Investing in Canada U.W.I.G

What is an Investment? A deploy of capital with the expectation to make a return on that capital

Canadian Marketplace Stocks Bonds/Fixed Income Real Estate Money Market Savings Deposits Mutual Funds/Exchange Traded Funds

Stocks Ownership of a company Shareholders Voting Rights Capital appreciation/depreciation Dividends

Bonds/Fixed Income Fixed investment for a guaranteed/variable return Low risk or high risk Fixed Stream of cash payments

Real Estate Owning a house or owning a stock that owns a house/property Property ownership/management Real estate income trust investing

Money Market Fund Trade in short-term loans between banks and other financial institutions Short term Liquid Virtually risk free

Savings Deposits Basic bank accounts Bank pays interest on your capital in the bank

Mutual Fund Professionally managed Stocks owned in a single fund Actively traded Expensive Service vs. DIY Prices only update at the end of the day Not as liquid

Exchange Traded Funds Professionally managed Stocks owned in a single fund Passively managed Traded in real time, updated immediately Cheap Liquid as a stock

How to Get Started Sign up for an online brokerage/trading platform through your bank, usually cheaper through specialized online brokerage Look into trading fees, before choosing a brokerage minimum requirements, etc Very similar to our investment simulator Typically allows trading all Canadian and U.S. stocks on major exchanges, mutual funds, bonds, options, ETFs, forex. Trading options, bonds and forex may require a special account.

The Canadian Market TSX index is heavily weighted towards financial firms, energy and commodity producers nearly 70% of the TSX mostly larger, established firms TSX Venture Exchange exists for small/emerging companies (more risky) Montreal Exchange - options trading Less liquid requires more knowledge Keep in mind taxes on capital gains and dividends if investing outside of a registered account

Investment Vehicles RRSP’s - Registered Retirement Savings Plan TFSA’s - Tax Free Savings Account RRIF - Registered Retirement Income Fund

Registered Retirement Savings Plan - (RRSP) Federally recognized savings vehicle Any contribution is tax deductible Can hold virtually any asset that can be traded/bought/sold Investments grow tax free until withdrawn Contribution limit is 18% of your income

Tax Free Savings Account - (TFSA) Federally recognized trading vehicle Investments/Contributions grown tax free Can hold virtually any asset that can be traded/bought/sold Contributions are always tax free, including withdrawals Limit of $10,000 a year ($36,500) since inception

Registered Retirement Income Fund - (RRIF) Similar to RRSP Same rules Can’t make contributions too All RRSP’s have to be converted to RRIF at age 71

Pension Vehicles Defined Benefit Plan Defined Contribution Plan Registered Pension Plan Canada Pension Plan Old Age Security Guaranteed Income Supplement

Defined Benefit Pension Plan Guaranteed income in retirement Actuarial designed formula (Average career salary * benefit percentage * years in plan) Ex: %50,000 * 2% * 35 = $35,000 Employer sponsored mainly Low death benefit payment Predictable, reliable, guaranteed Not always transferable

Defined Contribution Pension Plan Employer/employee sponsored Usually percentage of earnings matched Similar to a group RRSP Can be invested in anything Ownership is %100 yours Main source of income comes from investment returns Transferable

CPP/OAS/GIS CPP - Guaranteed pension every Canadian pays into (1065 monthly maximum) - indexed to inflation OAS - Guaranteed pension for citizens with low/median income (500-70 monthly maximum) - indexed to inflation GIS - A component of OAS, dependent on many factors

Tax, Fees, Efficiency and Compounding Tax deferral Fees/commissions Time value of money Compounding

How much should I Save or Invest? Everyone is different Highly variable and dependent on retirement income + investment returns Rule of thumb is 10%-20% of gross income Consider all sources (CPP, OAS, pension, savings) Average - comfortable retirement is considered 70% of working years income