R-squared is the measure of correlation between a fund and the market (benchmark). It is calculated by regressing the fund against an appropriate index over time. Values range between 0 and 1. The higher the value of R-square, the greater the correlation between the two. R-squared is calculated over the last 36 months. Canadian Equity fund R-Squared is typically calculated relative to members of the S&P/TSX Composite family of indexes, Canadian Bond fund R-Squared is typically calculated relative to the TSX DEX Universe Bond Index, and US Equity fund R-Squared is typically calculated relative to the S&P 500 Index.
An R-squared of 1 means that all movements of a fund are completely explained by movements in the index. Thus, index funds that invest only in S&P/TSX Composite Index stocks will have an R-squared very close to 1. Conversely, a low R-squared indicates that very few of the fund's movements are explained by movements in its benchmark index. An R-squared measure of 0.35, for example, means that only 35% of the fund's movements can be explained by movements in its benchmark index. Therefore, R-squared can be used to ascertain the significance of a particular beta or alpha. Generally, a higher R-squared will indicate a more useful beta figure. If the R-squared is lower, then the beta is less relevant to the fund's performance.
R-square is a statistical measure of an investment's market price in relation to an established index.
R-squared values range from 0 to 100. For example if an investment is said to have an R-square equal to 100 then then all of the investment's market price movement, up and down, is said to be explained 100% by movements in the investments benchmark. A high R-squared (between 85 and 100) indicates the investment's performance patterns have been in line with its benchmark index. An investment with a low R-squared (70 or less) doesn't act much like the index.
R-squared values are used in conjunction with an investment's beta when analyzing an investment's risks. For example, if a fund has an R-squared value of close to 100 but has a beta below 1, it is most likely offering higher risk-adjusted returns. A low R-squared means you should ignore the beta.
A brisk rise in the general price level of the market or in an individual stock.
A temporary price weakness in a security following a price upswing.
An investment vehicle that invests funds on behalf of its investors in real estate-related investments such as construction loans, mortgages, land and real estate company securities.
The nominal rate of interest minus the percentage change in the Consumer Price Index, or the rate of inflation.
The return from an investment after taking inflation into account (e.g.: if your investment earned 6% interest last year, but the cost of everything went up 4%, you are only ahead by 2%; your "real return" is only 2%).
An economic slowdown that often goes hand in hand with a "bear" market. It is defined by many economists as at least two consecutive quarters of decline in a country's gross domestic product.
The day a company sets as the last day people can buy stock and receive such things as dividends or rights. These people are called stockholders of record.
A preliminary prospectus, so-called because certain information is printed in red ink around the border of the front page. It does not contain all the information found in the final prospectus. Its purpose is to ascertain the extent of public interest in an issue while it is being reviewed by a securities commission.
A mutual fund may redeem or repurchase your mutual fund security at the net asset value (NAV) per security.
The purchase of securities by the issuing company from the holder, at a time and price stipulated in the original terms of the securities. The redemption price is the price at which debt securities or preferred shares may be redeemed at the option of the issuing company.
When new securities are sold by a government or a company and the money is used to pay off existing loans. The object may be to save interest costs, extend the maturity of the loan, or both.
Advisors and investment companies licensed by a securities regulator to buy and sell investments or advise on investments. Also, accounts and retirment plans protected by income tax and other laws.
An Registered Education Savings Plan (RESP) is a registered income tax deferred savings account that can assist you and your family to save and fund an individual's’s education after high school.
Technically, an RESP is a contract between a subscriber and an RESP promoter/provider under which the subscriber makes contributions on behalf of a beneficiary and the promoter/provider agrees to make Educational Assistance Payments (EAPs) to the beneficiary. The RESP is registered under theIncome Tax Act.
A RPP is a trust registered with Revenue Canada and established by a company to provide pension benefits for its employees when they retire. Both employee and employer contributions to the plan are tax deductible.
Now more commonly referred to as an investment advisor. This is a person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products. Investment advisors must attain set educational qualifications, follow certain rules and regulations and be registered by the securities commission of the province in which he or she works.
A personal retirement income fund offered by financial institutions. An RRIF is used to provide an ongoing minimum flow of income. RRIFs are governed by the Income Tax Act, which determines minimum withdrawal amounts. Locked-in pension benefits from federally registered pension plans cannot be transferred to an RRIF because an RRIF is not a locked-in retirement savings arrangement.
A vehicle available to individuals to defer tax on a specified amount of money to be used for retirement. The holder invests money in one or more of a variety of investment vehicles which are held in trust under the plan. Income tax is deferred until the money (the amount originally deposited plus any interest or dividends made on that money) is withdrawn at retirement. RRSPs can be converted into Registered Retirement Income Funds.
