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Mutual Fund Definition

Accrued interest Interest that has been earned but not received.
Accumulation Plan An arrangement which enables an investor to purchase mutual funds shares regular in large or small amounts.
Active Investments Strategies A method of managing a portfolio that requires regular decisions and adjustment to the portfolio by the investor. Decisions involve how much to buy, what to buy, when to buy and sell and how to reinvest.
Adjusted Cost Base The amount needed when calculating your capital gains or losses. The amount includes commissions and other currents tax considerations.
Adverse Market Conditions Unfavorable time to Buy or Sell.
Annual Report Reports range from very simple to very elaborate - each year a printed report containing information about a company's financial conditions.
Annual report A financial report sent yearly to a publicly held firm"s shareholders. This report must be audited by independent auditors.
Annuitant An individual who purchases an annuity and will receive payments from that annuity.
Annuity A contract that guarantees a series of payments in exchange for a lump sum investment.
Asian & Pacific Funds These funds invest primarily in equity investments in the Asia Pacific region which can include countries extending from Korea to South East Asia. Some funds may also invest in Australia and New Zealand.
Ask price A proposal to sell a specific quantity of securities at a named price.
Asset Class Performance Are based on historical performance characteristics, which include the expected future return, the expected future volatility (risk) of the return, and how the returns of assets classes perform relative to each other.
Asset Class Asset class' typically refer to securities that have similar features. For example, bonds and stocks are the two main classes. They are then subdivided into more defined classes such as mortgages, common stock and preferred stock. Asset classes are used in the process of asset allocation to control the risk and return characteristics of a portfolio.
Asset Mix Percentage of net assets invested in various classes of securities, as at a particular time. A Fund's investments can change at any time.
Asset-Backed Security (ABS) Are bundled pools of assets that are sold as units and these units are a security that is backed by an asset. Mortgage pools were the principal forerunners of the ABS market and this is now a multi-billion-dollar market in the U.S. More recently, banks in the U.S. and elsewhere have bundled credit card receivable and car loans as ABSs. The general theory is that safety in numbers provides a steady flow of income, usually interest income, while losses from defaults are spread across the pool.
Assets What a firm or individual owns.
Back End See "Deferred Load".
Back Office The administrative department of a brokerage house.
Back-end load A sales charge levied when a mutual fund units are redeemed.
Balance Sheet One of the financial statements that appears in a Company's Annual Report. Its divided into three major parts Assets (see assets), Liabilities which include debts, taxes owing and Shareholders Equity (see equity).
Balanced fund A mutual fund which has an investment policy of "balancing" its portfolio generally by including bonds and shares in varying proportions influenced by the fund"s investment outlook.
Bank Rate The rate at which the Bank of Canada makes short-term loans to chartered banks and other financial institutions, and the benchmark for prime rates set by financial institutions.
Bankers acceptance Short-term bank paper with the repayment of principal and payment of interest guaranteed by the issuer"s bank.
Bear market A declining financial market.
Bear/Bull Markets A declining market or a period of pessimism when declines in the market are anticipated (a way to remember bear down).

- Bearsare investors who believe interest rates are more likely to go up than down. If right the price of existing fixed- income securities such as bonds will go down.

