The A, B, Cs of Money: H

HARD STOP: Sometimes called a Stop Loss, this is the price level that if reached will trigger the sale of a security. It's used to protect you from the downside of holding an investment since the hard stop or stop loss is placed in advance of a negative move and remains active until the price of the security moves to the stop level.

HEDGE: This usually means taking an offsetting position in a related security to reduce the risk of adverse price movements in an asset. So, if you owned a stock and then sold a future contract stating that you'll sell your stock at a set price, you'd hedge to avoid market fluctuations. A perfect hedge reduces your risk to nothing except the cost of the hedge. They're still trying to perfect the strategy because hedge funds routinely get the crap kicked out of them.

HICCUP: When you and I get these, we drink backwards from a glass or suffer through the discomfort. When a stock gets this, the investor has to decide if it's a short-term disruption or a trend. If a company misses sales estimates for a quarter, is it an isolated event – a hiccup – or a harbinger of things to come?

HIGH RATIO MORTGAGE: If you can't come up with a 20% downpayment on a home, you have to take out a high-ratio mortgage. That means you have to pay insurance to Canada Mortgage and Housing Corporation (CMHC). There are other mortgage insurance providers but CMHC has the lion's share of the market. The insurance premiums are significant but are added into the mortgage, which makes it easy to ignore the additional cost.

HOME BIAS: While it's generally accepted that investing in foreign equities tends to lower the systematic risk on your portfolio, that doesn't stop investors from investing large amounts of money in domestic equities. One deterrent to foreign market investing may be the fact that investors must not only contend with a market they aren't familiar with, but also the fallout from currency fluctuations.

HOME EQUITY LINE OF CREDIT: A line of credit secured by the equity in your home, it can be in the form of a second mortgage or a collateral mortgage. The interest rate on a HELOC is usually lower than with an unsecured LOC because of the security you've offered to guarantee the loan.

HST: Harmonized sales tax is the tax everyone loves to hate. It combines a province's provincial sales tax (PST) with the federal Goods and Services Tax (GST) and gives a province the opportunity to tax crap it never used to tax to grab more money for the provincial coffers.

Share this on Facebook


Share this on del.icio.us


Digg this!


Share this on LinkedIn


Stumble upon something good? Share it on StumbleUpon


Tweet This!


Subscribe to the comments for this post?


Email this to a friend?