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Glossary of investment terms

Review our glossary for investor-related terminologies and navigate the world of investments with confidence. 

Absolute Return The measure of an investment’s gains or losses over a specific period, independent of any benchmark or index. 

Accredited investor Any individual, entity, or financial institution that meets specific financial criteria relating to income, net worth, or investment knowledge set by regulatory authorities.

Active management A style of fund management where the fund manager aims to outperform a benchmark, relying on analytical research and personal judgement to decide what securities to buy, hold, or sell.

Alternative investment Investments outside traditional investments (stocks, bonds, mutual funds). Alternative investments include real estate and commodities (gold, oil, natural gas), including special investment vehicles such as private equity, hedge funds, and mortgage funds.

Assets Resources with economic value owned by individuals or companies.

Asset allocation Strategic division of a portfolio among different asset classes, such as stocks, bonds, and cash. 

Assets under management (AUM) Total market value of all the securities a firm owns or manages on behalf of its clients. 

Asset class Investments with similar types of characteristics. These can be equities (shares), bonds, cash, or real estate. 

Auditors Independent entity that regularly reviews a firm to ensure the accuracy of financial records and compliance with tax standards and regulations

Annual Percentage Yield (APY) The total amount of money or interest, including compounded returns, earned on an investment in a year.

Annual Percentage Rate (APR) The total amount of money, interest, or fees paid on a loan in a year.

Annual Percentage Rate (APR) The total amount of money, interest, or fees paid on a loan in a year.

Basis point Equivalent to 1/100 of a percent, it describes the percentage change in interest rates.

Bear market  A sustained period of falling stock prices, typically by 20% or more. 

Benchmark  An index or standard against which an investment fund’s performance is measured. 

Blue chip Stock issued by a large and well-established company with an excellent reputation and sound financial structure. 

Bonds  Debt instruments which companies or governments issue with a promise to pay the original amount of investment and a specified amount of interest at maturity. 

Bond funds  A portfolio consisting primarily of bonds. 

Broker An individual or institution that arranges the buying and selling of securities on an exchange. 

Bull market A sustained period of rising stock prices, typically by 20% or more. 

Call options  A financial contract that gives the holder the right to buy an asset at a specified price within a specified time.

Canada Income Tax Act (ITA) Federal law governing the collection and administration of income tax in Canada. 

Canada Securities Administrators (CSA) The umbrella organization consisting of the ten provinces and three territories in Canada responsible for securities regulation across the country. 

Capital Total financial assets invested in securities to generate value. 

Capital gains This occurs when an asset is sold at a higher price than an investor originally paid. 

Capital preservation An investment strategy aimed at protecting an investor’s original capital investment from any significant losses. 

Cash flow The net balance of cash moving into and out of business from any investment activities in a specific period. 

Certificate of Deposit (CD)  A savings account offered by banks and credit unions that holds your money for a fixed period at an agreed interest rate and maturity date. At the end of the term, the investor receives the money originally invested plus the interest. 

Collateral  Physical property securing a loan. 

Commercial Mortgage  Loans secured by commercial properties to fund the development of a business premises. 

Commissions  Broker’s fee for purchasing or selling securities as an agent. 

Commodity  Tradeable goods and raw materials, such as gold, oil, and natural gas.  

Commodity funds  Mutual funds that invest in either the commodities or the companies that produce these commodities. 

Common stock  Represents the shares of ownership in a corporation. It comes with voting rights and profit sharing through dividends. Common stock is one type of stock that is traded on public exchanges. 

Compounding  Increasing value of an asset by earning returns (or interest) on the original investment and accumulated returns. 

Compound interest  Interest paid on interest.  

Corporate bond  A type of bond issued by a company to raise capital. 

Cost averaging  An investment strategy of consistently buying a fixed dollar amount of an asset at regular intervals, regardless of price. 

Coupon  The interest payment to the bondholder (investor) by the issuer (government or company) of the bond. 

Credit rating  A measure of the creditworthiness of a financial instrument or a financial custodian.

Credit risk The possibility of loss due to a borrower’s failure to meet their obligations to repay a debt. 

Debt Borrowed money. 

Derivatives  Financial instruments whose value is derived from an underlying asset. It is used to speculate and obtain leverage when the asset has achieved an agreed-upon price at some point in the future. 