- Bullsare investors who believe interest rates are more likely to go down than up. If right the price of existing fixed-income securities such as bonds will go up down.
Bearish An attitude or indication implying that prices are likely to experience a substantial decline.
BellCharts Quartile Ranking A measurement of a fund's performance against mutual funds that are available in Canada and that generally have similar investment objectives.
Bellwether Security A particular security that is felt to be representative of the market in which it trades. Hence, movements by a bellwether are taken as an indication of the overall direction of the market.
Beneficiary One who is to receive the benefits of any type of contract.
Beta A statistical term used to illustrate the relationship of the price of an individual security or mutual fund unit to similar securities or financial market indexes.
Bid price A proposal to buy a specific quantity of securities at a named price.
Blue chip A descriptive term usually applied to high grade equity securities.
Board lot A standard number of shares for trading transactions. The number of shares in a board lot varies with the price level of the security, although in most cases a board lot is 100 shares.
Board of directors A committee elected by the shareholders of a company, empowered to act on their behalf in the management of company affairs. Directors are normally elected each year at the annual meeting.
Bond fund A mutual fund whose portfolio consists primarily of bonds.
Bond A long-term debt instrument with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.
Book Value The original purchase price (cost) of your investment plus distributions valued at the time of distribution.
Book value The value of net assets that belong to a company"s shareholders, as stated on the balance sheet.
Broker A broker is a financial middleman who matches investors who wish to purchase a particular investment with those who wish to sell it. For this service, the broker charges a fee or commission that is usually related to the amount of money involved in the transaction.
Broker An agent who handles the public"s orders to buy and sell securities, commodities, or other property. A commission is generally charged for this service.
Bull Market A slang expression meaning an extended period of time during which the general price level of a market rose. Any metal in mass, gold and silver.
Bull market An advancing financial market.
Buying on margin Purchasing a security partly with borrowed money.
Callable Preferred shares or bonds that give the issuing corporation an option to repurchase, or "call" those securities at a stated price. These are also known as redeemable securities.
Canada savings bond A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.
Canadian Balanced These funds invest in a mixture of primarily Canadian Equities and Canadian Bonds. The ratio of the holdings in these two categories will vary from time to time, but will remain split in a ratio of between approximately 70/30 and 30/70 of the overall portfolio holdings.
Canadian Dividend These funds invest primarily in Canadian common and preferred shares, which pay dividend income.
Canadian Equity and Blue Chip Equity These funds invest primarily in Canadian common shares from issuers with market capitalization larger than $500 million.
Canadian Income These funds invest primarily in Canadian bonds issued by a variety of government and/or corporate issuers.
Canadian Small Cap Equity These funds invest primarily in Canadian common shares of companies with market capitalization less than $500 million dollars.
Capital cost allowance A taxation term, equivalent to depreciation, that makes allowance for the wearing away of a fixed asset.
Capital Gain A type of profit derived by selling an asset at a higher price than that at which it was purchased. One-half of the amount is taxable as income when received.
Capital Gains Profit earned from the sale of real estate, securities, mutual funds or other capital assets.
Capital loss The loss that results when a capital asset is sold for less than its purchase price.
Capital stock All ownership shares of a company, both common and preferred.
Capital In an investment context, the term usually means the financial assets that an investor owns, especially cash. In an economic context, the term usually means the machinery, buildings, equipment, and inventory a company uses to produce its goods.
Capital Generally, the money or property used in a business. The term is also used to apply to cash in reserve, savings, or other property of value.
Capitalization The total amount of all securities, including long-term debt, common and preferred stock, issued by a company.
Cash equivalent Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.
Cash surrender value The amount of cash a person may obtain by voluntarily surrendering a life insurance policy.
Certificate A document providing evidence of ownership of a security such as a stock or bond.
Closed end fund A fund company that issues a fixed number of shares. Its shares are not redeemable but are bought and sold on stock exchanges or the over-the-counter market in the same manner as other exchange traded equities.
Commercial paper A negotiable corporate promissory note with a term of a few days to a year. It is generally not secured by company assets.
Commissioner for oaths A Commissioner for Oaths is authorized by law to take and receive oaths and affirmations. He or she must verify the identity of the individual swearing or affirming the oath. A Commissioner for Oaths cannot certify that a statement being made is true nor can he or she certify documents as true copies of the originals. The following are examples of Commissioners for Oaths in Ontariojudges, justices of the peace, barristers and solicitors entitled to practice law, clerks, deputy clerks and treasurers of local municipalities, heads of municipal councils.
Common Equity A generic term describing stocks that represent ownership of a company and carry voting privileges in its affairs.
Common stock A security representing ownership of a corporation"s assets. Voting rights are normally accorded to holders of common stock.
Compound Interest Income earned on income that was previously earned. For example, if you invest $20,000 at 8%, you would earn $1,600 interest the first year. In the second year, you would earn an additional $128 of interest on the $1,600 interest of the first year as well as another $1,600. That $128 is called compound interest.
Compounding The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.
Conservative-Investment This is a relatively stable and predictable investment that usually features a specific (or limited) gain or loss.
Consumer price index A statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.
Contractual plan An arrangement whereby an investor contracts to purchase a given amount of a security by a certain date and agrees to make partial payments at specified intervals.
Convertible A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.
Corporation A legal business entity created under federal or provincial statutes. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts.
Correction in the Market A significant drop in the value of the stock market.
Correction A market correction is usually a sudden temporary decline in stock or bond prices after a period of market strength.
Coupon rate The annual interest rate of a bond.
Coupon vs. Yield The coupon on a bond is literally the portion of a certificate that is clipped (detached) and presented for payment when interest is due but the coupon also is used as a term for the rate of interest a bond pays. Yield is the current return on a bond in the market. As market conditions change, yield on the bonds rise or fall. If a bond bought at par, then the yield and the coupon rate are the same. But if the yield falls, the price of the bond must rise. And rising yields mean falling prices.
Current asset An asset that could be converted into cash within 12 months.
Current liability A liability that has to be paid within 12 months.
Current yield The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.
Custodian A financial institution, usually a bank or trust company, that holds a mutual fund"s securities and cash in safekeeping.
DCAF Dollar Cost Averaging Fund
Dealer A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
Debenture A bond unsecured by any pledge of property. It is supported by the general credit of the issuing corporation.
Debt An obligation to repay a sum of principal, plus interest. In corporate terms, debt often refers to bonds or similar securities.
Deferral A form of tax sheltering that results from an investment that offers deductions during the investor"s high-income years, and/or postpones capital gains or other income until after retirement or during another period when the income level is expected to change.
Deferred Load A deferred load fund is a mutual fund series that has no commission to purchase but is subject to a fund company charge upon redemption. Typically deferred load charges start at around 5% to 7% in the first year, and will decline towards 0% over the next 5 to 7 years. Also known as DSC funds, back end funds or rear load funds.
Deferred profit sharing plan A plan that allows an employer to set aside a portion of company profits from the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.
Defined benefit pension plan A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.
Defined contribution pension plan a registered pension plan that does not promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan.
Denomination The principal amount, or value at maturity, or a debt obligation. Also known as the par value or face value.
Depreciation Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.
Derivatives Financial contracts whose values are derived from an underlying asset, index or reference rate, such as interest rates, foreign exchange rates, or equity or commodity prices. Derivative can be used to manage financial risks and consist of:

-Interest rates swapsA contact between two parties to exchange a stream of interest rate payments, such as fixed rate payments for variable rates payments, on a specified notional value for a pre-determined time period.

- Swaps that have been entered into, but for which interest rate payment streams have not commenced by year-end, are referred to as forward starting swaps.

- Interest rate caps and floorsOption contracts for specified periods, based on interest rates, for which a cost (premium) is settled in advance. In the case of a cap, the agreement places a maximum on the cost of interest rate borrowings. In the case of a floor, the agreement places a minimum on the yield of interest rate investments.

- Forward rate agreementsA contract for payment or receipt of interest on a specified principal to be settled at a future date. The settlement amount is the difference between the contracted rate of interest and the market rate.

-foreign exchange forward contractsA contract to buy or sell a fixed amount of foreign currency on a specified date at a set rate of exchange.

