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Balanced fund

These funds are a mix of all types of investments. Changes in one type of investment are balanced by stability or growth in another. Balanced funds can be made up of a combination of equities, bonds, mortgages, and cash investments. The mix of these different investments is determined by professional fund managers who set objectives for the fund, and select the most suitable investments to meet those objectives.


A benchmark is a standard used to measure and monitor the performance of an investment fund. An appropriate market index is chosen as the benchmark, and the performance of a fund is compared to the performance of that index over time. For example, a stock index is used to measure the performance of an equity fund, and a bond index is used to measure the performance of a long-term bond fund.

Benchmark return

The annualized return of the benchmark. You can use fund reports to compare the historical performance of your investment funds against benchmarks over different time periods. A fund report is a useful tool that can help you assess if your investment’s performance is aligned with your investment objectives.


A bond is an investment option that promises to pay back the principal amount of the amount owed plus a predetermined interest rate. Corporations or governments issue bonds to borrow the money they need today, knowing they’ll have to pay it back with interest. In effect, by purchasing a bond you lend money to the seller. The bond represents an agreement to repay the principal plus interest.

Book value

Book value is the total of what you actually contribute to your group retirement or savings plan, less withdrawals.

CRA Notice of Assessment

A summary of your last year’s tax return, sent by the Canada Revenue Agency (CRA). It also outlines your current accumulated carry forward of unused RRSP contribution room.

Canada Revenue Agency (CRA)

The branch of the federal government responsible for administering tax, benefits and related programs and ensuring compliance on behalf of governments across Canada. For more information, visit its website at www.cra-arc.gc.caOpens a new website in a new window - Opens in a new window .

Capital risk

The risk of losing your capital – or the money you’ve already saved. If you save in a bank account, the chances of losing the amount of your original capital are extremely low, because banks carry deposit insurance. With stocks, there’s no such guarantee.

Contribution limit

This is the total amount you can contribute to a registered plan for which you can receive a tax deduction. For RRSPs, the CRA calculates this amount for you and advises you of your contribution limit with the Notice of Assessment you receive after your tax return is processed each year. If you didn’t make the maximum RRSP contribution, your unused limit is automatically carried forward and appears on your Notice of Assessment as unused contribution room. If you exceed your contribution limit by more than $2,000 each year, you will be subject to a penalty tax, which is calculated monthly.

Contribution types

A means of identifying deposits received. Sometimes referred to as account types. For example, Member Voluntary; Employee Contributions; Employer Contributions.

Credit risk

This is the risk that a company or individual will be unable to pay the interest or principal on a bond or loan you hold.

Currency risk

If you invest in foreign assets, currency exchange will be a factor when it comes time to buy or sell. That’s because currencies like the Canadian dollar go up and down.

Deferred profit sharing plan

These plans are set up by employers as a way to share profits with their employees. Contributions depend upon the profits of the company. Employee contributions aren’t allowed. The plan is registered with the CRA and contributions are tax deductible within certain limits, as defined by the Income Tax Act.

Defined benefit pension plan

A registered pension plan that provides an employee a specific benefit upon retirement usually based on earnings and years of service. Typically, a member’s benefit calculation involves a combination of number of years’ membership, salary and actual retirement date. With this kind of plan, members can determine exactly how much income they’ll receive during retirement. (Compare to Defined contribution pension plan.)

Defined contribution pension plan

A registered pension plan that doesn’t promise an employee a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan. Contributions are credited to an individual account for each member and invested, usually on the direction of the member, in a set of investment options chosen by the plan sponsor. When the member retires, the accumulated funds are used to purchase retirement income (Life income fund, Locked-in retirement income fund, annuity).

The amount of the income depends on a number of factors, including the amount of money that’s accumulated in the member’s account, so the actual income can only be estimated prior to retirement. (Compare to Defined benefit pension plan.)


An investment technique intended to minimize risk by placing money in a number of different investment options. In a diversified portfolio, a decline in the value of one stock, for example, should not dramatically affect the overall value of the holdings.


