Long-Term Investing

Really basic types of investments

I’m semi-clueless when it comes to investing, and I need to systematize my investment knowledge. I also need to read some good books on investing for individuals. Any recommendations?

This is a list of all the basic types of investments I know, available to an individual investor in Canada:

  • Stocks: these take time to research and are usually riskier than any other type of investment.
  • Mutual Funds: must pay attention to Expense ratios, as high carrying charges can potentially kill all the profit.
  • ETF’s (Index funds): these are nice and relatively safe when the market is up. Some of the more popular – and better? – funds are quite expensive, like the Vanguard Total Stock Market for example (VTI).
  • Bonds: I don’t have either experience or interest in these. Canada Savings Bonds rates have always been below what I get in our daily savings account.
  • Canadian Money Market investments:
    Government of Canada Treasury Bills
    Government of Canada Money Market Strips
    Government Guaranteed Commercial Paper
    Provincial Treasury Bills and Promissory Notes
    Bankers’ Acceptances
    Commercial Paper

    Looks like these may offer slightly higher rates than a savings account, especially if you have at least $10,000 you can leave alone for 6-18 months. Will look into these on Monday, have to call banks to get the rates and need to read more to figure out the differences.
  • GIC’s and Term Deposits: 90% of our money is in these at the moment (savings accounts, Term Deposits and GIC’s), making us only 3.5% for $US and 4% for $CAD.
  • Cash: not an investment but always a good idea to have some easily accessible cash.

Next, I want to figure out an investment ratio that makes sense in our situation. I’ll start with TD’s Mutual eFunds application questionnaire – Wealth Allocation Model, they call it. It’s supposed to help decide on Growth/Safety/Income ratio, as well as proper foreign exposure.

If you want to take a look at their form, download the PDF (link opens up the PDF document in a new window). The work sheet is on pages 6-9.

TD also offers an online Portfolio planner.

TD is not my favorite bank, I think they are alright, but I really like their online tools 🙂