How do I know which investments are right for me?
Before you invest, make sure you understand how various products or investments work, including any fees and whether they fit with your goals and risk tolerance. Consider meeting with a registered financial adviser who can help explain these to you. You should also do check the background of the company or person offering you any investment products.
Once you've decided what to invest in, you'll want to regularly check up on your investments to see how they are doing and if they are still helping you achieve your investment goals. If not, you may need to make some adjustments. If you use the services of a financial adviser, have them help you with this.
Some Common Types of Investments
When you buy securities that are “equities”, you become a part owner in a business. You may be entitled to vote at the shareholders’ meeting and will receive any profits the company allocates to its shareholders. These profits are called dividends.
Includes: common shares, restricted voting shares, preferred shares, flow-through shares, and rights and warrants
Investments funds are a collection of investments from one or more asset classes. Each fund focuses on specific investments, like government bonds, stocks from large companies, stocks from certain countries, or a mix of stocks and bonds.
Includes: mutual funds, closed-end investments, exchange-traded funds (ETFs), segregated funds, labour-sponsored investment funds (LSIFs), and commodity pools. For more on mutual funds, read the Understanding Mutual Funds brochure (PDF).
Alternative investments represent some of the most complicated types of investments. For this reason, they usually have higher-than-average risk in return for higher-than-average return potential. Alternative investments are typically meant for very knowledgeable investors or investors with a lot of money who can afford to take higher risks and get specialized advice.
Includes: options, futures and forward contracts, income trusts, limited partnerships (including flow-through limited partnerships), principal protected notes (PPN), linked notes, hedge funds, foreign currencies (FOREX), and other prospectus-exempt securities.
For more information, read the full Investments at a Glance brochure (PDF).
What is diversification?
Not all investments perform at the same level at the same time and diversification can reduce the volatility of your overall rate of return. Having a variety of investments can help offset the impact that poorly performing investments may have, while taking advantage of the earning potential of others. Investing in different asset classes can be part of a diversification strategy. For a more in-depth discussion of diversification and various asset classes, consider taking The Basics of Investing class.
Ready to learn more? Read up on various types of investment schemes and scams.