Bonds: A fixed income instrument is a legally binding debt contract. It may or may not carry periodic interest payments (called coupons). Governments and corporations are typical issuers.  Generally, the longer the maturity, the more sensitive bonds are to changes in short term interest rates.

Commodities: Basic materials and raw ingredients traded around the world. Crude oil, metals, lumber, gold, wheat, and orange juice as well as currencies and stock indices exemplify this category.

Derivatives: These are investment tools whose values or prices are derived from some other specified investment tools. Derivatives are a categorical label for securities such as ‘Futures’, ‘Options’ and ‘Swaps’.

Dividends: This is a share of a stock-issuer’s after-tax profit given back to its shareholders (the rest is call ‘Retained Earnings’ used to fund the company’s ongoing operations). There can be stock dividends and cash dividends. Cash dividends are sometimes re-invested in (or used to purchase more of) the company’s stock, this is abbreviated as ‘DRIP’ – Dividend Re-Investment Plan.

Exchange-Traded Funds: Often abbreviated as ‘ETF’. It is structured like a mutual fund but trades like a stock. In other words, buying and selling of ETF is done on stock exchanges instead of through mutual fund companies. It typically tracks a specific index and carries a lower MER since it does not involve active stock or bond picking on the fund company’s end.

Futures/Forwards: A sub category of derivatives. A legal contract that binds two parties to exchange an underlying instrument at a specified price at a specified time.

Hedge Funds: This is a category of investment funds that has diverse constituents. Hedge funds are best defined as investment funds seeking a absolute returns. Their strategies are opaque and they have little government oversight. Hedge fund managers have considerable latitude in their strategies and may participate along with the shareholders’ returns above specified “hurdle rates”.

Income Trusts: Public business entity structured not as a corporation but as a trust. As opposed to corporations, most income trusts may not have to pay corporate tax on their income as long as they pay out most of their income; therefore, your share of the profit is passed down to you in its entirety and is taxed at the personal level.

Money Market Instruments: This is often referred to as ‘Cash Equivalents’. It refers to Treasury Bills, Bankers Acceptance paper or ‘Money Market Mutual Funds’.

Mutual Funds: An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets (such as stocks, bonds or other asset classes) in accordance with a stated set of objectives. The shareholders pay a fee, called the Management Expense, to cover administrative costs. Most funds are sold by brokers in exchange for a commission.

Options: A sub-category of derivatives. Options give its holder the right to purchase (call option) or sell (put option) the underlying security at a pre-specified price before it expires at a specified date.

Property: If you hold title to your residence you are a property, or real estate, owner/investor. Beyond this familiar concept, you can invest in real estate via development, construction, and commercial property.

Stocks: They are also called Equities. A share of stock is a perpetuity and represents partial ownership of the stock-issuer’s business. Stock owners are entitled to a share of the after-tax income (called dividends) and to the residual of the business’ assets after the creditors have been paid off.

Swaps: A sub category of derivatives. An exchange of streams of payments over time according to specified terms. The most common type is an Interest Rate Swap, in which one party agrees to pay a fixed interest rate in return for receiving an adjustable interest rate from the other party.

Treasury Bills: They carry the short-hand ‘T-Bill’. They are issued by federal governments and usually will be paid off within one year.

Please e -mail or call us with any questions you may have with respect to the above, or any other investment tools.