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Where Should My Money Grow?

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Where Should My Money Grow?

When it comes to financial planning and saving for the future, there are numerous options available for where you can invest your hard-earned money. With all the options that are available, it’s important to fully understand each offering so you can make an informed decision about which one is right for you.

So what types of investments are there, anyway? Below is a breakdown of the more common ones:

Bank Products – Banks and credit unions offer safe and convenient ways for you to tuck away some savings. The advantages of bank accounts are the ability to quickly access your funds and they have wide flexibility. Because of their nature, your money isn’t going to increase a great deal with the interest accumulated.

Stocks – When you buy shares of a company stock, you own a piece of that company. Stocks come in a wide variety of formats – common shares, preferred shares, different class shares etc, depending on what type the company chooses to issue. Stocks are generally based on the company’s size and type and are often issued by the company to raise capital.  The company’s stock performance can be affected by market cycles and other factors like interest rates. Stocks offer the potential for short and long-term capital growth and some types of stocks will also pay the investor dividends. Within stocks are a wide array of choices, from penny stocks to large caps and more – each with different risk profiles.

Mutual Funds – are essentially a basket of stocks and/or bonds and sometimes other instruments eg. ETFs, that are pooled together in a unit trust and can either be open ended or close ended funds (ie. They have a fixed number units/shares). Mutual funds have mandates that they are required to adhere to for example, a Canadian Small Cap fund would only be able to invest in smaller Canadian companies – usually with market capitalization’s of less than $1Billion or so.

ETF’s – or Exchange Traded Funds, are similar to mutual funds, ie. they are baskets of various securities,  however they have some characteristics that are more similar to stocks eg. they can be traded throughout the day just as an individual stock would be. ETF’s can be sold short as stocks can be, mutual funds cannot be sold short. Due to the passive nature of ETF’s (although actively managed ETF’s are becoming more commonplace) the internal expenses of most ETF’s are considerably lower than their mutual fund counterparts – mutual fund expenses are trending lower though. ETF’s can offer tax advantages over mutual funds also through the process in which investments are redeemed from the vehicle limiting the possibility of paying capital gains.

Annuities – An annuity is a contract between you and an insurance company, in which the company promises to make periodic payments for the rest of your life, either starting immediately (called an immediate annuity) or at some future time (called a deferred annuity). Annuities can come with guarantees in the event you pass away early they will continue to pay out to your beneficiaries.

Retirement – There are many options available when saving for retirement and even managing your income after you retire. For saving, tax-advantaged retirement options such as a TFSA (Tax Free Savings Account) or a RRSP (Registered Retirement Plan) can be a smart, tax efficient choice. Which type of investments you choose is often dependent on your risk tolerance and retirement lifestyle.

Commodity Futures Commodity futures contracts are agreements to buy or sell a specific quantity of a commodity at a specified price on a particular day in the future. Commodities include metals, oil, grains, and animal products as well as currencies. Most futures are traded on the floor of a commodity exchange such as the Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME). Traditionally, investors have used stock brokerages to access these markets however there is now a wide range of online brokers that offer very competitive pricing to retail investors to invest and trade these types of financial instruments from the comfort of their own home.

Alternative and Complex Products – These products include notes with principal protection and high-yield bonds that have lower credit ratings and higher risk. The advantage is a higher rate of return.

Private Equity - is investment capital that is not issued on a public exchange. Private equity is composed of funds and investors that directly invest in private companies and can be composed of equity and debt in operating companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.

Hedge Funds - are alternative investments using pooled funds that employ numerous different strategies to earn active return, or alpha (return above a designated benchmark), for their investors. They are often only available to “exempt” investors – ie. Investors with net income of more than $200,000 or have more than $1,000,000 in investable assets.

Bonds – A bond is a loan an investor makes to an organization in exchange for interest payments over a specified term plus repayment of principal at the bond’s maturity date. Bonds come with various credit ratings and durations that are often correlated with the respective bonds yield. Higher credit rated bonds, such as Canadian government bonds, will have a lower bond yield than a bond issued by a corporation eg. A Suncor bond, as the Canadian government is presumed to be at a lower risk of default than a corporation.

Investment Funds – Investment funds pool money from many investors and invest it according to a specific investment strategy. Funds offer diversification, professional management and a wide variety of investment strategies and styles. But not all funds are the same.

Saving for College – Funding for college begins with savings, starting with how much to save. There are many smart ways to save for college, including RESP’s and other college savings plans.

Options – Options are contracts that give the purchaser the right, but not the obligation, to buy or sell a security, such as a stock or exchange-traded fund, at a fixed price for a specific time period. There are numerous strategies investors use when engaging in options investing, not only to make money but also for example to hedge the downside on a stock position they may be holding.

Security Futures – Federal regulations permit trading in future contracts on single stocks, also known as single stock futures, and certain security indices.

Insurance – Life insurance products come in various forms, including term life, whole life and universal life. There are also variations on these, which are considered securities.  Eg. Participating Whole Life Insurance can be a very tax efficient way to grow  and pass on wealth, and can act as a great fixed income component of your overall investment portfolio.


Clear as mud? Even with the most basic of knowledge, it can still be daunting to sift through all the information and decide which is best for you. This is why it is always recommended to seek the advice of a trusted professional, who can fully explain the options available to you, get a full understanding of the needs you have, and offer a solution that fits best with your lifestyle and your goals.

At Belmont Health & Wealth, your first consultation is always free. Let us take the worry out of planning for your future and give us a call today!


Image by TheDigitalWay from Pixabay

| Categories: Wealthy Ideas | Tags: financial planning, investments, future, benefit consulting | Return
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