Plans (RESPs) and annuities purchased with the proceeds of an RSP.

Registered pension plan
A private pension plan, usually established by an employer on behalf of its employees, and recognized by Revenue Canada. There are two basic types of pension plans — Defined Contribution Pension Plans and Defined Benefit Pension Plans (also referred to as a money purchase plan).

Registered Retirement Income Fund (RIF)
A type of registered plan that allows an individual to withdraw a stream of income from the savings or investments previously held in an RSP. The principal remains tax-sheltered until withdrawn from the plan as income.

Registered Retirement Savings Plan (RSP)
A formal investment plan which allows an individual to accumulate savings and earnings for retirement on a tax-sheltered basis.

Safe deposit box
A personal storage box located in a bank that can be rented on an annual basis to keep valuables and important papers.

Securities
Representing the full range of investment opportunities, a security can refer to an instrument which allows the holder to claim an ownership position in a corporation (a stock); a creditor relationship with a corporation, a government or its agency (a bond); or other rights to ownership as stipulated in specific contract (a futures contract).

Securities Commission
A provincial body responsible for the administration of a province’s securities legislation and entrusted with the regulation of public securities trading. Provincial securities commissions ensure that potential investors receive pertinent financial information and other data to permit informed decision-making, and establish safeguards against fraudulent trading activities.

Self-directed RIF
A RIF held with a brokerage firm which permits you to choose from the full scope of RIF-eligible investments.

Self-directed RSP
An RSP held with a brokerage firm which permits you to choose from the full range of RSP-eligible investments.

Share
Ownership of a part of the capital stock of a corporation as represented by the possession of share certificates registered in the name of the shareholder.

Shareholder
The owner of one or more shares or stocks in a corporation.

Speculator
One who is prepared to accept calculated risks in the marketplace in anticipation of higher returns.

Spousal RIF
A RIF set up from the proceeds of a spousal RSP. There may be tax consequences to the contributor if withdrawals in excess of the minimum annual RIF payment are taken in the year, or subsequent two years, after the plan is converted.

Spousal RSP
An RSP to which one spouse (usually the one with the higher earnings) makes contributions on behalf of the other spouse (usually the one with the lower earnings) and receives a tax deduction on the contribution.

Stockbroker
One who acts as an agent in the buying and selling of securities and charges a commission for these services (see also full-service broker, discount broker).

Survivor benefits
Benefits to which a surviving spouse is entitled with regards to pensions, health care benefits, etc.

Term deposit
Very similar in nature to a Guaranteed Investment Certificate (GIC), term deposits generally pay a slightly lower interest rate as they may be redeemed at any time.

Testator/Testatrix
A person who makes a will.

Treasury bills (T-Bills)
Short-term interest-bearing money market instruments issued weekly by the federal government and sold in maturities ranging from 30 days to one year.

Trustee
The person or persons who take legal title to a trust property and who are required to follow the terms of the trust. The trustee may be a trust company and/or an individual.

Undeducted contribution
The difference between the amount of tax deduction taken in a specific year and the (greater) amount of the individual’s actual RSP contribution. May be claimed as an expense on future tax returns.

Unused deduction room
The difference between your annual allowable RSP deduction limit and the actual (lesser) amount of your contribution. May be made up in future years in additional RSP contributions.

Vested
The point at which you earn the right to keep an employer’s contribution made to a company pension plan on your behalf.

Will
A written document conforming to strict provincial rules which gives instructions to the executors appointed under it concerning the distribution of the property and assets of a deceased person.

Withholding Tax
The amount of money a financial institution is legally obliged to withhold at source and remit to Revenue Canada on funds withdrawn from an RSP, or on RIF income payments which exceed the minimum annual income payment amount.

Yield
Return on an investment, reflected in historical terms. Yield is not guaranteed.