The A, B, Cs of Money: L

LADDERING: When you stagger the maturities on a series of investments (as with bonds or GICs) you are said to be "laddering" your investments. If you have $10,000 to invest in a GIC, you could put all $10,000 away for 5 years. Or you could ladder the GICS, $2,000 for 1 year, $2,000 for 2 years, $2,000 for 3 years and so on. The benefit to laddering is two-fold: first, you don't have to guess at which term will give you the biggest bang since you'll have some money invested for each term; second, since you have some money maturing each year, you can take advantages of upward swings in interest rates. If the interest rate movement is downward, only some of your money is exposed to the lower rate.

LEADING INDICATOR: An economic factor that is used to measure how the economy is trending. They're not always accurate, however. Bond yields are often thought to be a good leading indicator of the market since bond traders speculate on trends in the economy.

LEVERAGE: Using borrowed money to buy more of an investment in order to increase the potential profit earned. Leveraging also exposes you to more risk since a fall in the value of the investment may result in a "call" or request for repayment of the loan forcing the sale of the investment at exactly the wrong time.

LIABILITIES: What you owe. These, combined with assets (what you own) are used to calculate your net worth.

LIEN: The right of a creditor to take possession of the goods of someone until that someone fulfils his or her obligations such as a payment of a debt or of an outstanding invoice. It can put a real crimp in your sales plan if someone has put a lien on your home.

LIPSTICK EFFECT: Coined by Leonard Lauder, Chairman of Estee Lauder, this refers to the trend that during tough times sales of lipsticks go up. So increases in lipstick sales have become synonymous with economic uncertainty or recession.

LIQUIDITY: The ease with which an asset can be converted to cash without a loss of value. A savings account is the most liquid investment. Some assets have a high level of trading activity making them more liquid. Assets that can be easily bought or sold are known as liquid assets.

LIRA: Locked-in Retirement Accounts are created when money is transferred from a pension plan to a locked-in RSP.

Here's a note a got from my girlfriend Victoria about her LIRA, which you might find interesting and useful:

My pathetic little locked-in RRSP was destined to become a pathetic little annuity.  My only other chance to access the money came if I qualified under the complicated 'Financial Hardship' clause.  On the site www.osfi-bsif.gc.ca under 'Pension Unlocking', I discovered that I could transfer my locked-in RRSP using the 'Small Balance Unlocking' clause into i) a tax-deferred regular RRSP, ii) a tax-deferred regular RRIF, or iii) I could take it in cash and pay tax on the withdrawal.   I qualified because I am over 55 and my plan was below $24,150.

Anyone who owns a locked-in RRSP, a locked-in Life Income Fund, or a Restricted Life Income Fund can find out what options are available at this website.   Small balance unlocking is just one clause.  There is also Financial hardship, Non-residency, Shortened life expectancy, and One-time 50% unlocking, each with their specific terms for qualifying.

LOAD: The commission that must the paid on the purchase or sale of a mutual fund. A front-end loan means the commission is paid when the mutual fund is bought and reduces the amount you have to invest.  Back-end loads come into effect when the investment is sold and will be higher if your investment has grown. Do I have to say that you should avoid loaded mutual funds?

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