Investment Glossary

A fee, sales charge, or commission paid at the time mutual funds or other annuities are redeemed. The fee amounts to a percentage of the value of the share being sold. The fee percentage is highest in the first year and decreases yearly until the specified holding period ends, at which time it drops to zero.

A financial statement describing a company's assets liabilities and shareholders' equity. The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.

A balanced fund is a mutual fund that balances its portfolio by including bonds and shares in varying proportions in order to mitigate risk while providing income and capital appreciation. A balanced fund is geared toward investors who are looking for a mixture of safety, income and modest capital appreciation. The amounts that such a mutual fund invests into each asset class usually must remain within a set minimum and maximum.

The rate at which a central bank such as the Bank of Canada makes short-term loans to financial institutions, and the benchmark for prime rates set by financial institutions. Changes in bank rate are reflected in the prime lending rates offered by commercial banks (to their best customers), which in turn affect investments such as bank deposits, bond issues, mortgages. This term has largely been replaced by newer terms base-rate and prime rate.

Short-term credit investment where the repayment of principal and payment of interest is guaranteed by a bank.

A financial market characterized by falling prices. A bear market is not the same as a market correction; a correction is a short-term trend that has a duration of less than two months, whereas bear markets can last for an average of six months or more. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the “bottom” or end of the bear market and a return of sustained increases can be very difficult to gauge. Trying to recoup losses made by miscalculation in a bear market can be very risky because it is quite difficult for an investor to make meaningful gains during a bear market unless it is through short selling.

A statistical term used to compare the risk of an individual security or portfolio to that of the market as a whole. In general terms, a security with a beta of 1.5, will move, on average, 1.5 times the market return; the stock's excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return.

Beta also represents systematic risk that cannot be mitigated by diversification.

The bid price is the highest price a buyer is willing to pay for a security. “Bid” and “ask” prices are fundamental market concepts, as they detail the exact amount at which securities can be bought and sold at any point in time. It should be noted that the current price is not the price for which securities can be purchased, but is instead the price at which the shares last traded hands. To determine the price at which a security can be bought, it’s necessary to look at the bid and ask prices because they will often differ from the current price. See also: “ask” price.

The Blue Book of Real Estate Investing is a book authored by LEAGUE Financial Partners outlining the basic principles of investing in Canadian real estate investment trusts (REITs). Among the useful information you can expect to find:

• How to profit from investing in a REIT
• The LEAGUE Credo: our strict code of conduct for treating our investors
• How a REIT is less volatile than common stocks
• How to earn monthly income
• Tax efficiencies
• Diversification through asset types and locations

The Blue Book empowers you to understand real estate investing and make sound decisions about where your money is going - and where it could be coming from for years to come.

A common term for high grade equity securities. The most popular index that follows blue chips is the Dow Jones Industrial Average. The Dow Jones Industrial Average features a price-weighted average of 30 blue-chip stocks that are regarded as the leaders of their respective industries.

A board lot is standard number (or “lot”) of shares designated by a stock exchange for trading transactions, usually 100 shares, although the number of shares in a board lot varies with the price level of the security. When this type of block trade is made, the exchange where the securities are traded tend to consider the transaction as involving a single trading unit. By utilizing a board lot approach, the process of selling securities is greatly simplified, since calculating the purchase prices for the lot is easier for both the buyer and the seller.

An elected or appointed committee, empowered by shareholders of a company to act on their behalf in the management of company affairs. The funds, assets or property belonging to others are held in trust by the board of directors, which in turn has a fiduciary duty to provide effective stewardship. The board of directors commonly oversees and advises management on issues facing the organization.

A long-term debt instrument or security where there is an agreement to pay a set amount of interest, as well as to return the principal amount, at a later date (known as maturity). a bond is like a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.

A collective investment scheme or fund whose portfolio consists primarily of bonds. Bond funds are usually classified according to their primary assets:

There are several different definitions of book value: