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
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 🙂