Common Financial Terms

How your money is split between asset classes like stocks, bonds and cash.

A period when prices fall significantly, often defined as 20% or more from a recent high.

The gap between the highest price a buyer will pay and the lowest price a seller will accept.

An informal term for large, well-established companies with a long track record.

A loan you make to a government or company in exchange for interest payments.

A long period when prices are generally rising.

Profit from selling an investment for more than you paid. Inside a TFSA, it isn't taxed.

Earning returns on your past returns, not just on what you put in. It's why time matters so much.

How much you're allowed to put into your TFSA. It grows each January 1 and carries forward if unused. The CRA keeps the official number.

Spreading money across many investments so that one doing badly has less impact on the whole.

A payment some companies make to shareholders out of their profits. Not guaranteed.

Investing a fixed amount on a regular schedule regardless of price.

Dividend Reinvestment Plan. Automatically uses your dividends to buy more units or shares.

Another word for a company's profit (net income).

Exchange-Traded Fund. A basket of investments you can buy and sell on a stock exchange like a single stock.

First Home Savings Account. Combines a tax deduction on contributions with tax-free withdrawals for a qualifying first home purchase.

Guaranteed Investment Certificate. A Canadian deposit that pays a fixed rate for a set term. It can be held in a TFSA.

High-Interest Savings Account. A savings account that pays interest. Some can be held inside a TFSA.

A list of investments used to measure a market, such as the S&P/TSX Composite or the S&P 500.

A fund that tries to match the performance of an index rather than beat it.

The general rise in prices over time, which reduces what each dollar can buy.

An order to buy or sell only at a price you choose, or better.

How quickly something can be turned into cash without losing value.

An order to buy or sell immediately at the best available price.

Management Expense Ratio. A fund's yearly cost as a percentage of your investment.

A pooled investment bought from the fund company or an advisor and priced once a day. These often have higher fees than ETFs.

The value of everything a fund owns, divided by its number of units.

The statement the CRA sends after you file your taxes. It can show your RRSP room, and your CRA My Account shows your TFSA room.

Putting in more than your TFSA room. The CRA charges a 1% tax per month on the excess until it's removed.

Moving money directly between your own TFSAs at financial institutions. Done properly, it doesn't count as a withdrawal and contribution.

Buying or selling to bring your mix of investments back to the split you planned.

Part of a fund distribution that returns your own invested money rather than earnings.

How much ups and downs in value you can handle, financially and emotionally.

Registered Retirement Savings Plan. Contributions can lower your taxable income now, but withdrawals are taxed as income later.

When a company buys its own shares, reducing the number available. This can raise earnings per share.

A small piece of ownership in a company.

Dividing each share into several cheaper shares. Your total value doesn't change.

Tax-Free Savings Account. A Canadian account where investment growth and withdrawals are tax-free. You can only put in as much as your contribution room allows.

The short code used to identify an investment on an exchange.

How long until you expect to need the money.

How much and how quickly an investment's price moves up and down.