A per share payment designated by a company’s board of directors to be distributed among shareholders. For preferred shares, it’s generally a fixed amount. For common shares, the amount is at the discretion of the company’s board.

Dollar-cost averaging

Investment of a fixed amount of money at regular intervals, usually each month, which over time should even out the effects of market fluctuations.

Early retirement date

The earliest date on which a member of a registered pension plan or a deferred profit sharing plan can elect to retire and commence retirement benefits. The early date is often 10 years prior to a normal age of retirement but is determined by plan provisions.

Employee incentive plans

Many companies choose to reward performance or encourage long-term commitment through share-based compensation. Generally, these types of compensation are based on set criteria and objectives and may have time restrictions. There’s a wide range of incentive plans. Stock option plans, restricted share unit plans, long-term incentive plans and employee benefit plans are a few of the types of incentive plans available.

Employee profit sharing plan

A non-registered, non-tax-sheltered plan that’s governed by certain provisions of federal tax legislation. The plan may allow for employer-only or employer and employee contributions. Employer contributions are tied to company profits and may be either a fixed percentage of salary or a variable amount. Employee contributions aren’t tax deductible, and all earnings within the plan, including company contributions, are taxable to the employee.


The common or preferred shares of a corporation, which represent the investor’s ownership in the corporation. A company raises money by selling part ownership (pieces of equity) of the company. The equities, often called stocks or shares, are then listed on a stock exchange to be traded. After the initial public offering (IPO), stocks are traded at prices determined in the market by the interaction of buyers and sellers. The price of a stock isn’t guaranteed and can fluctuate from day to day.

Equity fund

Equity funds (see investment fund) are made up of a number of individual securities (mainly stocks). A company raises money by selling part ownership (shares/stocks) of the company. The stock is then listed on a stock exchange to be traded. After the initial public offering (IPO), stocks are traded at prices determined in the market by the interaction of buyers and sellers. The price of a stock isn’t guaranteed and can fluctuate from day to day.

Fund operating expense

FOEs are fees charged directly to a fund to cover costs including audit and custodial fees, fund transaction costs, taxes paid by the fund, bank fees, fund valuation and reporting. Fund operating expenses may be associated with third party investment manager underlying funds and/or segregated funds. Charged as they occur, the total amount of fund operating expense is calculated at the end of each year. Therefore, the amount reported to you will usually be the previous year end charges calculated as a percentage of the fund. This does not include GST/HST, which is also charged, where applicable.

Geographic risk

The economy of a particular country or region can slow down, adversely affecting the value of stocks trading in that country.

Gross pre-retirement income

The total of all types of income that must be included in the calculation of taxable income.

Group registered retirement savings plan

A collection of individual RRSPs sponsored by an employer or association. Plan members contribute a portion of earned income (up to a maximum limit) and claim the contribution as a tax deduction. Because the contributions are often made through payroll deduction, the tax savings can be immediate. Members choose their own investment options from the set of investments offered by the plan, and all the earnings within their RRSP remain tax-deferred while the money is in the plan. The amount of retirement income depends on a number of factors including the final accumulation of money within the plan and the type of retirement income chosen.

Guaranteed interest account

An investment offered by life insurance companies that guarantees the principal amount and pays a predetermined rate of interest for a specified term. Each deposit carries its own deposit date, interest rate and maturity date.

Income fund

An investment fund that invests primarily in fixed income securities such as bonds, mortgages and preferred shares. The objective is to produce income for investors while preserving capital.

Income risk

If you invest to receive a fixed income, you may be locked-in to a certain interest rate. If interest rates go up, you run the risk of losing out on the income that you would have received from the new, higher rate.

Index fund

An investment fund that matches its portfolio to a specific financial market index, such as the S&P 500, with the objective of duplicating the general performance of that index.

Inflation risk

The risk that the buying power of your money will shrink over time unless the growth on your investments keeps pace with inflation.


