Saving and Investing Where Should You Put Your Money?

Savings Accounts

Term Deposits  Financial Institution pays a fixed amount of interest for a fixed amount of money for a fixed amount of time (usually less than a year)  Benefits: Low risk, higher interest rate than savings account  Trade Offs: Money “ locked in ” (not liquid)

Guaranteed Investment Certificates (GICs)  With a GIC, the person who invests makes an agreement to keep the funds untouched until the prescribed time has expired or, in financial terms, has “matured.”  ONLY issued by the Canadian Gov’t.  Benefits: No risk, slightly higher interest rate than savings account, Term Deposits  Trade Offs: Money “ locked in ” (not liquid), very slow growth

Bonds  An “ IOU ”, certifying that you loaned money to a government or corporation  A buyer purchases a bond and receives a fixed interest rate for a period of time. When the time is up, the bond “ matures ” and the buyer redeems the bond for the full face value  Benefits: Usually low risk, regular interest income  Trade Offs: Extremely slow growth

Stocks  Represent ownership of a corporation. Stockholders own a share of the company and are entitled to share profits as well as a vote in how the company is run.  Money can be made by earning “ dividends ” (profit payouts to shareholders) or by selling the stock on the open marker for more than you bought it for.  Benefits: opportunity to make a lot of money, liquid  Trade Offs: High Risk, selecting and managing stocks requires research and help from a good brokerage firm

Common shares/stock  Common shares are usually purchased for potential capital appreciation (earnings)  If the company makes money you will share in the profits either by seeing the value of your shares rise, by being paid dividends, or both; if the company suffers a poor year or the markets decline, your share values may fall and dividends are unlikely (resulting in a potential capital loss)

Blue chip stock  Typically stocks of large, stable and actively traded companies with a record of regular dividend payments  Tend to be conservative

Penny stock  Low-cost common shares (typically under $1), usually purchased for speculative purposes  Issued by start-up or unproven corporations seeking capital for expansion  Small-, mid- and large-cap stock  Corporations of all sizes issue common shares to raise money; generally, the smaller the corporation, the higher the risk

Stock Lookup Online  Stock Watch –  s/lookup.asp

History of the Dow Jones

Mutual Funds  Professionally managed portfolios made up of stocks, bonds, and other investments  Funds pool the money of several individuals to purchase a variety of investments  Profits are returned to shareholders in the form of dividends  Benefits: diversification, professional management, flexible, moderate risk  Trade Offs: Management fees and expenses, loss of control over investment decisions