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    • Asset allocation

      Asset allocation involves the decision of how much of a portfolio to put into each asset class, or security type. Ibbotson did a study of pension funds and found that more than 90% of a portfolio’s return can be attributed to the asset allocation as opposed to the individual securities selected. The primary determinants of asset allocation are risk tolerance (how the investor feels about risk), time horizon (how long the investor has before they will need to start drawing on their investments), growth requirements and whether the client may need to draw out funds (liquidity needs). Also see asset class.

    • Asset classes

      Asset class refers to types of investments or classifications of investments. Examples of asset classes include stocks, bonds, cash equivalents, real estate and hedge funds. Also see asset allocation.

    • Bond

      If you own a bond you are loaning money to the company or organization that issued the bond. Bonds generally pay interest income at some specified interval.

    • Book value/Unit cost

      Book value or unit cost refers to the price that a security was bought. Book values are necessary to compute both realized and unrealized capital gains.

    • Canada Education Savings Grant (CESG)

      The Canada Education Savings Grant (CESG) complements RESP contributions as the government of Canada contributes 20% of the first $2,500 in annual contributions made to an RESP. The government may contribute up to $500 per year to a participating RESP. This income is available upon withdrawal from the RESP by a post-secondary recipient.

    • Capital preservation

      Capital preservation generally means to preserve the initial amount invested, regardless of the effect inflation has on the investment value.

    • Cash flow management

      This entails reviewing your income and expenses to ensure that you are not spending more than you earn.

    • Common stock

      Common stock refers to the regular shares in a corporation. When you own common stock, you own a part of the company. You participate in the profits and losses of the firm. Profits may be distributed as dividends or may reflect in the higher market value of the shares in the market, or both.

    • Debt management

      Can you reduce the amount of interest that you’re paying? Can you pay off your debts sooner? What debts should you pay off first? This section includes any strategy that helps a debtor to repay or otherwise handle their debt better.

    • Discretionary account

      A discretionary account is a type of account where the investment decisions are made by the portfolio manager instead of the client. This applies to separately managed accounts.

    • Dividends

      A dividend is the distribution of earnings to shareholders which is most often paid as cash or stock. The amount is decided by the board of directors and is usually paid quarterly. Dividends are not guaranteed. Dividends paid on Canadian corporations are taxed at a more favorable rate than interest income.

    • Education funding

      Education funding is a subset of financial planning which plans for the goal of funding for your own education goals or that of a beneficiary. How much do you need to save for your children’s (or grandchildren’s) education? Should you use an RESP?

    • Equities

      The term Equities refers to ownership in a public or private company. Other terms that mean the same thing are common stock and stock ownership.

    • Estate planning

      Estate planning is the act of preparing for the transfer of a person’s wealth and assets after his or her death. Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one’s estate. How do you get it to your beneficiaries as quickly and as easily as possible? How do you plan for tax consequences so you don’t burden your heirs?

    • Financial Planning

      This is an investment strategy that seeks to invest in companies that are growing their earnings at an above average rate. Superior growth potential often justifies a higher stock price

    • Income tax planning

      What are tax effective strategies? Can you reduce the amount of tax that you are paying? Should you contribute to an RRSP or a Tax-Free Savings Account? Should you consider tax shelters? What opportunities do you have to split your income for tax savings? Tax planning is an exercise to minimize tax liability through the best use of all available allowances, deductions, exclusions, exemptions, etc., to reduce income and/or capital gains.

    • Individual Pension Plan (IPP)

      An IPP is a retirement savings program sanctioned by CRA that is mainly for key executives, owners of corporations or those that are professionally incorporated. An IPP is a defined benefit pension plan for one person. The main advantage to an IPP is that it generally allows certain high income individuals to exceed the CRA annual maximum contribution limits.

    • Insurance and risk planning

      A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium. Do you need insurance (life, disability, critical illness, long term care)? How much and what kind?

    • Interest

      The income paid on a bond or other fixed income security. In Canada, interest income is taxed at your marginal tax rate.

    • Investment horizon

      The time period used for planning and forecasting purposes or the future time at which the investor requires the invested funds.

    • Investment planning

      Are your current investments achieving the rate of return you need to meet your goals? How do you get a higher return while minimizing risk? What asset allocation should you have? Investment planning is a subset of financial planning. It is the process of matching your financial goals and objectives with your investment resources

    • Investment Policy Statement (IPS)

      An IPS is a formal document where a client’s risk profile, time horizon, liquidity needs and financial objectives are articulated. An IPS usually also contains a recommended asset allocation and portfolio recommendations.

    • Liquidity

      This term refers to the need for cash or for convertibility to cash. Someone that has high liquidity needs must to be able to access cash on a regular basis.

    • Market value

      Market value is the current value at which a security can be either bought or sold. In statements, it is usually the closing price of the security on the last business day of the month.

    • Par value

      Some securities, like bonds and preferred shares are issued at a particular value called par value. This is also the value at which they are redeemable for cash.

