Glossary

Active Management

Refers to the management of an investment portfolio where the manager attempts to outperform the market or some benchmark index rather than mirror the market. The opposite is passive management.

Annuity

A typical annuity is a series of fixed payments at regular intervals (usually monthly) lasting for life but often with benefits to be payable to a beneficiary or the estate after death. The term “annuity” is often used interchangeably with the term “life annuity,” which refers to an immediate annuity that lasts for the entire lifetime of the person receiving payments from the annuity.

Asset Bubble (e.g., Housing Bubble, Stock Market Bubble)

A rapid rise in the price of an asset class beyond its fundamental value based on standard valuation metrics. Asset bubbles can last for many years before prices return, usually suddenly, to their fundamental value or below.

Asset Mix

The composition of a portfolio broken down by the major investment categories (e.g., 70 per cent equities/30 per cent fixed income).

AVC

Additional Voluntary Contributions—contributions that an employee may be permitted to make to a pension plan. They do not generate matching employer contributions.

Basis Points (bps)

Used to measure investment fees. One hundred basis points equals one per cent.

Bear Market

A falling market characterized by negative sentiment pertaining to a class of assets such as the stock market or fixed-income market. The opposite of a bull market.