A security recorded on the books of a company in the name of the owner. It can only be transferred when the securities certificate is endorsed in that name and the certificate is forwarded to the transfer agent. Registered debt securities may be registered as to principal only or fully registered. In the case of fully registered debt securities, interest is paid by cheque rather than by coupons attached to the certificate.
Government-approved savings plans such as Registered Pension Plans, Registered Retirement Savings Plans and Registered Retirement Income Funds, in which funds contributed by individuals are tax-deductible within certain limits and investment earnings accumulate in the plans on a tax-deferred basis until de-registration or maturity of the plans.
Usually a trust company appointed by a company to manage the issuance and registration of securities certificates.
- The process of securities registration involves filing a prospectus with the securities administrators as required under the Securities Act of each province in which the securities will be offered.
- Investment dealers and sales staff involved in the investment business must be registered with the applicable self-regulatory organization. Before registration is allowed, basic standards must be met, such as minimum capital requirements for a firm and minimum educational qualifications for personnel.
Distributions may be reinvested in the fund or sent to the unit holder. This depends on the policy of the fund.
In general, a “reporting issuer” is a corporation that has issued securities to the public.
Reporting issuers are subject to continuous disclosure requirements under Provincial securities law. That means they must file their disclosure documents on the System for Electronic Document Analysis and Retrieval (SEDAR). These documents include financial statements, material change reports and prospectuses.
An agreement between a seller and a buyer, usually in government securities, in which the seller agrees to buy back the security at a later date.
Used in technical analysis to describe a price level that a security has difficulty reaching.
In a family plan, each beneficiary must be related by blood relationship or adoption to each living subscriber or any deceased original subscriber. Only in an RESP that is a family plan can more than one beneficiary be named. A beneficiary under a family plan entered into after 1998, must be less than 21 years of age at the time he or she is named as a beneficiary. When one family plan is transferred to another, a beneficiary who is 21 years of age or older can still be named a beneficiary to the new RESP.
Similar to a Life Income Fund (LIF), however, an RLIF annuitant may on a one-time basis unlock 50% of the funds.
Similar to a Locked-in Registered Retirement Savings Plan, however, the RLSP has restricted transfer options.
Shares that have limited voting rights or in some cases, no voting rights. These shares participate in a company's earnings and assets in liquidation as common shares do and are sometimes referred to as restricted common shares. Restricted shares may not command the same market price as voting common shares of the same company since they do not have voting rights.
The cumulative total portion of annual earnings retained by a company after payment of all expenses and dividends. Can be considered money that the company puts back into its business for expansion, etc.
A feature which can be included in a new debt issue or preferred share that grants the holder the option, under specified conditions, to redeem the security on a stated date. This date would be prior to maturity in the case of a debt issue.
The income earned or a capital gain made on an investment.
A return from an investment that is not considered income. The return of capital is when some or all of the money an investor has in an investment is paid back to him or her, thus decreasing the value of the investment.
For example, let's say you invest $10,000 of your savings in a single investment and over the next 12 months that investment earns $500.00. But over that same 12 months the investment has given you payments that total $1,200.00 - which means that $500.00 was from the investment's earnings and $700.00 was a return of your own savings - a return of capital. Now, at the end of the 12 months, you no longer have $10,000 invested, but rather $9,300.00 ($10,000 - $700).
The exchange of a greater number of a company's shares for a lesser number. For example, exchanging three shares for one. This results in a higher share price and less shares outstanding. This is also called a consolidation or a negative split.
The temporary privilege granted to a company's existing common shareholders to acquire additional common shares directly from the company at a stated price. The price is usually at a discount to the market price of the common stock on the day the rights are issued, and the rights only are good within a specified time period. Rights of listed companies trade on stock exchanges from the ex rights date until their expiry, so holders can either exercise the rights or they can sell them.
The right of a purchaser of a new issue to withdraw from the purchase agreement within the specific province's applicable time limits if the prospectus contained an untrue statement or omitted a material fact.
The right of a purchaser of a new issue to withdraw from the purchase agreement within two business days after receiving the prospectus.
The future chance or probability of loss.
Return on Assets (ROA) is net income divided by assets.
Return on Equity (ROE) is net income divided by net worth. ROE is the product of profit margin, sales/assets, and debt leverage; it measures how efficiently a company uses shareholders' equity to generate profits.
An investment trust that gets income from royalties. Usually associated with income from ownership in oil or gas wells. Royalty trusts are similar to real estate investment trusts (REITS).
A way to quickly estimate how long it will take an investment to double in value.
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