AmortizationNumber of years over which the principal and interest of a loan are paid. The maximum amortization period for a mortgage loan is 25 years.
Assets All of the tangible and intangible property belonging to a company or to a person: money, equipment, securities, buildings, etc.
D
DecileIn the Morningstar ratings, the term decile refers to the positioning of a mutual fund in relation to other funds in its peer group. For example, a fund that ranks in the first decile obtained a return that places it in the top 10% of the best performing funds in its peer group.
E
EI Employment Insurance.
F
Family trust Financial tool that enables members of a family to reduce their taxes while providing for the financial future of their descendants or heirs who have little or no income. The head of a company can transfer to the family trust his or her personal assets and family patrimony, various property, shares, and other investments.
First Home Savings Account (FHSA)
Registered savings account that allows first-time home buyers aged 18 and over to save $8,000 a year (lifetime limit of $40,000) for the down payment and earn tax-free investment income. Eligible withdrawals are tax-free and do not have to be repaid.
G
Group RRSP Plan in which participants invest in order to receive a retirement income. A customized Group RRSP meets the requirements of the Voluntary Retirement Savings Plans Act and is a choice option for employers.
Growth This style emphasizes current and future company earnings. The price paid for a stock is less important: the focus is on growth potential. This style is usually more volatile.
Growth-at-a-reasonable-price style The manager looks for stocks that have high potential but that are selling at a reasonable price. This is a hybrid style that combines value and growth.
Growth stocks The growth style counts on a promising earnings outlook. The manager looks for companies that have strong earnings and sales growth, and for which expectations are high.
H
HBP Home Buyer’s Plan.
Home Buyers’ Plan (HBP) Program which under certain conditions enables you to borrow funds from your Registered Retirement Savings Plan (RRSP) to buy or build a home. The maximum withdrawal amount is $35,000 in a calendar year. Repayment terms apply.
I
Incapacity Inability of a person to administer his or her property for the following reasons:
degenerative mental illness
stroke
intellectual disability
head injury
age-related impairment
Income The manager looks for high-dividend paying stocks. This is a low-volatility style that benefits from solid, well-established companies and relies on dividends to generate an attractive and steady return.
Income splitting Method of transferring, in the form of a gift or a loan, part of the income of a person in a higher tax bracket to a family member in a lower tax bracket.
Individual Pension Plan (IPP) Registered defined benefit pension plan that enables a company to save for the retirement of a key employee or a major shareholder.
Investment vehicle Generic term for a variety of financial products in which one can invest and grow one’s money: RRSP, mutual funds, etc.
J
Joint-stock corporation or company “Artificial person” that can own property and enter into agreements in its own name. Legal entity belonging to the shareholders, who are not personally responsible for the debts, decisions or obligations of the company. Control of the company is proportional to the number of voting shares held by the shareholders.
L
Lease Financing method that enables you to buy property (movable or immovable) at the end of a lease contract. No down payment is required. Rent paid by the business is fully tax deductible.
Life income fund (LIF) Registered account to which sums accumulated in a LIRA can be transferred.
Lifelong Learning Plan (LLP) Plan that enables you to withdraw funds from your RRSP to finance full-time training or education for you or your spouse. The withdrawal limit is $20,000 over four years. You have up to 10 years to repay the withdrawn funds to your RRSP.
LIF Life Income Fund.
LIRA Locked-in Retirement Account.
LLP Lifelong Learning Plan.
Locked-in Retirement Account (LIRA) Account to which “locked-in” sums from an employer pension plan, certain annuity contracts, or another LIRA can be transferred.
M
Median The median value of a category is the mid-point of that value’s distribution for all funds in a sample. For instance, one half of the funds in a group have returns below the median, and the other half has returns above the median.
Momentum The manager seeks big short-term gains. Characterized by high turnover, this style invests in stocks that are in strong uptrends, without regard for the price. It performs well in times of euphoria at the end of bull markets.
Morningstar rating Morningstar is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar provides data and research insights on a wide range of investment offerings. Its ratings, based on distinctions between different fund categories, are designed to help investors identify the best performing funds in their peer group.
Mortgage loan Loan for the purchase of a home or other property which is paid back over many years. The property serves as security for the repayment of the loan and may be seized by the creditor if the loan is not repaid in a timely manner.
