Exchange-traded funds (ETFs)






Built like mutual funds, ETFs consist of a portfolio of investment products, but they trade like individual stocks on major stock exchanges and can be bought or sold at any time throughout the trading day.

Some of the potential benefits of ETFs include2 :

  • Low cost way to invest in the market and access a broad range of asset classes and investing themes
  • Remain liquid regardless of trading volume
  • Provide a tax-efficient structure with low turnover



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American depositary receipts
Certificates issued by a U.S. Depositary Bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored" the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADR's. "Unsponsored" ADR's do not receive such assistance. ADR's carry the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American Depositary Shares (ADS) are a similar form of certification.

Employee of a brokerage or fund management house who studies companies and makes buy and sell recommendations on their stocks. Most specialize in a specific industry.

Annual report
Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement. Regulators require that it be distributed to all shareholders. In the US, a more detailed version is called a 10-K.

Profiting from differences in the price of a single security that is traded on more than one market.

An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, usually by 20% or more.

Beta (Stocks)
Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70 % of the market change; 1.3 means the stock is likely to move up or down 30 % more than the market.

Bid price
The highest price a prospective buyer or dealer is willing to pay.

An investor who thinks the market will rise.

Bulletin board stocks
Certain stocks not specifically authorized to trade within NASDAQ which were originally printed by the National Quotation Bureau in a daily publication called the pink sheets. Prices given for these stocks may not accurately reflect the most current market conditions for the stock.

Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buyout is done with borrowed money.


Capital gains
If your company's stock price increases, you will be presented with the opportunity for a "capital gain" which is the profit between what you originally paid for the stock and the higher price you sell it for.

Cash dividends
Cash dividends represent the stockholders share of the company profits. Companies are not legally bound to pay dividends and many companies do not for various reasons. However, if a company does pay out dividends, they are usually paid out once each quarter. Dividends are frequently discussed in terms of "payout ratio" and "yield."

Closing purchase
A transaction in which the purchaser's intention is to reduce or eliminate a short position in a stock, or in a given series of options.

The written statement that follows any "trade" in the securities markets. Confirmation is issued immediately after a trade is executed. It spells out settlement date, terms, commission, etc.

CUSIP number
The Committee on Uniform Security Identification Procedures was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal, government and corporate securities.

Day order
An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Distribution of a portion of a company's earnings, cash flow or capital to shareholders, in cash or additional stock.

Dividend yield
Is calculated by dividing the annual dividend payment by the per share price you paid for the stock. Thus, if you paid $10 per share and received $0.20 in dividends, your dividend yield would be 2 percent.

The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Principal Canadian stock exchanges are: Toronto Stock Exchange (TMX Group), and the TSX Venture Exchange (TSXV). Principal US stock exchanges are: New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASDAQ).

Ex-dividend date
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend. A stock that has gone ex-dividend is marked with an x in newspaper listings on that date.


Good 'til cancelled
Sometimes simply called "GTC", it means an order to buy or sell stock that is good until you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated.

Initial public offering (IPO)
A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains.

Limit order
An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker "Buy me 100 shares of xyz Corp at $8 or less" or to "sell 100 shares of xyz at $10 or better."

Limited liability
You cannot be held personally liable for the debts or for the actions of a company in which you invest, and generally cannot lose more than the amount of your investment even if the company goes bankrupt.

The degree to which a security can be bought or sold, without affecting the market price. Something that trades frequently, and with high volume, is more liquid than something that trades infrequently or with little volume.

Market capitalization
The total dollar value of all outstanding shares. Computed as shares multiplied by current market price. It is a measure of corporate size.

Market order
An order to buy or sell a stock at the current price.


Over-the-counter (OTC)
A security which is not traded on an exchange, usually due to an inability to meet listing requirements, is said to trade Over-The-Counter. For such securities, broker/dealers negotiate directly with one another over computer networks and by phone, and the NASD monitors their activities. See also OTC Bulletin Board, Pink Sheets and Bulletin Board Stocks.

OTC bulletin board
A US electronic quotation system for unlisted, non-Nasdaq, over-the-counter securities

Payment date
Date on which a declared stock dividend or a bond interest payment is scheduled to be made.

Payout ratio
Is calculated by dividing the annual dividend payment by the annual earnings per share. For example, if ABC Company had earnings per share of $1.00 and paid out $0.05 per quarter or $0.20 annually in dividends, its payout ratio would be 20 percent.

Pink sheets
A daily listing of bid and ask prices for over-the-counter stocks not included in the daily NASDAQ over-the-counter listings, published by the National Quotation Bureau and used by brokerages.

Formal written document to sell securities, describing the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives, risks and other essential information.

Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.


Record date
Date by which a shareholder must officially own shares in order to be paid a dividend or other distribution. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the "owner of record" on settlement date, which currently occurs 3 business days after the trade date for securities.

Reverse stcok split
A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock's market price and attract investors.

Rights offering
Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock.


The Securities and Exchange Commission, the US primary federal regulatory agency of the securities industry.

Selling short
If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, the investor borrows 1000 shares of XYZ on July 1 and sells it for $8 per share. Then, on Aug 1, the investor purchases 1000 shares of XYZ at $7 per share. The investor has made $1000 (less commissions and other fees) by selling short.

Settlement date
The month, day, and year the transaction will settle. As per industry standards, settlement occurs within 3 days after the transaction date for Equities.

Share repurchase
Program by which a corporation buys back its own shares in the open market. It is usually done when the company thinks its shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.

Short sale
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.

Stock dividends
Companies sometimes pay out dividends in stock. For example, if a company declares a 10% stock dividend that means that the number of shares you own will be increased by 10%. Although you are getting additional shares, you must remember that your total ownership of the company has not increased. The proportionate ownership of all shareholders has been increased equally by 10 percent. Another point to keep in mind is that unlike cash dividends, stock dividends are not necessarily taxed in the same way as cash dividends.

Stock split
Companies frequently increase or decrease their number of shares outstanding by splitting the stock. An example explains the process best. Say you own 200 shares of ABC Inc., which has 100,000 shares outstanding, trades on the NYSE for $80 per share, and earns $4.00 per share. Then ABC declares a 2 for 1 split. You will now get one additional share of ABC for each share that you already own for a total of 400 shares. At the same time, ABC will now have 200,000 total shares outstanding and all of its applicable ratios will be divided by this higher number. For example, its earnings per share will be $2.00 and its price will be $40.00. In other words, the total pie is the same size, it's merely been divided into smaller pieces.

Stop loss order
An order to sell a stock when the price falls to a specified level.


Trade date
The date on which a trade occurs. Trades generally settle (are paid for) 1-3 business days after the trade date. With stocks, settlement is generally 3 business days after the trade date.

Voting rights
You can vote on company issues such as electing the board of directors and issuing new securities. In most cases, you will receive a ballot form, known as a "proxy" that you can mail back to the company.

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