Glossary of Investment Terms

Annuities An investment option where you receive a steady monthly income (generally for life) in exchange for a lump sum from your RRSP, RIF or LIF.
Asset Allocation A description of the major categories of investments your portfolio is invested in.  Generally 90% of portfolio returns are attributable to the decision as to how much is invested in:
    - Cash, Bonds, Canadian and International Equities
As a rough rule of thumb we recommend starting with your age as a percentage in bonds.  Then use a tool like the Scotia Investment Selector and our professional advice to tailor the allocation to match your personal profile. 
CCPC Shares A Canadian Controlled Private Corporation
Contribution Limit How much you can contribute to an RRSP, generally 18% of last year's earned income.  Shown on your Notice of Assessment.
Dividends and Distributions When you get income paid out from a fund, or have the income re-invested in the fund
Dollar Cost Averaging A strategy to help you buy more of a fund when it is low
Foreign Content The percentage amount of a portfolio invested outside of Canada
GIC Guaranteed Investment Certificate
Index Funds A mutual fund that tracks the performance of a major stock index by including all the company shares in that index.  No manager attempts to separate the good and poor performing companies.
Labour Sponsored Funds A special type of mutual fund that offers Canadian investors additional tax savings.
LIF - Life Income Fund Like a RIF, but for your locked in RRSP (from a pension plan)
Managed Account Programs Also known as "Wrap" accounts, these programs make all of the investment management decisions for you.  Essentially they are large mutual funds, but can have the benefits of wider diversification, and customization.  An example can be found on our Lifepoints link page.
MER Management Expense Ratio - the total annual cost of the management fees and other expenses of running the fund.  Fund returns are posted net of fees.  Eg. a fund that reports a 10% one year return, with a 2.3% MER, actually returned 12.3% before fees, the net return to the investor is 10%.
NAV Net Asset Value per share - essentially the share price (value of fund divided by number of units outstanding)
RESP Registered Education Savings Plan A tax assisted way to save for a Canadian child's education
RIF - Retirement Income Fund One of the best options for your RRSP at maturity, which allows you to take a regular (taxable) income, while still deferring taxes on the remainder of the account.
Risk The amount of volatility that you can expect on a fund.  Generally based on the historical standard deviation (or variance) of returns over the last 3-5 years.  Good examples of Risk Return charts can be found on our Index Funds page.  Usually included in performance reporting on funds, or by services like Morningstar/Bellcharts.
Spousal RRSP An RRSP that you contribute to and get the tax receipt for, however the money and account is in your spouse's name, so he/she can take it out at retirement (or after 3 years from your last Spousal contribution) at his/her lower tax rate.
SWP A Systematic Withdrawal Plan
   
Got a question? E-mail us at spiessmcgladeteam@scotiawealth.com

 



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    allan.mcglade@scotiawealth.com

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