The amount of money you earn from a borrower in exchange for a specified amount of money.

Interest rate risk

There’s always a risk that interest rates will rise. Rising interest rates undermine the value of bonds and can also have a negative impact on stocks.

Investment fund

An investment entity that pools unit holder funds and invests in various securities. Mutual funds and segregated funds are two types of investment funds.

Investment management fee

IMFs represent fees paid to the investment manager for their professional services including the daily management of each fund. It also includes the fee for the cost of administering your plan and providing various services. IMFs are calculated based on the asset value of each fund and are paid directly from the fund each day.

Investment management fee and expense

This represents the combination of the fund operating expense and investment management fee, with HST excluded.

Investment manager

Also known as the money manager or fund manager, the organization responsible for the investment of the fund’s portfolio.

Investment portfolio

The combined funds you have selected for your plan, which could include equities, bonds, mortgages and more. Having a portfolio reduces risk by providing diversification.

Investment style

The manner in which an investment manager selects and manages investments.

Liquidity risk

Liquidity refers to your ability to convert your investments to cash.

Locked-in retirement account

A retirement savings account consisting of locked-in funds transferred from a registered plan that may only be used to provide an annuity or life income fund when members attain the age specified by pension legislation.

Marginal tax rate

The tax rate that you pay on your next dollar of income. (Canada has a progressive or graduated tax system, which applies higher tax rates as income increases.)

Market risk

The volatility of stock market prices due to company performance and political and economic conditions.

Market timing

An attempt to move in and out of the stock market, buying low and selling high based on the predicted moves in the market.

Market value

The current price at which you could sell your holdings.

Maturity date

The date on which a guaranteed investment comes due.

Money market fund

A money market fund invests in short-term interest-bearing investments – investments that mature in less than one year. A typical investment in the money market fund would be Government of Canada treasury bills. Investors often choose to "park" their money in a money market fund while they’re deciding where they want to invest for the long term.

Money purchase pension plan

(See defined contribution pension plan.)

Mutual fund

A pool of assets that gives individual investors access to a well-diversified portfolio of equities, bonds, and other securities. Each unit holder holds units of the fund representing their proportionate share and participates in the gain or loss of the fund. Units can usually be redeemed as needed. The fund's net asset value (NAV) is typically determined each day and published on financial websites and in some newspapers. Each mutual fund portfolio is invested to match the objective stated in the fund’s prospectus.

Non-registered savings plan

Savings in a non-registered plan aren’t tax-sheltered and are subject to annual taxation. Although fairly unrestricted by government regulations, there may be employer-imposed limits or insurance or securities law regulations.

Normal retirement date

The date on which a member of a registered pension plan or deferred profit sharing plan would normally retire as determined by the plan provisions and/or provincial pension legislation.

Old age security

A government income benefit that’s based on age and how long you’ve lived in Canada. The program has three parts:

  • The OAS pension
  • The guaranteed income supplement (GIS)
  • The spouse’s allowance (SA)

To receive the full OAS benefit you must have lived in Canada for 10 years prior to your application. However, in 1989 the government introduced a “clawback,” which means that if your income exceeds a certain limit each year, your OAS pension will be reduced accordingly. The GIS is a monthly benefit paid to people who receive OAS, but have little or no other income. The SA is paid to the spouse of someone receiving OAS who is between ages 60 and 64 and whose family income doesn’t exceed certain limits.

Pending transactions

Transactions that are either postdated or are currently in process but not completed because unit values have not yet been declared.

Pension adjustment

An amount that reduces the allowable contribution limit to an RRSP based on the benefits earned from the employee’s pension plan or deferred profit sharing plan. This amount is calculated by your employer and is on your T4 each year. It is equal to:

  • Dollar value of employee and employer contributions to a defined contribution registered pension plan
  • Dollar value of the annual benefit earned for a defined benefit registered pension plan
  • Employer contributions to a deferred profit sharing plan

Pension income

Regular payments from a retirement product, purchased from the proceeds of an employer-sponsored pension plan.