Distribution  The disbursement of an asset’s earnings to the investors. 

Diversification   Investing among and within different asset classes to spread the risk and lessen exposure to any one type of asset. 

Dividend The share of a company’s profit to its shareholders in proportion to the number of shares they hold. 

Domestic bonds Bonds issued and traded within a country’s boundary and denominated in that country’s currency. 

Dividend Reinvestment Plan (DRIP) A program that allows investors to reinvest their cash dividends to purchase additional shares automatically. For example, Amur Capital MIC funds are eligible for DRIP. 

Duration A measurement that indicates how much a bond’s price might change if interest rates fluctuate. 

Earnings per share (EPS)  The value ratio between a company’s annual income and the number of outstanding stock shares. 

Equity  The proportionate interest in a company. 

Exchange Traded Fund (ETF) A type of index fund that mimics the performance of a specified index by investing in the companies included in that index. Like stocks, ETFs can be traded throughout the day. 

Exempt Market A section of capital markets where securities can be sold without the requirements of a prospectus and do not have to be publicly traded. 

Exempt Market Dealer (EMD) Registered securities dealer that trades prospectusexempt securities, such as derivatives, private equity, and mortgage funds. 

Execution The completion of a purchase or sale order for a security.  

Exposure Total capital invested in a particular asset. 

Fiduciary responsibility The duty imposed by law on a management company and its representatives to act in the best interests of their investors. 

Financial year A one-year or 12-month period that companies and governments use for financial reporting. 

Fixed income securities Debt securities that give a steady payment of interest and a promise to repay the amount owing at maturity. Fixed income assets include bonds, treasury bills, and mortgages. 

Flow-through entity A legal entity whose income is passed straight to its investors and is taxed only once at the investor level. As a result, the investment avoids double taxation, which is common with income from regular corporations. Mortgage Investment Corporations (MICs) are considered flow-through entities. 

Fund earnings The investment gains or losses at a specified point in time. 

Fund management company An institution that manages investments on behalf of their investors. 

Fund manager A person appointed for the day-to-day administration, including strategic allocation and management, of a portfolio of a fund. 

Fund Fact Sheet A short, easy-to-read document designed to give investors a high-level view of a fund. This includes the fund’s investment objectives, risk level, cost, and historical performance. 

Financial Statement A formal record that details a company’s financial performance over a specific accounting period. 

Government bonds Fixed-income securities issued by a government to finance various public initiatives, such as infrastructure spending and projects. 

Growth stocks Common stock of a company with above-average earnings growth rate or potential for growth. 

Guaranteed Investment Certificate (GIC)  A special deposit that allows investors to get the original amount invested by the maturity date, plus the compounded returns based on an agreed interest rate. 

Hedge fund An investment fund that invests in non-traditional assets and whose fund manager employs nontraditional investing methods, such as leverage, shorting, or derivatives. 

Hedging A risk management strategy that involves buying or selling an investment to reduce the risk of loss due to adverse price movements. Investors do this by taking opposite positions in the same or related assets to offset the loss of an existing position. 

Illiquid State of an asset that cannot be easily sold or exchanged for cash. 

Income Profit from an investment in the form of interest, dividends, or capital gains. 

Income distribution  The disbursement of an asset’s earnings to the investors.

Income property  Built or bought property that is used as capital investment. 

Index A group of securities, derivatives, or other financial instruments used to measure the performance of a specific market. It is often used as a benchmark to evaluate an investment’s performance. 

Index funds Investment funds that follow a benchmark index through its stock selection and weightings. 

Inflation The broad, general rise in prices of goods and services in an economy. Inflation erodes the real value of an investment’s return by decreasing your ability to buy as much for the same amount of money. 

Interest Monetary charge for borrowing money. 

Intrinsic value The actual or inherent worth of an asset independent of its market value. 

Investment grade  The rating given by credit rating agencies, such as Standard & Poor’s, Fitch, and Moody’s, to corporate and municipal bonds. A bond that is investment grade means it has a low to moderate risk of default. 

Investment horizon The period of time investors wants to keep investing. 

Investment instruments The types of investments such as equities, bonds, and money market instruments.