- Index-linked call optionThe right but not the obligation to buy on or before a specified date, an underlying notional amount at a contracted price based on a stock market index.
Discount The amount by which a bond sells on the secondary market at less than its par value or face value.
Distribution History Per unit dollar figure representing accrued capital gains and dividends paid out annually, or on a year-to-date basis.
Distributions Payments to investors by a mutual fund from income or from profit realized from sales of securities.
Distributions Payments from the fund that may include dividends from capital gains or earnings from sale of securities with the funds portfolio holdings and/or return of capital. A distribution is made by cash or by investing in additional units/shares via a Dividend Reinvestment Plan (DRP). Funds are required to distribute capital gains (if any) to unit/shareholders at least once per year.
Diversification - 1 Diversification occurs by when investing in a number of different securities. This reduces the risks inherent in investing by spreading the risk over several different investments. Diversification may be among types of securities, companies, industries or geographic locations.
Diversification - 2 The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.
Diversification - 3 The investment in a number of different securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographical locations. You can't count on the stock market alone to make you rich - especially if your money is in just one stock or even just in Canada. You can't count on your house to fund your retirement. Various economic conditions lend themselves to different weighting
Dividend fund A mutual fund that invests in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.
Dividend tax credit An income tax credit available to investors who earn dividend income through investments in the shares of Canadian Corporations.
Dividend A per-share payment designated by a company"s board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.
Dividends Dividends are the share of a company's stock. Not all profits are paid in dividends; some are usually reinvested in building up the operations of the company, with the intention of producing additional future profits.
Dollar Cost Averaging A principle of investing which entails the use of equal amounts for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.
Early Redemption Fee Fee charged to unitholders who redeem or switch out of their units within 30 or 90 days of their original purchase. Should an investor choose to redeem or switch during this time, a 2% fee would be charged and paid to the fund for the benefit of other unitholders.
Earned income For tax purposes, earned income is generally the money made by an individual from employment. It also includes some taxable benefits. Earned income is used as the basis for calculating RRSP maximum contribution limits.
Earnings statement A financial statement showing the income and expenses of a business over a period of time. Also known as an income statement or profit and loss statement.
Emerging Markets These funds invest primarily in equities issued by companies domiciled in the less developed countries of the world. This can include, but is not limited to, Central and South America, Asia Pacific countries and Eastern Europe.
Equity The net worth of a company. This represents the ownership interest of the hareholders (common and preferred) of a company. For this reason, shares are often known as equities.
Equity fund A mutual fund whose portfolio consists primarily of common stocks.
European Equity These funds invest primarily in common shares of companies based in Western Europe including the United Kingdom, and in some cases Eastern Europe.
Face value The principal amount, or value at maturity, of a debt obligation. Also known as the par value or denomination.
Fair market value The price a willing buyer would pay a willing seller if neither was under any compulsion to buy or sell. The standard at which property is valued for a deemed disposition.
Fiduciary An individual or institution occupying a position of trust. An executor, administrator or trustee. Hence, "fiduciary" duties.
Financial Intermediaries Corporations that receive savings and investment funds from individuals and invest them in capital market securities. Examples would include chartered banks, trust companies, life insurance companies, mutual funds, and pension funds.
Fiscal policy The policy pursued by government to manage the economy through its spending and taxation powers.
Fixed assets Assets of a long-term nature, such as land and buildings.
Fixed dollar withdrawal plan A plan that provides the mutual fund investor with fixed-dollar payments at specified intervals, usually monthly or quarterly.
Fixed Income Fund A fund whose assets are invested in preferred shares, bonds and mortgages.
Fixed income investments Investments that generate a fixed amount of income that does not vary over the life of the investment.
Fixed liability Any corporate liability that will not mature within the following fiscal period. For example, long-term mortgages or outstanding bonds.
Fixed-period withdrawal plan A plan through which the mutual fund investor"s holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital, together with accrued income, is systematically exhausted.
Foreign Content The 2005 Federal Budget removed the foreign content limit for registered plans. Customers with RSPs, pension plans or other registered accounts are no longer subject to the 30% foreign content limit. This change means that customers can now exceed 30% in foreign holdings in their accounts without incurring a monthly 1% penalty.
Front-End Load A sales charge levied on the purchase of mutual fund units.
Front-Load A front load mutual fund is a fund that offers a broker the option of charging investors a commission on the purchase. The commission is charged as a fixed percentage of the gross dollars invested. Also known as Service Charge (SC), Initial Service Charge (ISC), Low Service Charge (LSC), or Front End (FE).
Full-Service Brokerage Full-service brokerage is the most traditional type of brokerage. It offers advice on building portfolios, on the types of securities to buy and sell, and asset allocation. In general, full-service
brokerages charge higher commissions in exchange for this advice.
Fund Manager The individual or team of individuals manages a mutual funds portfolio of stocks, bonds and other securities. The fund manager decides when to buy or sell the securities held in the mutual fund. The fund manager is paid an annual management fee for his or her services. A fund manager is also referred to as a Portfolio Manager, Money Manager, or Mutual Fund Manager.
Fund Number Number assigned to each Fund for the purpose of placing instructions to purchase, redeem, or transfer Fund units.
Fund Sponsor The name of company responsible for promoting and distributing its fund(s). Most fund sponsors will promote under the same brand name several different funds, often managed by different fund managers. Also known as the Fund Company.
Fundamental Analysis A method of evaluating the future prospects of a company by analyzing its financial statements. It may also involve interviewing the management of the company.
Global Bond These funds invest primarily in bonds issued by governments or corporations domiciled outside of Canada.
Global/International Equity These funds invest primarily in common shares issued by corporations domiciled outside of Canada. In some cases the funds may exclude U.S stocks. Please talk to a Mutual Fund Specialist at 1-800-461-3863 for specific details.
Growth Stock Growth stocks are equity shares of companies whose earnings are expected to increase at an above-average rate. Low yields and relatively high price/earnings ratios often typify growth stocks. Their prices reflect investors' belief in their future earnings in growth.
Guaranteed investment certificates A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.
IFIC Investment Funds Institute of Canada. The mutual fund industry trade association set up to serve its members,cooperate with regulatory bodies, and protect the interest of the investing public that use mutual funds as a medium for their investments.
Inception Date The year that a fund was formed and became available for sale to unit holders.
Income funds Mutual funds that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.
Index fund A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.
Index A statistical yardstick, determined by tracking the ups and downs of a particular market by monitoring a group of securities over time.
Inflation A condition of increasing prices. In Canada, inflation is generally measured by the Consumer Price Index.
Initial Sales Charge See Front Load.
Interest Payments made by a borrower to a lender for the use of the lender"s money. A corporation pays interest on bonds to its bondholders.
Internal Rate of Return (IRR) Any IRR calculation must be based on continuous compounding, Thus the Internal rate of return of an investment, is the growth rate of the money over a time period relative to the amount invested. IRR, which compares the profit to the amount invested, and is expressed as a percent gain or loss for easy comparison with other percent changes for the same time period.
International fund A mutual fund that invests in securities of a number of countries.
Intrinsic value The amount by which the price of a warrant or call option exceeds the price at which the warrant or option may be exercised.
Investment adviser Investment counsel to a mutual fund. Also may be the manager of a mutual fund.
Investment company A corporation or trust whose primary purpose is to invest the funds of its shareholders.
Investment Considerations Choosing which investments are right for you will depend on a number of factors:

