Chapter 1.1:
An Investor's Glossary
December 20, 2017
By: Luis Tallavo, Project Coordinator, YFP

  • A stock is an ownership in a company
  • A stock is a piece of the company, therefore if the company does well, you do well
  • There are many types of stocks, but overall, stocks are associated with more risk
  • A loan, generally to the government or a company
  • In return, they pay you interest for the term of that loan
  • Bonds are considered conservative types of investments
  • You can often choose the length and term of the bond, also known as “maturity”
  • A large basket of stocks or bonds
  • A pool of money from a large sum of investors is placed in a fund, which then invests in certain securities with different levels of risk
  • Excellent way to obtain professional money management and instant diversification that would otherwise be more difficult to obtain yourself
  • An income from a pension or investment that is set at a particular figure
  • Lending money to a company or government for interest (also known as a bond) is a form of fixed income.
Foreign Developed
  • Companies based elsewhere with developed economies and generally accepted currencies
  • In investing, when referring to a foreign developed market we focus on its economy and capital markets
  • The country must be high income, but also consider openness to foreign ownership, ease of capital movement, and efficiency of market institutions
Foreign Emerging
  • Countries with relatively undeveloped economies
  • These are often regarded as more volatile and associated with higher risk but also higher expected returns
  • The largest emerging stock markets are Brazil, Russia, India, and China
  • The idea is to create a portfolio that includes multiple investments, in multiple different sectors in order to reduce risk
  • A sum of money paid regularly by a company to its shareholders out of its profits
  • Not all investments will provide a dividend, however, they are a great thing to look out for
Dividend reinvestment plan (DRIP)
  • An equity investment option offered where the investor does not receive quarterly dividends directly as cash. Instead, the investor’s dividends are directly reinvested in the underlying equity
  • An increase or decrease in the value of a capital asset
  • The change in worth is realized once the asset is sold
Full-Service Brokerage
  • A licensed financial brokerage firm that provides a large variety of services including research and advice, retirement planning, tax tips and so on
Market Capitalization
  • The market value of a company’s outstanding shares
  • Found by taking the stock price and multiplying it by the total number of shares outstanding
Return on Capital (ROC)
  • Refers to principal payments back to “capital owners” that exceed the growth of a business or investment
  • A series of fixed payments paid at regular intervals over the specified period.
  • A trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms
Asset Allocation
  • Apportioning a portfolio’s assets according to an individual’s goals, risk tolerance, and investment horizon
Buy and Hold
  • A passive investment strategy in which an investor buys stocks and holds them for a long period of time, regardless of fluctuations in the market
  • An investment technique where the investor buys a fixed dollar amount of an investment on a regular schedule
  • This is done regardless of the share price, however; the investor purchases more shares when prices are low and fewer when they are high
  • It is meant to allow investment over time instead of investment as a lump sum
Ticker Symbol
  • An abbreviation used to uniquely identify publicly traded shares of a particular stock in a market. For example, “AAPL” for Apple.
Price-to-book Ratio (P/B)
  • A ratio used to compare a stocks market value to its book value
  • A lower P/B ratio could mean that the stock is undervalued
Price-to-earnings Ratio (P/E)
  • Used to determine if a company’s stock price is over or undervalued
  • It measures the current share price relative to its per-share earnings.
Payout Ratio
  • The proportion of earnings paid out as dividends to shareholders
Earnings per share (EPS)
  • The portion of a company’s profit allocated to each outstanding share of a common stock
  • An indicator of a company’s profitability
Short selling
  • Selling a security that is not owned by the seller
  • It is driven by the belief that a security’s price will decline
  • Often considered one of the riskiest types of investments
  • Tracks an index, commodity, bonds, or a basket of assets like an index fund.
  • ETF’s are traded like a common stock on a stock exchange
  • Typically have higher daily liquidity and lower fees than mutual fund
  • A Canadian investment that offers a guaranteed rate of return over a fixed period of time
  • The return is generally low, however, it has very low risk
  • A type of Canadian account for holding savings and investment assets.
  • They have tax advantages compared to investing outside of tax-preferred accounts
Registered retirement income fund (RRIF)
  • A tax-deferred retirement plan under Canadian tax law.
  • You can use an RRIF to generate income from the savings accumulated under your registered retirement savings plan.
  • A flexible investment account where you are not taxed, even when the money is withdrawn
  • Often used by parents to save for their children’s post-secondary education in Canada
  • Gives you access to the Canada Education Savings Grant (CESG)
Joint Account
  • A bank account shared by two or more individuals
  • Often shared between close relatives or business partners
  • A measurement of the value of a section of the stock market
  • Tool used by investors and financial managers to describe the market
  • Some examples are NASDAQ and S&P500
  • A type of mutual fund with a portfolio constructed to match or track the components of a stock market index.
Gross Domestic Product (GDP)
  • One of the primary indicators used to gauge the health of a country’s economy
  • Total dollar value of all goods and services produced over a specific time period
Marginal Tax Rate (MTR)
  • The percentage of tax applied to your income for each tax bracket in which you qualify.
  • The percentage taken from your next dollar of taxable income