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
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,
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
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
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.