Asset allocation
The mix of different types of investments in your portfolio. A portfolio may be allocated by asset class (e.g., stocks and bonds), by geographic region, by management style, or by many other criteria. Your financial advisor will help you determine the right asset allocation for your particular situation based on your risk tolerance and the length of time you have to invest.

Balanced fund
A fund that balances its stock and bond holdings to achieve lower risk and moderate long-term growth.

Bond
A long-term debt instrument issued to a company in return for the promise of a certain amount of interest and repayment of the principal on a specified maturity date.

Capital gain
The amount an asset has increased in value since its purchase. For example, if you buy a security for $1,000 and sell it for $1,200, you have realized a $200 capital gain.

Contractholder
An investor who holds a segregated fund contract.

Distributions
Payments made to unitholders to pass on interest income, dividends and capital gains earned by a fund.

Diversification
An investment strategy designed to minimize risk by spreading investments across different asset classes (e.g., stocks and bonds), geographic regions, currencies and management styles.

Dividend
A payment made to shareholders in an amount set by the company's board of directors.

Dollar cost averaging
The effect of regular, frequent investing, which evens out the purchase price of a fund's units over time by allowing more units to be purchased when prices are low and fewer units to be purchased when prices are high.

Equity fund
A fund that invests primarily in Canadian or international common stocks.

Financial advisor
A professional who works with investors to develop financial plans designed to meet their particular needs.

Fixed-income fund
A fund that invests primarily in bonds and other investments that generate a fixed amount of income.

Inflation
A gradual decrease in the buying power of cash over time. In Canada, inflation is tracked by the Consumer Price Index.

Information folder
A legal document that serves a similar purpose for segregated funds as a simplified prospectus serves for mutual funds.

Interest
Income generated by fixed-income investments, such as bonds. Interest represents the payments made by a borrower to a lender.

Load
The sales charge paid by investors to a financial advisor when fund units are bought (front-end load) or sold (back-end load).

Management Expense Ratio
A percentage that expresses the total operating costs of a fund divided by the average total assets. The MER is deducted from the fund and paid to the fund company before prices and rates of return are reported in the newspapers.

Management style
The strategy an investment manager uses to achieve returns. The most common management styles are "value," which seeks undervalued stocks and holds them until their true worth is recognized by the market, and "growth," which looks for stocks that are poised to increase in value in the near future.

Mutual fund
An investment that pools money from many different unitholders and invests it in selected securities. Each mutual fund unitholder owns a certain number of mutual fund units, which can be sold on demand.

Net asset value per unit
A way of expressing the value of fund units. It measures the net asset value of the fund divided by the number of units outstanding.

Pre-authorized chequing plan
A systematic way to invest by establishing a set amount to be withdrawn regularly from your bank account and transferred to a particular investment.

Registered Education Savings Plan
A program sponsored by the federal government that helps investors save for their children's and grandchildren's education.

Registered Retirement Income Fund
A fund set up with the proceeds of a Registered Retirement Savings Plan to provide a steady stream of income during retirement.

Registered Retirement Savings Plan
A program sponsored by the federal government that helps Canadians save for their retirement by allowing contributions to be deducted from an investor's income and money to compound tax-free within the plan.

Segregated fund
An insurance product that generally buys units of an underlying mutual fund but offers its contractholders certain death and maturity guarantees which protect the principal amount of an investment.

Simplified prospectus
A legal document that outlines important information about a mutual fund. Prospective unitholders should read the simplified prospectus thoroughly before investing.

Stock
Equity or ownership in a publicly traded company. Stocks are also referred to as equities and shares.

Systematic withdrawal plan
A plan that allows investors to receive regular payments from their fund account.

Unitholder
An investor who owns units of a mutual fund.