What Is a Guaranteed Investment Certificate - DOC

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					Investing Options (separate from your glossary, please)

Investment      Description                                Risk
Buying Stocks      Buy a portion (shares) of the          Very
                    company. If the share price            high
                    increases, you make money.
                   Broker Fee: It costs you to buy a
                    share. Usually $30.00/trade or a
                    % of how much you buy

G.I.C.             Guaranteed Investment Certificate No
                   Purchased from a bank for a set      Risk
                    time period, at a set interest rate.
                   No way to lose your money.
                    Interest rate is usually very low

Savings Bonds      Similar to a G.I.C., but you           Very
                    purchase bonds from a                  little
                    government or a major corporation      risk
                   When you buy a bond, you are           (rates
                    actually buying „debt‟—you are         can
                    loaning the government money.
                   Purchased through a bank for a set
                    time period, at a set interest rate.
                   Bonds no longer work with a
                    paper certificate—its electronic

Mutual Funds       Buying a group of similar stocks,      Med-
                    but a financial company (bank)         High
                    buys and manages them for you.         Risk
                   Advantage: you don‟t have to do        (you
                    any work. Disadvantage: they           can lose
                    charge a 2-3% fee.                     $)
R.S.P‟s         Retirement Savings Plans. A tax-           Varies
                                                           on what
                sheltered way of investing. You pay tax    you
                on the interest when you pull the money    invest in
                out in retirement. You can invest in a
                GIC, mutual fund, etc., but it‟s under
                the R.S.P. tax-deferred umbrella.
                You can use your RSP money to buy
                your first house, but you have to pay it
                back within 15 years.
Treasury-bills Short-term government obligations           Low
(T-bills)       (debts-loan gov. money), generally         Risk
                issued with various maturities of up
                to one year. Like a bond, but for a
                short time period. Money
                guaranteed, but interest rates vary.
Money Market A glorified bank account, but you             Low
                usually have to give 24-48 hours notice    Risk
                to withdraw your money. Interest rates
                are higher than a standard savings
                account. Interest rate fluctuates.
Investment      Usually linked with on-line banks (like    Low
Savings         ING direct). A higher interest savings     Risk
Account (ISA) account, but you can often withdraw
                money using bank card or internet.
                ISA’s must be linked with an ‘external
                checking account’, like Royal Bank.
Property (Land, Fixed assets (physical items that          Usually,
                                                           very low
Houses)         increase in value) are often a good        risk
                investment. Ex 1: A house bought in        (especiall
                Etobicoke in 1960 cost $40 000. It‟s       y land)
                now worth $600 000. Ex 2: A house          High
                bought in Calgary in 1985 worth            risk if
                $200 000 was worth $100 000 in 1995.       buying
                                                           & selling
                Usually, land & house values slowly        in a year
                increase, steadily, over time.
Own a business Rather than putting your cash into a           Very
                financial investment, you put that            high
                money into the start-up costs for a small     risk,
                business. As the business makes               ly if no
                money, you earn back your original            business
                investment, and hopefully more.               plan
                However, 1 in 5 small businesses fail in
                the first year. You could lose all your $
Buy a franchise You buy the rights to own a store that is     Med
                part of a larger corporation. Advantage:      risk, if
                You have the name, idea, marketing.           you can
                Disadvantage: 1) Huge costs—1/2 a             the
                million for Tim Hortons for everything        start-up
                2) You cannot customize your business         fees
Gambling/       Your chances of winning the grand             Waste
Lottery         prize in any Ontario-based lottery are        of
                less than being struck by lightening          money
                This is not an investment. “Lotteries
                are a burden and a tax on the poor…”
Commodities     You buy physical, raw-products.               For an
                Examples include livestock, lumber,           investor,
                metal, oil/natural gas, pork bellies, corn,   EXTRE
                wheat, etc. These commodities trade on        MELY
                                                              high risk.
                an open market, where the price
                fluctuates. Your goal is to buy a large
                quantity at a low price, and sell it at a
                higher price. You have to be able to
                store and transport the commodity.
Gold            Is a special commodity. It‟s value per        Safe,
                ounce is worth more than most                 the price
                commodities. Gold prices tend to              changes
                changes exactly OPPOSITE the stock            slowly
                markets. If the market is down, gold
           price go up. Gold is considered the
           default investment when markets are in
Currency   You buy and sell other countries‟           Safe,
           money. If their currency increases at a     the price
           faster rate than your currency, then you    changes
           make money. International investors         slowly
           are less interested in Canadian currency,
           because it‟s almost the same value as
           the US currency. It‟s no longer a deal.

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