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Accrued interest:Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond’s price plus “accrued interest,” calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semi-annually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter’s proportion of interest earned.)Annual Return
The simple rate of return earned by an investment for each year.
Broad categories of investments grouped by basic type consisting of:
- Stocks (also referred to as Equity or Growth investments)
- Bonds (also referred to as Income or Fixed Income investments)
The percentage of your investment held in each asset class. One of the most important decisions you must make is determining your asset mix (E.g., 60% stocks, 40% bonds).
Bear MarketA term used to describe a declining market.Blue Chip
A large, well capitalized and actively traded stock. Generally one of the largest stocks in a market with a good history of dividend payments.
Bonds are debt and are issued for a period of more than one year. The US government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.
Bonus share Free shares of stock given to current shareholders, based upon the number of shares that a shareholder owns. While this stock action increases the number of shares owned, it does not increase the total value. This is due to the fact that since the total number of shares increases, the ratio of number of shares held to number of shares outstanding remains constant.
Broker An individual who is paid a commission for executing customer orders. Also, person who acts as an intermediary between a buyer and seller, usually charging a commission. A “broker” who specializes in stocks, bonds, commodities, or options acts as an agent and must be registered with the exchange where the securities are traded.
The amount by which government spending exceeds government revenues.
A term used to describe a rising market. Business day: A day in which financial markets are open for trading. Buy: To purchase an asset; taking a long position.
CapitalForms of wealth. For your purposes, capital means financial assets such as investments in securities, a home, other assets or cash.Capital Markets
Generally, the market places where money is raised and securities are traded (E.g. The Toronto Stock Exchange). Stocks, bonds and money markets are each a part of the capital markets.
Central bank intervention
The buying or selling of currency, foreign or domestic, by central banks in order to influence market conditions or exchange rate movements.
Any event initiated by a corporation which impacts its shareholders. For some such events, shareholders may or must respond to the corporate action or select from a list of possible actions. Examples include mergers, stock buybacks, bonus shares and stock splits.
A decline in stock or bond prices after a time of market strength.
A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.
DeflationaryA circumstance where the general price of goods and services is declining.Diversification
Spreading your investments amongst different asset classes, individual companies, industries or even different sectors of the economy. The old saying “Don’t put all your eggs in one basket” is an example of diversification.
A share in the profits of a limited company that is paid to shareholders.
A measurement of the price volatility of bonds. Those with longer duration are more sensitive to interest rate changes than bonds with short duration, and therefore are more volatile.
EquityOwnership of an asset. You can have sole ownership such as the equity in your house, but generally it refers to shared ownership of a company via stocks.Top
Fixed IncomeDebt securities such as bonds, debentures and mortgages. With fixed income assets, you are lending your money to a borrower in return for a steady payment of interest and a promise to repay the amount owing at a future date (also called “maturity date”).Fixed Income Security
A preferred stock or debt instrument that has a stipulated interest or dividend rate (E.g. GIC or a bond). It is also used in reference to overall investment policy.
HedgeUsed to describe protective maneuvering by an investment manager to reduce the risk of loss from a specified event.Top
IndexA statistical tool which provides a performance standard against which the performance of other similar investments can be compared. For example, the performance of one particular stock can be compared against The Jamaica Stock Exchange All Jamaican Index, which represents the average performance of all of the publicly traded Jamaican companies.Investment Portfolio
Your financial assets including stocks, bonds, short-term securities and cash.
LiquidityThe ability to convert an asset easily into cash. For example, Canada Treasury Bills are the most liquid securities you can buy.Load
The sales charge, or commission on a particular mutual fund.
Money MarketThe part of the capital market where short-term debt securities are traded. Also used to refer to short-term securities in general such as Treasury Bills.Top
No LoadA Fund that does not have a commission or a sales charge.Top
Preferred SharesShares that carry a fixed dividend rate which the company is obligated to pay before it distributes dividends to common shareholders. On the termination of the company, these shares rank in front of common stock and after debenture holders.Top
RallyA brisk rise in the general price level of securities.Rate-of-Return
The increase in value of an investment. There are several variations on the way a rate-of-return can be presented. Total rate-of-return is the return from any income received plus any price or capital appreciation or depreciation. Cumulative rate of return is the return earned over a period of time (three months, three years, 10 years, etc.). Annualized rate-of-return is the method of presenting the cumulative return from any period of time on an average annual basis.
Short-termGenerally refers to an investment made for one year or less. In the case of bonds, it refers to a period of between one and five years.Stock split
An increase in the number of outstanding shares of a company’s stock, such that proportionate equity of each shareholder remains the same. This requires approval from the board of directors and shareholders. A company whose stock is performing well may choose to split its shares, distributing additional shares to existing shareholders. The most common stock split is two-for-one, in which each share becomes two shares. The price per share immediately adjusts to reflect the stock split, since buyers and sellers of the stock all know about the stock split (in this example, the share price would be cut in half).
• The most liquid security
• Bearer instrument
YieldThe percentage return on an investment from any dividend or interest income.Yield Curve
A curve that plots the yield on bonds of various maturities.