Your Primary Goal - Is it to have your money readily accessible, to have a dependable source of regular income, or to build your assets over time? Each type of investment fulfills a different need.

Your Time Horizon - When will you need the proceeds of your investment? If it's in a few months or years, short-term cash or income investments should be considered. With a long term horizon, you may want to add growth investments to the mix.

Your Risk Tolerance - Growth investments with a higher level of risk will generally pay higher return, but if your nest egg and peace of mind are key, investments with safety of principal may be the answer. (See Risk Tolerance)
Investment Counselor A person who, for a fee, advises you on which investments you should make.
Investment Dealer A company that acts as a middleman in the capital markets by buying and selling securities with its own funds, and then filling sale or purchase requests from its own security holdings. A dealer will also act as a broker, but a broker may not necessarily be a dealer.
Investment fund A term generally interchangeable with "mutual fund."
Investment funds institute of canada (IFIC) The mutual fund industry trade association set up to serve its members, co-operate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.
Investment Strategy The method used to select which assets to include in a portfolio and to decide when to buy and when to sell those assets.
Issued shares The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to issue.
Japanese Equity These funds invest primarily in common shares issued by corporations domiciled in Japan.
Know Your Client Rule (KYC) The rule that recognizes the fiduciary duty of the investment advisor to understand the client's investment objectives and make appreciate recommendations for investments.
Labour-Sponsored Venture Funds Venture capital corporation's established by unions, managed by investment managers subject to government regulations
Latin American Equity These funds invest primarily in common shares issued by corporations domiciled in Central and South America.
Letter of intent An agreement whereby an investor agrees to make a series of purchases of mutual fund units.
Letters of administration - the Certicicate of Appointment of Estate Trustee without a will? It is a certificate, issued by the court certifying who has the authority to administer the estate of an individual who died without leaving a valid will.
Letters probate - the certificate of appointment of estate trustee with a will? It is a certificate, issued to an executor/estate trustee by the court, confirming the executor/estate trustee's authority, as set out in the will, to administer a particular estate. This document is not complete unless it has a copy of the valid will attached.
Leverage The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.
Liabilities All debts or amounts owing by a company in the form of accounts payable, loans, mortgages and long-term debts.
Life annuity An annuity under which payments are guaranteed for the life of the annuitant.
Life expectancy adjusted withdrawal plan A plan through which a mutual fund investor"s holdings are fully depleted while providing maximum periodic income over the investor"s lifetime.
Liquidity Refers to the ease with which an investment may be converted to cash at a reasonable price.
Load Commissions charged to holders of mutual fund units. (See sales charge.)
Long-term asset A mutual fund that charges a commission to purchase its shares.
Long-term debt Debt that becomes due after more than one year.
Low Load With a low load, the mutual funds company pays the salesperson a reduced commission at the time of purchase, and a reduced redemption fee generally applies to redemptions made after the first two years of purchase. Also known as Level Load or Low Sales Charge (LSC).
Managed Investment Fund A specific pool of money that is invested by an institutional investor or a professional investment manager.
Management company The entity within a mutual fund complex responsible for the investment of the fund"s portfolio and/or the administration of the fund. It is compensated on a percentage of the fund"s total assets.
Management expense ratio A measure of the total costs of operating a fund as a percentage of average total assets.
Management Expense Ratio (MER) Is a measure of the total administrative costs incurred by a mutual fund expressed as a percentage of the assets. These costs include costs incurred in day to day operation of the fund and the compensation paid to the fund manager for managing the investments (management fee).
Management Fee The compensation paid to the mutual fund manager by the fund company for managing the mutual fund and for supervision of the day-to-day administration and operations of the mutual fund.
Management Fee The sum paid to the investment company's advisor or manager for supervising its portfolio and administering its operations.
Margin An investor"s equity in the securities in his or her account. The margin purchaser puts up a portion of the value of the securities, borrowing the remainder from the investment dealer.
Margin The amount of money supplied by an investor as a portion of the total funds needed to buy or sell a security, with the balance of required funds loaned to the investor by a broker, dealer, or other lender.
Marginal tax rate The rate of tax on the last dollar of taxable income.
Market Bottom The time when a category of securities, such as stocks, are felt to have reached their lowest prices as a group for an extended period of, say, three or four years. Usually measured by the
lowest level of an index that indicates what is happening within that market, such as the Dow Jones Industrial Index.
Market Capitalization Market capitalization is the amount of money someone would have to pay to buy the company. To calculate market capitalization, multiply the total number of a company's shares by the current price per share. For example, if a company has 10 million shares, and the current price is $20 per share, then the company's market capitalization is $200 million ($20 x 10 million).

