The importance of investing Flashcards
High interest savings accounts
High interest savings accounts are savings accounts that pay a high rate of interest compared to other savings accounts available on the market. The best interest rates in Canada are currently around 2.25%. In Canada, you’re required to pay income tax on the money you earn in a non-registered high-interest savings account.
Tax-free savings accounts
The name tax-free savings account (TFSA) actually refers to a tax shelter that can be used with a number of different investment products, but there are savings accounts available as a TFSA. TFSA savings accounts typically offer a lower interest rate than high interest savings accounts, but as the name suggests interest earned is tax-free. You can only open a TFSA if you’re a Canadian citzen age 18 or over.
Youth savings accounts
Many banks and financial institutions offer special savings accounts just for children. Youth savings accounts sometimes offer special incentives and educational tools to teach kids how to save money and how to bank.
Stocks
Stocks are a type of security that gives stockholders a share of ownership in a company. Companies sell shares typically to gain additional money to grow the company. This is called the initial public offering (IPO). After the IPO, stockholders can resell shares on the stock market.
Seniors savings accounts
Less common than children’s accounts, seniors savings accounts can offer special interest rates or reduced fees for Canadians who are 60 and over.
Mutual funds provide the following benefits:
Automatic diversification at various levels.
Access to financial markets worldwide.
Access to all major asset classes.
A broad selection of fund types.
A diversity of investing styles.
Professional management.
Elimination of the need for individuals to perform detailed and ongoing securities analysis.
The option of making automatic investments and withdrawals.
Many funds can be purchased with small initial and subsequent investments.
No transaction fees, if you pick the right place to open your account.
No sales commissions if you choose no-load mutual funds or invest through a retirement plan that offers no-load funds.
Bonds
Bonds – also known as fixed income instruments – are used by governments or companies to raise money by borrowing from investors. Bonds are typically issued to raise funds for specific projects. In return, the bond issuer promises to pay back the investment, with interest, over a certain period of time.
Options
Options are essentially contracts between two parties that give holders the right to buy or sell an underlying asset at a certain price within a specific amount of time.
Exchange Trade Funds
An exchange-traded fund (ETF) is a pooled investment security that can be bought and sold like an individual stock. ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of securities.
Mutual fUND
A mutual fund is a type of investment vehicle where the money collected from various investors is pooled together to invest in different assets including bonds, stocks, and/or money market investments.
cryptocurrency
Cryptocurrency is digital money that doesn’t require a bank or financial institution to verify transactions and can be used for purchases or as an investment. Transactions are then verified and recorded on a blockchain, an unchangeable ledger that tracks and records assets and trades.
Tax Free Saving Accounts
What is a TFSA. The TFSA program began in 2009. It is a way for individuals who are 18 years of age or older and who have a valid social insurance number (SIN) to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes.
money that you inside, if you make money off of it, you don’t have to pay tax on it, 750000, black berry stock, 4 dollar stock is 8 dollars, now the money is doubled, if that money was in another account you would have to pay tax, but in TFSA you do not have to pay that tax (after your tax)
RRSPs anyone that (gross): IF you make 100,000 dollars, government allows 18% you can move in to RRSP account every year, if you earned 100,000 18,000 in to RRSP, remaining 82,000, taxed at 82,000, can’t take RRSP money until 65 -you want to take the money out you have to pay tax and you can get it back, u
RESP: The government promotes this idea of saving money for your childs post secondary education by saying that if they parent contributes a certain amount of money to their childs future education the governement will try to match the amount based on their household income. If the parent contributes to their childs RRSP from birth (18 years) they would be able to maximize the amount of money they would make at the end as not only will the government try to match the amount but that money may also gain interest which will compound throughout the years which will inevitably result in a large sum of money for their child’s education. If lets say the child turns 18 and choose not to pursue post-secondary education then the parents will only get the amount of money that they contributed the rest would go back to the government.
Real estate: buy a property, agriculture, house, commerical building. Invest in Real estate investment trust. Company that buy real estate, buy their stocks. The value of the property will go up as the years go on, rent the property cash flow,.
ETF
buys a diversity SP500 of stocks, bonds, real estate, etc. The risk level is not as bad as one would be investing in so many places that you wouldn’t lose money as fast as you may if you invested in cryptocurrency but it won’t grow as fast either. ETFs uses the Index and isn’t as expensive as would a Mutual fun as there is no one person handling all your money.
