CSC (Canadian Securities & Investment) key terms

The degree of investment value fluctuation an investor can emotionally and financially withstand. It is assessed through goals, time horizon, income stability, and past reactions to losses, and it shapes suitable asset allocation.

The objective ability of an investor to absorb losses without jeopardizing essential goals, based on income, net worth, liquidity needs, and time horizon. It can differ sharply from the investor's emotional willingness to take risk.

The division of a portfolio among asset classes such as cash, fixed income, and equities. It is the primary driver of portfolio risk and return and should follow from the investor's objectives, horizon, and risk profile.

Spreading investments across assets, sectors, and regions so that any single loss has limited impact on the whole portfolio. It reduces unsystematic risk but cannot eliminate market-wide risk.

A measure from -1 to +1 of how closely two investments move together. Lower or negative correlation between holdings improves diversification benefits, while highly correlated assets add little risk reduction.

A statistical measure of how widely returns vary around their average, commonly used as a proxy for total volatility. Higher values indicate a wider spread of possible outcomes and greater uncertainty for the investor.

Risk that affects the entire market, such as interest rate shifts, inflation, or recession, and cannot be removed by diversification. Investors are generally compensated for bearing it through higher expected returns.

A measure of a security's sensitivity to movements in the overall market. A beta above one suggests greater volatility than the market; below one suggests less; a negative beta implies movement opposite to the market.

The pace and magnitude at which an investment's price rises and falls over time. High volatility means wider short-term swings and greater chance of loss if funds are needed quickly.

The danger that an asset cannot be sold quickly at a fair price, or that selling it forces a discount. It matters most when an investor needs cash on short notice or holds thinly traded securities.

Periodically buying and selling holdings to restore a portfolio to its target asset mix after market moves have shifted the weights. It enforces discipline and can control drift in risk exposure.

Investing a fixed sum at regular intervals regardless of price, so more units are bought when prices are low and fewer when high. It smooths entry cost but does not guarantee a profit.

An instruction to buy or sell a security immediately at the best available price. Execution is fast and certain, but the final price is not, which matters in fast-moving or illiquid markets.

An instruction to trade only at a specified price or better. It protects against unfavorable prices but may remain unfilled if the market never reaches the stated level.

An order that becomes a market order once a trigger price is reached. It is often used to cap losses, but in a gap or thin market the executed price can be well beyond the trigger.

The gap between the highest price buyers will pay and the lowest price sellers will accept. It is a transaction cost that widens for illiquid or less actively traded securities.

The length of time an investor expects to hold assets before needing the money. Longer horizons generally allow more equity exposure and more time to recover from market declines.

Growth earned on both the original principal and previously accumulated interest. Over long periods it can make a far larger difference to outcomes than the starting amount alone.

The value today of a sum to be received in the future, after discounting at an appropriate rate. It lets a saver compare goals and payments that occur at different times.

The general rise in prices over time, which erodes the purchasing power of money. Planners must use real, after-inflation returns when projecting whether savings will meet future goals.

Investment return after subtracting inflation, showing the actual gain in purchasing power. A positive nominal return can still be a negative real return if prices rise faster.

Readily accessible savings set aside to cover unexpected expenses or income loss, typically several months of essential costs. It prevents forced selling of long-term investments or reliance on high-cost credit.

Tracking income and spending to direct surplus toward goals and to anticipate shortfalls. It underpins budgeting, debt reduction, and saving for both short- and long-term objectives.

A structured plan that allocates expected income across spending, saving, and debt repayment. It turns intentions into limits and reveals where money is leaking from priority goals.

Coverage that pays a death benefit only if the insured dies within a set period, with no cash value. It is usually the cheapest way to protect dependents during earning years.

Permanent coverage with a guaranteed death benefit and a cash value that grows over time. Premiums are higher than term, and early cash value is typically less than premiums paid.

The person or entity named to receive policy proceeds or account assets on the owner's death. Designations normally override a will, so they must be kept current after life events.

Arranging how assets will be managed and distributed during life and after death. It includes wills, trusts, beneficiary designations, powers of attorney, and steps to reduce taxes and delays.

A legal arrangement in which a trustee holds and manages assets for the benefit of named beneficiaries. Trusts can control distribution timing, provide privacy, and address incapacity or estate tax concerns.

The process of gathering a client's objectives, financial situation, knowledge, and risk profile before recommending a product. Recommendations must fit that profile, with documented reasoning and periodic review.

The onboarding and ongoing duty to identify each client, understand their circumstances, and verify source of funds. It supports both suitable advice and compliance with anti-money-laundering requirements.

Policies and controls to detect and report attempts to disguise the proceeds of crime through the financial system. They include client due diligence, transaction monitoring, and reporting suspicious activity.

A confidential filing to the financial intelligence unit when activity suggests possible money laundering or terrorist financing. Staff must not tip off the client that a report has been made.

A legal obligation to act in the client's best interest ahead of one's own, with loyalty, care, and full disclosure of conflicts. It is stricter than merely selling suitable products.

A situation where personal or firm interests could improperly influence advice or decisions given to a client. It must be identified, disclosed, and managed, or the relationship avoided.

An arrangement in which the client authorizes the manager to buy and sell within agreed guidelines without prior approval for each trade. It requires clear objectives, limits, and regular reporting.

A scheme that reimburses depositors up to a set limit if a bank fails. It protects small savers and underpins confidence in the banking system, but the cap and coverage rules vary by jurisdiction.

The yearly cost of borrowing expressed as a rate, including specified fees, so loans can be compared on one basis. For savings, a comparable annual rate shows the effective return on deposits.

The loan amount divided by the property's appraised value, expressed as a percentage. Higher ratios mean more leverage for the borrower and greater risk for the lender, often raising rates or insurance costs.

An asset pledged to secure a loan, which the lender may seize if the borrower defaults. It lowers lender risk and can reduce borrowing costs but puts the pledged asset at risk.

A numerical rating of a borrower's creditworthiness based on repayment history, debt levels, and account history. It influences loan approval, interest rates, and sometimes insurance or rental decisions.