-Large cap is a company with over $1 billion in market capitalization

-Mid cap has between $500 million and $1 billion

-Small cap has less than $500 million.
Market index A vehicle used to denote trends in securities markets. The most popular in Canada is the Toronto Stock Exchange 300 Composite Index (TSE 300).
Market Price In the case of a security, market price is usually considered the last reported price at which the stock or bond is sold.
Market Timing An element of investment strategy. Investors will often seek to increase the amount of money they can make in a particular security or category of security by purchasing it when the market associated with that type of security is near its trough, and sell these holdings when the market is near its peak.
Maturity The date at which a loan or bond or debenture comes due and must be redeemed or paid off.
Money market A sector of the capital market where short term obligations such as Treasury bills, commercial paper and bankers" acceptances are bought and sold.
Money market fund A type of mutual fund that invests primarily in treasury bills and other low-risk, short-term investments.
Money purchase pension plan Another term for defined contribution pension plan.
Mortgage and Short Term Bond Funds in this category are invested primarily in Canadian residential mortgages. Some funds may hold short term duration bonds.
Mortgage fund A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds alsoinvest in commercial mortgages.
Mortgage-backed securities Certificates that represent ownership in a pool of mortgages. The holders of these securities receive regular payments of principal and interest.
Mutual Balanced Funds A fund which has an investment policy of "balancing" its portfolio, generally by including bonds and shares in varying proportions influenced by the fund's investment outlook.
Mutual Dividend Fund A mutual fund that invest in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.
Mutual Equity Funds A fund whose portfolio of which consists primarily of common stock.
Mutual fund An investment entity that pools shareholder or unitholder funds and invests in arious securities. The units or shares are redeemable by the fund on demand by the investor. The value of the underlying assets of the fund influences the current price of units.
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.
Mutual Funds A mutual fund is a portfolio of investment securities held in the name of the fund, which is owned by people who have bought shares in the fund itself.
Mutual Growth Funds Fund that hold growth shares of companies whose earnings are expected to increase at an above-average rate. Growth stocks are often typified by their Low yields and relatively high price/earnings ratios. Their prices reflect investors, belief in their future earnings growth.
Mutual Income Funds Mutual funds that invest primarily in fixed-income securities such as bonds, mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.
Mutual Index Funds A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.
Mutual International Fund A fund that invest in securities of a number of countries.
Mutual Money Market Fund A type of mutual fund that invests primarily in treasury bills and other Low-risk short-term investments.
Mutual Mortgage Fund A mutual fund that invest in mortgages. Portfolios of mortgage funds usually consist of first mortgages on Canadian residential property, although some funds also invest in commercial
mortgages.
Mutual Real Estate Fund This type of fund invests primarily in residential and/or commercial real estate to produce income and capital gains for its unitholders.
Mutual Specialty Fund A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.
NAVPS Net Asset Value per share is the price or market value of an individual share or unit of a mutual fund.
Net asset value The value of all the holdings of a mutual fund, less the fund"s liabilities.
Net Asset Value per Share Calculated by subtracting current liabilities from total assets and dividing by the total number of shares outstanding. Investors may buy a fund at this price plus fees, if any, and may sell at this price minus redemption fees, if any. Net Asset Value per Share is not known at the time that an order is placed since it is reflection of closing security prices within the fund.
Net asset value per share Net asset value of a mutual fund divided by the number of shares or units outstanding. This represents the base value of a share of unit of a fund and is commonly abbreviated to NAVPS.
Net Asset Value The performance of a hypothetical investment of $1000 invested at the Fund's inception. Figures include reinvestment of dividends and capital gains, but do not reflect the effect of any applicable sales charges or redemption fees, which would lower these figures.
No Load Term used to describe a mutual fund that can generally be purchased or redeemed without a sales commission.
No-Load Fund A mutual fund that does not charge a fee for buying or selling its shares.
Notary public A Notary Public is authorized by law to take and receive oaths and affirmations. He or she must verify the identity of the individual swearing or affirming the oath. A Notary Public is authorized by law to notarize (certify the accuracy of) copies of documents.
Objective A position or financial state you wish to achieve. Well-defined objectives are critical to the success of any money management plan because they provide your plan with a sense of purpose and a benchmark against which you can measure your progress.
Odd lot Any number of securities that represents less than a board lot.
Open-end fund An open-end mutual fund continuously issues and redeems units. If a investor wishes to buy or sell units of an open-end mutual fund, they will do so directly from the fund (as opposed to using a stock exchange). Most mutual funds are open-ended.
Open-end fund An open-end mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.
Option The right or obligation to buy or sell a specific quantity of a security at a specific price within a stipulated period of time.
OSC - Ontario Securities Commission (SEC) Agency created by the Ontario Government to protect investors in securities transactions by administering various securities acts.
Other Sector/Special Equity The investment strategies of funds in this category will vary but may include Health Care, Science and Technology and Telecommunications funds.
Over-the-counter market A securities market that exists for securities not listed on stock exchanges. Bonds, money market securities and many stocks are traded on the over-the-counter market.
Par value The principal amount, or value at maturity, of a debt obligation. It is also known as the denomination or face value. Preferred shares may also have par value, which indicates the value of assets each share would be entitled to if a company were liquidated.
Pension adjustment An amount that reduces the allowable contribution limit to an RRSP based on the benefits earned from the employee"s pension plan or deferred profit sharing plan.
Pension plan A formal arrangement through which the employer, and in most cases the employee, contribute to a fund to provide the employee with a lifetime income after retirement.
Performance Performance figures for years 1 through 7 are calculated on an annual basis. Figures quoted since inception reflect cumulative, rather than annual, growth. Both annual and cumulative figures include reinvestment of dividends and capital gains, but do not reflect the effect of any applicable sales charges or redemption fees, which would lower performance figures.
Permanent life insurance Life insurance coverage for which the policyholder pays an annual premium, generally for the life of the insured. This type of policy features a savings component, known as the cash surrender value.
Portfolio All the securities which an investment company or an individual investor owns.