Mortgage term Period during which the terms and conditions of your loan remain in force. For example: a mortgage amortized over 25 years with a 5-year term at an interest rate of 4.5%. At the end of the term, the mortgage can be renegotiated or renewed for a new term with payments to be made according to the terms and conditions chosen.
P
Payment deferral Measure similar to that offered to individuals for their personal mortgage
Portfolio Term that designates all the financial assets, securities or investments held by an institution or an individual.
Q
QPIP Quebec Parental Insurance Plan
QPP Quebec Pension Plan.
Quartile The quartiles divide the data into four equal regions. Expressed in terms of rank (1, 2, 3 or 4), the quartile measure shows how well a fund has performed compared to all other funds in its peer group. Most fund managers aim to perform in the top half (the first or second quartile) at all times.
Québec enterprise number (NEQ) Numerical identifier assigned to a business when it registers in the enterprise register.
R
Recession Temporary phase of an economic cycle defined by a decrease in economic activity. Practically speaking, the term recession can be used when real gross domestic product (GDP)* has fallen for at least two consecutive quarters. *Value of the economic output of a given country, adjusted for inflation.
Registered Education Savings Plan (RESP) Allows savings for education to grow tax-free and gives entitlement to government grants. Plan funds are used to pay for the post-secondary education of your children or grandchildren.
Registered plans Savings plans or registered investments designed to help individuals save primarily for retirement or to obtain tax deferrals, depending on the product chosen. General features:
Annual contribution limits
Contributions are tax deductible
Withdrawals are taxable to varying degrees
Age limit (mandatory withdrawal) in some cases
Registered Retirement Income Fund (RRIF) Registered account to which sums accumulated in an RRSP can be transferred. Income earned in an RRIF is tax-exempt. Amounts paid out of an RRIF are taxable on receipt by the pensioner.
Registered Retirement Savings Plan (RRSP) Plan in which participants invest in order to receive a retirement income. Contributions are tax deductible. Capital gains and income earned in the plan are not taxed, but withdrawals are taxable. The Canada Revenue Agency determines the annual contribution limit.
Risk tolerance An investor’s capacity to accept a substantial decrease or loss in value of the investments in their portfolio. The risk level is often proportional to the expected return of an investment.
RRIF Registered Retirement Income Fund.
RRSP Registered Retirement Savings Plan.
S
S&P/TSX Index The S&P/TSX is a Canadian benchmark index which represents about 70% of the total market capitalization of the Toronto Stock Exchange (TSX) and which includes approximately 250 companies (the Toronto Stock Exchange has 1,500 listed companies).
Share Ownership security or share of the capital of a company held by a shareholder in the business.
Supplemental Pension Plan (SPP) The two main types of supplementary pension plans to which employers and employees can contribute are:
Defined benefit plans The amount of benefits is fixed and is based on a percentage of earnings and the number of years of service, or according to other calculation formulas approved by the RRQ.
Defined contribution plans The contribution is fixed but the amount of benefits is subject to market fluctuations and the return on the investments chosen by the participant.
T
Tax Free Savings Account (TFSA) Savings account that enables individuals age 18 or over to earn investment income tax-free. The annual contribution limit may vary. Sums withdrawn from a TFSA are not taxed.
Transfer duties Registration duties paid to the municipality when buying a property. Also called “welcome tax,” these duties are payable within 30 days following receipt of the bill. The calculation rules vary according to the municipality.
U
Unit value Indicator of the market value of a single unit, security, bond or share held in an investment fund.
V
Value The manager looks for undervalued stocks. Their price must be lower than the manager’s target price. Although it benefits in rising markets, the value style produces better results when markets are falling. It is usually less volatile, with low security turnover.
VIX Index The Volatility Index (VIX), also known as the “fear index,” is the volatility indicator for the U.S. market, compiled daily by the Chicago Board Options Exchange.
Volatility Term designating the variation in the price of a security over a given period.
VRSP Voluntary Retirement Savings Plan.
W
Wealth management Service that takes charge of managing your investments and covering the seven areas of financial planning: taxation, legal aspects, investments, retirement, finances, insurance, estate.
