Your Financial Goals

Investing 101

You work hard for your money, so you should get your money working hard for you. There are many ways to invest and it’s really a matter of selecting the right investments for you as an individual based on many factors that centre around your current life stage and your personal financial goals. Investing is striking a balance between the potential return you want with the level of reasonable risk you are prepared to accept. Investing isn’t a gamble. It's a matter of making informed decisions and carefully managing your money. Many investments are also based on compounding interest, so it's important that you put your money to work as early as possible in order to make the most of it.

Cash and Equivalents

Cash and equivalents include money in your bank account and “cash-like” investment options like Canada savings bonds, treasury bills and money market funds. While your money is generally very safe in these options, and you have easy access to it, but the rates of return tend to be low.

The Tradex Investment Savings Account is a good example of this type of investment. It’s a place to park your money for shorter terms perhaps while you are investigating other options or saving for a short term objective.

Fixed Income Securities

These investments are based on debt. When you buy a bond or another “fixed income security” you are lending your money to a government or company for a certain period of time. In return, you receive the face value of the investment and interest at the end of the bond’s term.

These options are generally low risk and provide a better rate of return than cash equivalents because you are taking some risk by lending out your money for a longer period of time.
Fixed Income options through Tradex  include GIC’s (Guaranteed Investment Certificates), and Tradex Bond Fund.

Equities

Stocks or “equities” are basically a stake in a business. When you purchase equity you become part owner of the business you are investing in. Compared to fixed income securities, stocks can provide relatively high returns, but you are at risk of losing some or all of your investment.

The long term returns realized from the various asset classes can vary significantly and are related to the risk as outlined in the Andex Chart  with equities passing repeatedly through periods of strength (Bull) and weakness (Bear).

Mutual Funds

A mutual fund is a collection of stocks and/or bonds. The fund is similar to a company that unites the contributions of many individuals and invests their money in a diversified portfolio of stocks, bonds and/or other securities. Each individual investor owns shares or units that represent a fraction of the total holdings of the fund. The majority of the income earned by the fund is distributed over the year to the fund’s unitholders. This income is generated by the holdings of the fund as its stocks and bonds provide dividends and interest. Usually the capital gain produced by sales of the fund’s securities is passed on to the investors as well. In some cases individuals can recognize additional profit by selling their units in the event that the fund holdings have increased in price and the fund manager has not sold the assets already. In this last case the investor loses any stake in further increase that the fund benefits from as they have sold their units.

By investing in mutual funds you get the huge benefit of professional management of your money. You also benefit from mutual funds through diversification. You are investing in units of a pool of many assets and, in theory, losses on a few of the assets in the pool are less likely to affect the value of your shares than if you had owned stocks directly in a falling asset.

For more information on the availability of mutual fund products through Tradex, please see the mutual fund options listed under Products on the main page or contact a Tradex advisor for a personal explanation of the available options, with no obligations.

Further details on the benefits from diversification amongst investment management styles, geographic regions and  asset classes are outline here.