Portfolio Management The systematic development and implementation of an investment strategy, the purpose of which is to achieve the investor's financial goals. Often portfolio management is mistaken for the simple buying of new securities and the selling of current holdings.
Portfolio Manager An individual, usually a professional, who attempts to produce the highest return on invested capital while incurring a minimum of risk within the guidelines laid down by the person or company whose funds he is investing.
Precious Metals These funds invest primarily in the common shares of Canadian domiciled gold or other precious metals producing, mining or exploration companies. Some funds may also choose to hold the physical precious metals commodities as a portion of their investments. These funds can also have up to 30% of their holdings invested in companies based outside of Canada.
Preferred share An ownership security, senior to the common stock of a corporation, with preferred claim on assets in case of liquidation and a specified annual dividend.
Premium The amount by which a bond"s selling price exceeds its face value. Also, the amounts paid to keep an insurance policy in force.
Present value The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.
Price earnings ratio The market price of a common share divided by its earnings per share for 12 months.
Primary distribution A new security issue, or one that is made available to investors for the first time.
Principal The person for whom a broker executes an order, or a dealer buying or selling for his or her own account. Also, an individual"s capital or the face amount of a bond.
Prospectus The document by which a corporation or other legal entity offers a new issue of securities to the public.
Prospectus A detailed statement prepared by an issuer and filed with the a Securities Regulator prior to the sale of a new issue. The prospectus gives detailed information on the issue and on the issuer's condition and prospects.
Quartile Mutual funds are grouped into sectors. For the proposes of comparison, ach sector is divided into four quartiles (or quarts); the best performing funds are in the top quartile.
Rate of Return (Dollar-Weighted) Also called the internal rate of return, the interest rate will make the present value of the cash flows from all the sub-periods in the evaluation period plus the terminal market value of the portfolio equal to the initial market value of the portfolio.
Rates of return -Annualized The average (compounded) annual return earned over a multi-year period
Rates of retu r- Calendar A calendar year return is an annual return for a period beginning on January 1 and
ending December 31.
Rates of return - Compound The average annual change in the net asset value, assuming all dividends and (3, 5 and 10 years) capital gains are reinvested on the date of distribution. Sales or redemption fees are also excluded.
Rates of return - Current The current rate of return is the annual rate of return on an investment. For a stock, it is calculated by dividing the annual dividend by the current market price.
Rates of return - Simple The percentage change in the net asset value in each period of time. This return (1 mo., 6 mos. and 1 year) includes reinvestment of dividends and capital gains and excludes sales or redemption
Ratio withdrawal plan A type of mutual fund withdrawal plan that provides investors with an income based on a percentage of the value of units held.
Real estate fund A mutual fund that invests primarily in residential and/or commercial real estate to produce income and capital gains for its unitholders.
Real estate investment trust A closed-end investment company that specializes in real estate or mortgage investments.
Real Rate of Return The rate of return on an investment after the effects of inflation have been removed. Hence the return produced by the investment in excess of the rate of inflation.
Rear Load See Deferred Load.
Redeemable Preferred shares or bonds that giver the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities.
Registered education savings plan (RESP) A plan that enables a contributor, on a tax deferral basis, to accumulate assets on behalf of a beneficiary to pay for a post secondary education.
Registered retirement income fund (RRIF) A maturity option available for RRSP assets to provide a stream of income at retirement.
Registered retirement savings plan (RRSP) A retirement savings plan to hold amounts deducted from taxable income, within certain limits, in a tax deferred state. There are various investment options and a tax deferral on investment income and gains. Available to individuals to and including 69 years of age, but must be collapsed by the end of the year in which the holder turns 69 years of age.
Resource These funds invest primarily in common shares of Canadian corporations involved in the exploration for, mining or drilling of, refining of or production and harvesting of natural resources ranging from pulp and paper to base metals. These funds can also have up to 30% of their holdings invested in companies based outside of Canada.
Retained earnings The accumulated profits of a company. These may or may not be reinvested in the business.
Retractable Bonds or preferred shares that allow the holder to require the issuer to redeem the security before the maturity date.
Rights Options granted to shareholders to purchase additional shares directly from the company concerned. Rights are issued to shareholders in proportion to the securities they may hold in a company.
Risk The possibility of losses being suffered or the uncertainty of future returns. Risk can take several forms, some of which are financial risk, political risk, operational risk, environmental risk.
Risk - Adjusted Assets Assets categories are assigned pre-determined risk weighting factors. The asset face values are then adjusted by the risk weighting factors in order to reflect a comparable risk per dollar among all types of assets.
Risk - Company When you buy shares, you buy part of a business. Even in booming industries, poorly run business' lose money over time.
Risk - Credit This is a prime concern for the income investor. What are the chances that the issuer of your bond will suspend interest payments or fail to pay back principal at maturity? What is the risk that dividends on your shares will be cut or skipped? Rating services assess those risks.
Risk - Currency This risk applies when your investment is made in foreign money. Perhaps you buy shares on the New York Stock Exchange, or purchase a mutual fund that invests outside Canada. When converted to Canadian dollars, your return will get an extra push up or down, depending on whether the Canadian dollar has gained or lost value.
RISK - Economic Some investments are more sensitive than others to changes in the economy. The auto industry is "cyclical." It tends to do well in good times and suffer in downturns. Utilities such as telephone companies are less sensitive..
RISK - Industry Some industries are inherently volatile, because the dramatic pace of change means a whole generation of technology can quickly become outdated. Examples include the computer and health industries.
RISK - Inflation. That's the risk that your investment won't keep up with inflation. It's a major concern for those who buy GICs and other seemingly "risk-free" investments. Say you buy a 5 year GIC that pays 8%. remember that this income stream is fixed for 5 years. If inflation averages 5% a year between now and maturity, your "real return" is only 3%. Real return is the difference between the stated return and the inflation rate. Moreover, if that GIC is not held in an RRSP or some other tax shelter, you must pay tax on the interest each year. Say your marginal tax rate is 40%. That cuts your 8% GIC rate to 4.8% after tax ( 8 x (1.00 - 0.40) ).