Personal rate of return

This is the calculation of your own personal rate of return based on your investments. It is a precise mathematical calculation called the internal rate of return. Your personal rate of return appears on your Canada Life member statement.

Plan provisions

The terms and conditions of a group retirement or savings plan as selected by your employer/plan sponsor in conjunction with any applicable provincial and/or federal legislation.

Political risk

Investing in a foreign country can be affected negatively by political instability, which can take the form of a coup or a sudden change in government policies.

Pooled registered pension plan

A registered and tax-deferred retirement plan designed to provide retirement income for employees and self-employed people who don’t have access to a workplace pension. Contributions you make to a PRPP are tax deductible within certain limits. Investment income isn’t taxed until it’s paid out of the plan. Because individuals’ assets are pooled, a PRPP offers investment and savings opportunities at lower cost.

Rate of return

Measurement of the performance of an investment over a specified period of time.

Registered pension plan

A registered pension plan is an arrangement set up by an employer with the purpose of providing retirement income to employees. The plan is registered with CRA in order to provide tax advantages. It is also registered either provincially or federally and must be administered within certain rules and limits. Contributions you make to an RPP are tax deductible within certain limits. Investment income isn’t taxed until it’s paid out of the plan. A registered pension plan may be a defined benefit or defined contribution pension plan.

Registered retirement savings plan

A registered and tax-deferred retirement plan that allows individuals to set aside tax deductible sums of money, within limits, up to the end of the year in which they turn 71 (or such age tax legislation in effect may provide).


The possibility of loss and the uncertainty of future returns.

Segregated fund

A segregated fund is an investment option available only through an insurance contract. It allows you to combine your money with many other clients. Each individual client is allocated a number of "units" of the segregated fund, which are then used to determine the value of their contract. A professional investment manager then takes the pool of money to the marketplace and invests in a variety of investments consistent with the fund's objective. The unit value of the segregated fund fluctuates with the performance of the underlying investments held by the fund. For example, if the segregated fund invests in shares of companies and the prices of those shares start to move upward, the unit value of the segregated fund will likely increase.

Spousal registered retirement savings plan

An RRSP registered in the name of your spouse (as defined by the Income Tax Act). You deduct the annual contribution from earned income (the maximum is your contribution limit minus your personal RRSP contributions) and your spouse receives the eventual income generated. The Income Tax Act’s definition of “spouse” includes common-law spouses in many circumstances.


The common or preferred shares of a corporation which represent the investor’s ownership in the corporation. Also called equities.

Term deposits

Shorter terms than GICs. Term deposits range from 30 to 364 days and often require a higher minimum deposit amount. The rate of return is set and your risk is minimal.

Time horizon

The period of time between now and when you will need an investment for other purposes (e.g., to provide a retirement income or to purchase an annuity).

Today's dollars

The value of money today. Future dollars is the value of money in the future, factoring in the eroding effect of the inflation rate.

Unit value

The cost or value of one unit of an investment such as an investment fund. Unit values are declared at a predetermined time

Variable investment funds

Sometimes referred to as market-based funds, segregated funds or pooled funds. Assets of a pension plan held by an insurance company for investment management only. These funds are segregated from the assets of the insurance company.


The point in time that a member of a registered plan is entitled to the employer’s contributions made to the plan on the member’s behalf. These funds become available upon termination of employment, retirement or death. Vesting is determined by plan provisions and/or legislation.

Voluntary retirement savings plan

A registered and tax-deferred retirement plan designed to provide retirement income for employees and self-employed people in Quebec who don’t have access to a workplace pension. Contributions you make to a VRSP are tax deductible within certain limits. Investment income isn’t taxed until it’s paid out of the plan. Because individuals’ assets are pooled, a VRSP offers investment and savings opportunities at lower cost.

Year’s maximum pensionable earnings

Maximum amount of earnings on which a member contributes to the Canada pension plan/Quebec pension plan. YMPE is determined in the late fall and is effective Jan. 1 each year.