The A, B, Cs of Money: M

MARGIN: When you borrow money to buy a security you are said to be "buying on margin." Investment houses often offer the option of letting you use their money to increase the number of units of an investment that you can buy. This is wonderful when the value of the investment goes up since buying on margin amplifies your profits. But margin-buying comes with a downside. Should your investment fall in value, the loss will be amplified. Well, you could just hold the investment until its value goes back up, right? Maybe not. Since the investment house has the right to "call your margin" – ask for it's money back RIGHT NOW            — that could force you to sell those investments that are under water at exactly the wrong time. Oh well, you win some, you lose some.

MARGINAL TAX RATE: Canada operates under a graduated income tax system, so your tax rate goes up as your income rises. Your marginal tax rate is the rate at which your last dollar of income will be taxed. If you get a raise at work, and you watch your income taxes deducted at source rise dramatically higher, it's your Marginal Tax Rate at work. If you make an RRSP contribution, the deduction is based on your marginal tax rate. Careful though; remember as your deductions take effect, your marginal tax rate will fall which means you won't get as big a bang for your RRSP dollar in terms of tax savings. This is one reason why those big, fat RRSP catch-up loans are such a BAAAAAAAD idea.

MARKET CAPITALIZATION: This is the moolah somebody would have to pony up to buy a company. Market capitalization is calculated by multiplying the total number of a company's shares by the current price per share. So, if a company has 10 million shares, and the current price is $25 per share, then the company's market capitalization is $250 million. Typically companies are categorized into large cap, mid-cap, and small cap. While these numbers can move, large cap companies tend to be with over $1 billion in market capitalization, mid caps run between $500 million and $1 billion and small caps have less than $500 million.

MER: The Management Expense Ratio on a mutual fund is what it costs the company to operate the fund. The MER is calculated by dividing operating expenses by the average dollar value of its assets under management. Since these expenses are taken from a fund's assets, they lower the return on the fund. People like to get all knotted up over MERs. As far as I'm concerned I'll pay to get a better than average return – smart managers deserve to be compensated – but I'm not going to fork over good money to get what the index returns (I can buy the index for that) or LESS.

MORTGAGE: From MORT (death) and GAGE (promise) a mortgage is your promise to stay in debt until you die! No, not really. Although people used to aim to have their mortgages paid off before they died so they could pass their homes on to their children free and clear. That was back when generations lived in a single home. Now people are split into two distinct groups: those hell-bent on becoming mortgage free ASAP and those who are piling more and more debt into their homes to satisfy their consumer-itch. If you plan to retire with a whopping mortgage, you're a fool. If you're racking up consumer debt on a line of credit or on credit cards while you rabidly attack your mortgage, you're a fool. BTW: they guy borrowing is called the mortgagor and the guy lending is called the mortgagee.

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