Now subtract the 5% inflation rate and you'll see you're actually losing money - or at least purchasing power - on a risk-free GIC. The same goes for Canada Savings Bonds, though their rates are adjusted each year
Risk - Interest Rate This is related to inflation risk. As inflation goes up, so do interest rates on newly issued bonds and other fixed-income vehicles. As interest rates rise, the market value of previously issued instruments fall. Conversely, as interest rates fall, those values rise. That is a big concern for an investor who has to sell a bond before it matures.
Risk - Liquidity How easily can you get at your money without undue capital loss? A bank account is highly liquid and carries no risk of capital loss - as long as you're within deposit insurance limits. But it yields very low returns. Stocks and bonds are highly liquid and offer higher returns, but greater capital risk. Residential real estate is liquid when the market booms, but you'll get hammered if you have to sell when the market is down.
Risk - Market That's the risk associated with just being in the market. A market plunge will hit the shares of even the world's best companies. You might own the nicest home in the area , but an overall slump in housing will reduce its value.. What you paid for something is irrelevant; it's worth only what someone will pay when you go to sell.
Risk - Political Government action affects every investment, either directly, through changes in tax or zoning laws, or indirectly, through economic policy. The longer you hold your investment, the more you run the risk that politicians and bureaucrats will change the rules.
Risk - Reinvestment The risk that proceeds received in the future will have to be reinvested at a lower potential interest rates.
Risk -Premium The difference between the required rate of return on a riskless asset with the same expected life.
Risk 1) The possibility that some invested funds will be lost through a decline in the value of the investment.

2) Degree of uncertainty of return of asset.

We have defined the following 13 types of risks separately, they are shown below as Adjusted assets, Company Risk, Credit Risk, Currency risk, Economic Risk, Industry Risk, Inflation Risk, Interest Rate Risk, Liquidity Risk, Market Risk ,Political Risk, and Reinvestments.
Sales charge See Front Load.
Sales charge In the case of mutual funds, these are commissions charged to holder of fund units, usually based on the purchase or redemption price. Sales charges are also known as "loads."
Securities Act Provincial legislation regulating the underwriting, distribution and sale of securities.
Securities A catchall term for stocks, bonds, and money market instruments.
Settlement Date The date on which a trade is cleared by delivery of securities against funds. The settlement data may be the trade date or a later date.
Shareholder The owner of a share or shares; hence a part-owner of a corporation.
Shareholders equity The amount of a corporation"s assets belonging to its shareholders (both common and preferred) after allowance for any prior claim.
Shares A document signifying part ownership in a company. The terms "share" and "stock" are often used interchangeably.
Short selling The sale of a security made by an investor who does not own the security. The short sale is made in expectation of a decline in the price of a security, which would allow the investor to then purchase the shares at a lower price in order to deliver the securities earlier sold short.
Short Term trading fee See Early Redemption Penalty.
Simplified prospectus An abbreviated and simplified prospectus distributed by mutual fundsto purchasers and potential purchasers of units or shares (see prospectus).
Small Cap A small cap stock is one issued by a company with less than $500 million in market capitalization.
Specialty fund A mutual fund that concentrates its investments on a specific industrial or economic sector or a defined geographical area.
Spread The difference between the rates at which money is deposited in a financial institution and the higher rates at which the money is lent out. Also, the difference between the bid and ask price for a security.
Stock options Rights to purchase a corporation"s stock at a specified price.
Strip bonds The capital portion of a bond from which the coupons have been stripped. The holder of the strip bond is entitled to its par value at maturity, but not the annual interest payments.
Systematic withdrawal plan Plans offered by mutual fund companies that allow unit holders to receive payment from their investment at regular intervals.
Tax credit An income tax credit that directly reduces theamount of income tax paid by offsetting other income tax liabilities.
Tax deduction A reduction of total income before the amount of income tax payable is calculated.
Technical analysis A method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.
Technical analysis A form of investment research that focuses on information and events in the marketplace itself, generally without reference to the fundamental underlying the issuers of the securities traded in the market. Hence, a stock market technician might look at stock prices and trading volumes in an effort to determine where prices were going in the future.
Term insurance Temporary life insurance that covers the policyholder for a specific time.
Term to 90 annuity An annuity that pays a fixed amount each year until it is exhausted in the year that the annuitant turns 90.
Time-weighted return (TWR) A time-weighted return is a measure of the performance (income and price changes) of investments independent of the amount of money invested. Because the TWR is expressed as a percent gain or loss, it's makes for a easy comparison with other percent changes for the same time period.

By annualizing the TWR and expressing it as an interest rates that you can easily compare it with other interest rates for the same time period.
Time-weighted return (TWR) A time-weighted return is a measure of the performance (income and price changes) of investments independent of the amount of money invested. Because the TWR is expressed as a percent gain or loss, it's makes for a easy comparison with other percent changes for the same time period.

