Ask Price
The lowest price investors are willing to sell their position (stock, ETF, bond).
Example: The lowest price an investor is willing to sell stock ABC is $10. This becomes the ask price.
Related Words: Offer price, sell, supply, bid price, spread.
Asset
Something you own that puts money into your pocket or has future value.
Examples: Real Estate, Dividends, Loans, Investments
Related Words: Investing, Rental Income, Dividends, Investments, Real Estate
Assets Under Management (AUM)
The total amount of assets that an investment firm or advisor manages.
Example: CI Investments has $144 Billion in assets under management.
Related Words: Investment Firm, Financial Advisor, Assets
Black Swan Event
An unpredictable event that has a major effect on the world and financial markets.
Examples: 9/11, Rise of the internet, Covid-19
Related Words: surprise, major impact, obvious in hindsight, rare.
Break-Even Point
The point when your investment has no profit or loss.
Examples: A stock you invested in drops 50%. Two years later it increases by 100%. The investment is at the break-even point.
Related Words: Even, profit, gain, loss, percent,
Capital Gains
The profit from the sale of an asset. In other words, selling something for more than you paid for it.
Example: If you buy $100 of a stock and the price rises to $150, your capital gains is $50.
Related Words: Primary Residence, Property, Real Estate, Bonds, Sell, Profit, Asset, Investment, Shares, Business, Cryptocurrency
Cease Trade Order
When a companies stock is forced to stop trading on a stock exchange.
Example: If Company XYZ fails to submit important documents on time to the securities commission, they can issue a cease trade order.
Related Words: Stop, halt, bad, CTO
Cognitive Dissonance
Mental tension humans feel when they think of two conflicting pieces of information.
Example: Realizing you’re paying high fees to your investment advisor who is a close family friend.
Related Words: Discomfort, Contradicts, Values, Beliefs, Blame, Justify, Guilt, Discomfort.
Didero Effect
One purchase leads to a range of additional purchases.
Example: A hot tub purchase leads to additional purchases such as chemicals, maintenance, water, and electricity costs.
Related Words: consumerism, liability
Doubling Down
Doubling your investment, often after a significant decline, with the hopes of breaking even.
Example: 100 shares at $2.00/share invested in Company XYZ. The shares fall in value to $1.00. Another $200 is invested into the company.
Related Words: Loss, Risky, Strategy, Break-Even
Equity Dilution
Happens when a company issues more shares which ends up lowering the percentage of ownership of current stock holders.
Example: Company XYZ has 100 outstanding shares and it needs to raise money. They issue and sell 100 more. This lowers the original percentage of ownership by half.
Related Words: Stock Dilution, Watered Down, Decrease Percentage, Raise Money
Fiduciary
A person who gives financial advice and acts in their client’s best interest.
Example: A fiduciary will often charge an hourly or flat rate for advice and does not benefit from the investments that a client purchases.
Related Words: Conflict of interest, financial advisor, financial planner, flat fee, hourly rate.
Home Country Bias
When investors are over weighted in their domestic market compared to their country’s overall percentage of the world economy.
Example: Canada represents only 3% of the global stock market but Canadians will often hold upwards of 50% of their investments in Canadian equities and fixed income.
Related Words: Country, unbalanced, bias, domestic.
Illiquid
When an asset isn’t easily exchanged for cash at a fair market price.
Example: A private investment in a company.
Related Words: private investments, penny stocks, real estate, can’t sell.
Liability
Something you own that continuously takes money out of your pocket.
Example: Debt, Cars, Boats, Cell Phones, Mortgage
Related Words: Interest rates, Non-deductible debt, Wants.
Market Maker
A business that buys and sells securities and makes money through the bid/ask spread.
Example: NYSE, TSX, Citadel Securities.
Related Words: Bid/Ask Price, Spread, Stock Exchanges, Liquidity, Liquidity Provider, Designated Broker, High Volumes
Penny Stocks
Shares of a company that trade for less than $1.
Examples: Mining Companies.
Related Words: Cheap, Risky, Growth, Mining Companies.
Prime Interest Rate
The base rate determined by banks to used as a starting point to lend money to borrowers.
Example: A mortgage rate could be prime – 0.85% and a car loan could be prime + 2%.
Related Words: Borrow, interest rate, prime, mortgage, loan
Sequence of Returns Risk
The order of your investment returns can have a significant impact on your retirement.
Example: In Bill’s first year of retirement, the market crashes by 30%. He runs out of money in 20 years.
Related Words: Sequence, Return, Risk, Timing, Order, Crash, Bear Market