    • Preferred shares

      These are shares that are generally issued at par value and can have either a fixed or variable dividend. Preferred shares generally do not have voting rights but they do rank above common shareholders for payment of dividends and claim on assets of the firm.

    • Private Client Questionnaire (PCQ)

      The PCQ is an information gathering document that is filled out and signed by a client. This is also referred to as a risk profile or a Know Your Client (KYC) questionnaire. The PCQ is used by the portfolio manager to create the Investment Policy Statement (IPS).

    • Quarterly Investment Review (QIR)

      The QIR is an enhanced consolidated report that shows how your account has performed relative to the appropriate benchmark, the holdings in each of your mandates as well as the activity for the quarter.

    • Real Estate Investment Trust (REIT)

      An entity that may invest in real estate or mortgages on real estate and whose earnings are exempt from federal taxation. REITs must meet certain strict requirements in order to get around paying corporate income taxes.

    • Realized capital gains

      A realized capital gain is a capital gain that occurs when a capital asset is sold. This is also called taxable capital gain.

    • Registered Education Savings Plan (RESP)

      A Registered Education Savings Plan, or RESP, is an investment vehicle used by parents to save for their children’s post-secondary education in Canada. The main advantages of RESPs are the Canada Education Savings Grant (CESG) and a tax-deferred income.

    • Registered Retirement Income Fund (RRIF)

      A RRIF is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan. To fund their retirement, RRSP holders often roll over their RRSPs into a RRIF. The RRIF pays out a prescribed mandatory minimum payment each year, but there is no maximum annual withdrawal limit. Withdrawals from a RRIF are subject to taxes imposed by Canada Revenue Agency (CRA).

    • Registered Retirement Savings Plan (RRSP)

      A type of account for holding savings and investment assets. RRSPs have various tax advantages compared to investing outside of tax-preferred accounts. RRSP contributions are tax deductible and taxes are deferred until the money is withdrawn.

    • Retirement planning

      Retirement planning is a subset of financial planning. It is the planning one does to be prepared for life after paid work ends, not just financially but in all aspects of life. The non-financial aspects include such lifestyle choices as how to spend time in retirement, where to live, and when to completely quit working. Financial aspects include how much do you need to save to meet your retirement goals? Should you start your pension early? Should you draw from RRSPs or non-registered funds first? How do you transition to retirement?

    • Risk tolerance

      This term generally refers to an investor’s ability to tolerate swings in market value of their portfolio. It takes into account a client’s attitude toward investments, as well as their overall financial situation including net worth. In general, investors with longer time horizons, higher net worth and/or a very good knowledge of investing have a higher risk tolerance than other investors.

    • Separately Managed Accounts (SMA)

      Separately Managed Accounts are a type of discretionary fee based account where the client owns actual stocks and bonds. Each account could potentially be managed by a different investment manager. SMAs provide clients with access to some of the same managers that manage large pension funds for much smaller account sizes.

    • Socially Responsible Investing (SRI)

      Socially Responsible Investing (SRI) involves using your power as an investor to bring about social change by investing in companies that are good corporate citizens while at the same time avoiding certain types of companies. This is also known as ethical investing.

    • Stocks

      Stock or common stock refers to ownership in a company. Usually owning the common stock of a corporation entitles the holder to vote on proxy statements and participate in the earnings of the corporation either through dividends or increased market value of the company or both.

    • T1135 or Foreign Income Verification Statement

      A form to disclose all specified foreign property held by Canadians in non-registered accounts. “Specified foreign property” encompasses all non-Canadian property including foreign bank accounts, US investment accounts, shares in foreign companies (i.e. non-Canadian stocks, US listed ETF’s etc.), bonds and debentures issued by foreign governments or companies (ex. US Treasury Bonds), income producing real estate (vacation homes are exempt) and offshore mutual funds The complete list can be found on the CRA website.

      Investments held inside Canadian registered accounts are exempt from this reporting requirement, as are foreign securities held by Canadian mutual funds and ETF’s. This means the average investor only has to worry about non-registered accounts and foreign bank accounts.

      For individuals with investments outside registered accounts, the form must be completed if the aggregate cost of all investments exceeds $100,000 CAD at any point during the year.

    • Tax-Free Savings Account (TFSA)

      An account that provides tax benefits for saving in Canada. Investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn.

    • Unrealized capital gains

      This refers to gains on positions not yet sold. These gains are also referred to as paper profits, as they are not guaranteed until the position is actually sold. In order for a gain to be crystallized or realized for tax purposes the position must physically be sold.

    • Value (investment style)

      This is an investment strategy that invests in companies that are deemed to be undervalued compared to the market in general and/or their true underlying asset value. Value managers are often looking to buy companies that are out of favor in the market ahead of main stream recognition.

    • Volatility

      Volatility usually refers to the swings in market prices for securities. For example, a volatile stock would be one where the price movements are frequent and large, such as technology stocks. Less volatile securities like bonds may not change in market value very much from month to month.

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