By annualizing the TWR and expressing it as an interest rates that you can easily compare it with other interest rates for the same time period.
Timing the market The method investing by timing market highs ("sell" points) and market lows ("buy" points).
Top-Down A management style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding the financial markets and various industry sectors. The top- down manager selects a portfolio of individual securities within the favored sector. (See bottom-up)
Trade A securities transaction.
Transfer Fee Fee payable on a internal transfer of units from one Fund to another Fund.
Treasury bill (T-bill) Short-term government debt. Treasury bills bear no interest, but are sold at a discount. The difference between the discount price and par value is the return to be received by the investor.
Trust An instrument placing ownership of property in the name of one person, called a trustee, to be held by the trustee for the use and benefit of some other person.
U.S. Balanced These funds invest in a mixture of U.S. Equities and Bonds. Generally the ratio of the holdings in these two categories will remain split in a ratio of between approximately 70/30 and 30/70 of the overall portfolio holdings.
U.S. Small & Mid Cap Equity These funds invest primarily in common shares of US companies with a market capitalization of less than approximately $1.5 billion in the case of small cap holdings and between approximately $1.5 billion and $10 billion for mid cap share holdings.
Underwriter An investment firm that purchases a security directly from its issuer for resale to other investment firms or the public or sells for such issuer to the public.
Unit trust An unincorporated fund whose organizational structure permits the conduit treatment of income realized by the fund.
Universal life insurance A life insurance term policy that is renewed each year and which has both an insurance component and an investment component. The investment component invests excess premiums and generates returns to the policyholder.
US Large Cap Equity These funds invest primarily in US common shares of companies with a market capitalization in excess of approximately $10 billion.
Value A V security is one that is seen to be under valued relative to its "fair" market value. An investor who purchases a Value security is expecting that once the market realize that the stock is in fact undervalued, the price of the stock will rise.
Value at redemption This is the dollar amount of your investment at the time you decide to sell, or redeem, your mutual fund. A back-end load calculated on the value of your investment when you sell, or
redeem, it can significantly reduce your investment return. Refer to the example above under.
Value Manager A manager who seeks to buys stocks that are at a discount to their “ fair value” and sell them at or in excess of that value. Also called contrarians because they see value where many other market participants do not.
Variable life annuity An annuity providing a fluctuating level of payments, depending on the performance of its underlying investments.
Vesting In pension terms, the right of an employee to all or part of the employer"s contributions, whether in the form of cash or as a deferred pension.
Volatility In its standard definition, volatility is a measure of the rate of change in the price of a security over a specified time. The usual yardstick is standard deviation from average price.
Volatility also has become a sophisticated security in the over-the-counter market where investors take on risks of volatility in security, the process that works much like an expensive insurance policy in high-risk markets.
Voluntary accumulation plan A plan offered by mutual fund companies whereby an investor agrees to invest a predetermined amount on a regular basis.
Voluntary Accumulation Plan A plan offered by financial institutions whereby an investor over agrees to purchase investment units or make contributions towards an RRSP, the amount is normally predetermined and make via a Pre-authorized Cheque (PAC).
Waiver of probate bond If an executor/estate trustee does not wish to apply for Letters Probate or a Certificate of Appointment of Estate Trustee, and the value of a specific amount is above the threshold of a given financial institution, the executor/estate trustee can apply for a Waiver of Probate Bond from an insurance company. Thie Waiver of Probate Bond serves as insurance cover to an institution in the event that any claims arise as a result of it having paid out assets without requiring that a formal appointment of an executor/estate trustee be obtained. A premium calculated as a percentage of the value of the account at the specific financial institution (e.g. 1.5% of $175,000) is paid to the insurance company.
Warrant Certificates allowing the holder the opportunity to buy shares in a company at a stated price over a specified period. Warrants are usually issued in conjunction with a new issue of bonds, preferred shares or common shares.
Withdrawal Plan The ability to establish automatic periodic redemption's from a mutual fund or registered retirement plan and have proceeds mailed directly to the investor
Withholding Tax A tax levied on dividends paid abroad or levied by the trustee of a retirement savings plan on early encashment or other withdrawals within a certain time frame. A tax levied by a country of source on income paid, usually on dividends remitted to the home country of the firm operating in a foreign country.
WRAP Account An account offered by Investment Dealers whereby investors are charged an annual management fee based on the value of invested assets. TD Waterhouse offers a similar service in the TD Managed Assets Program.
Wrap account The term wrap account often is used to describe an arrangement between a client and the client's dealer whereby the dealer agrees to be compensated through a fixed annual fee from the client (usually calculated as a percentage of the value of the client's account) in lieu of all other forms of compensation including commissions, service (trailer) fees and other fees. Wrap accounts typically are available only for larger account sizes (for example, a minimum of $100,000 of assets) and include additional services. The additional services vary, but may includeasset allocation and rebalancing services, enhanced reporting, and access to select investment managers. These additional services and annual fee are "wrapped" together as a single comprehensive investment solution for the client. Wrap accounts that invest in mutual funds usually are eligible to purchase classes of securities that are charged lower management fees to reflect that the mutual funds' manager is not paying any compensation to the client's dealer.
Wrap Account An account offered by investment dealers whereby investors are charged an annual management fee based on the value of invested assets.
Yield Annual rate of return received on investments, usually expressed as a percentage of the market price of the security.
Yield curve A graphic representation of the relationship among yields of similar bonds of differing maturities.
Yield Curve A graph showing, for securities, that all expose the investor to the came credit risk, the relationship at a given point in time between yield and current maturity. Yield curves are typically drawn using yields on governments of various maturities.
Yield to maturity The annual rate of return an investor would receive if a bond were held until maturity.
Yield The return on an investment, expressed as a percentage.
Zero coupon bond A bond that pays no interest and is initially sold at a discount.

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