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Today we will discuss the possible risks and benefits associated with Stocks, Bonds and Mutual Funds. After viewing this Padlet you will better understand why people invest in these assets and the different long-term/short-term benefits of each investment. As the world continues to innovate, I believe investing is one of the keys to success.

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This video does a great job of explaining what Stocks, Bonds and Mutual Funds are and how they differentiate from each other. The narrator in the video gives a breakdown of each investment and relatable examples that you can use to better understand each investment. During the video, the narrator mentioned an important statement about bonds: the length of the term being offered depends on the time your money will be tied up.

I had chosen this video compared to the multiple other videos because of the simplicity and examples that the narrator used. Compared to the other videos I had watched, this video was short, simple, and straight to the point. Not only were the examples that were used in the video perfect to help me get a better understanding, but some visuals made it more engaging. The other videos that I watched were all boring and basic.

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Stocks, Bonds and Mutual Funds Explained

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This article is the government of Canada’s information on investing. This website offers different topics of investment such as types of investments, Common investment terms, the risk level of investments, how taxes apply to investments and fees and costs of investments. You can select the type of investment you are interested in and gain all the necessary information once it takes you to the page of information. This website doesn’t only cover Bonds, Stocks and Mutual Funds but also ETFs, GICs, Security, T-bills, etc.

I had chosen this website compared to the others cause not only does it cover my topics for this assignment, but it also offers other investment information that can be helpful when looking to invest. This website is also brought to us by the Canadian Government, which is a commonly known source and compared to other sites has more trust. One thing that I learned from this website is different questions that I can ask myself to determine my risk level. I answered the questions on the website and it was determined that I have a low-medium risk level.

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personal finance; investments; securities; stock markets; savings; bonds; fees; costs; taxes; banking

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Common types of investments, their risk levels, costs and fees. Understand common words used when investing.

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Although there are a lot of benefits to investing, this video talks about the risks of investing in bonds. The narrator sits down and uses visual aids to help explain the different risks that are involved in bonds. This video is extremely important in today’s world as interest rates are still rising and inflation is going up. The value of bonds is going to drop and interest rates continue to rise. After watching the video, you can conclude that bonds have lower risks with a lower reward compared to stocks.

I had chosen this video because it is important to learn the risks of investments, specifically bonds. I had chosen to do a specific video on the risks of bonds because bonds typically have a repertoire of a low-risk low reward system. I wanted to watch a video where it talks about the different risks involved with bonds and what may affect them. I learned a whole bunch of new things in this video, in specific how interest rates have such a big impact on the success of a bond.

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This article summarizes the key benefits of investing in stocks. Although this article only covers stocks, I found it extremely beneficial and the majority of the other videos and websites express Bonds and Mutual Funds. One of the key points stated on the website is that stocks can help build your savings, protect your pockets and maximize income from investments. The article also uses visual aids to help gain a better understanding of the benefits of investing in stocks. The article also talks about the different types of stocks and the different benefits each one presents. Not only does it use visual aids, but it uses good formatting and different types of charts/tables which make it more easier and engaging to read.

I had chosen this website compared to the other websites because I felt it was important to determine the key benefits of investing in stocks. I felt this was the best website to do this because it offered multiple visual aids and charts/tables to display the information. One thing that I learned on this website is the number of different stocks you can invest in and the different benefits it offers. I found this interesting because although I knew there were different stocks to invest in, I can use this to benefit myself when investing in stocks.

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Stocks can be a valuable part of your investment portfolio. Owning stocks in different companies can help you build your savings, protect your money from inflation and taxes, and maximize income from your investments.

Let's look at these three benefits in detail.

Build. Historically, long-term equity returns have been better than returns from cash or fixed-income investments such as bonds. However, stock prices tend to rise and fall over time. Investors may want to consider a long-term perspective for their equity portfolio because these stock-market fluctuations do tend to smooth out over longer periods of time.

Protect. Taxes and inflation can impact your wealth. Equity investments can give investors better tax treatment over the long term, which can help slow or prevent the negative effects of both taxes and inflation.

Maximize. Some companies pay shareholders dividends ¹ or special distributions. These payments can provide you with regular investment income and enhance your return, while the favourable tax treatment for Canadian equities can leave more money in your pocket. (Note that dividend payments from companies outside of Canada are taxed differently.)

Different Stocks, Different Benefits

The two main types of equity investments below can each offer investors different benefits.
1. Common shares
Common shares are the most (you guessed it!) common type of equity investment for Canadian investors. They can offer:

Capital growth. The price of a stock will go up or down over time. When it goes up, shareholders can choose to sell their shares at a profit.

Dividend income. Many companies pay dividends to their shareholders, which can be a source of tax-efficient income for investors.

Voting privileges. The ability to vote means shareholders have some measure of control over who runs the company and how.

Liquidity. Typically, common shares can be bought and sold more quickly and easily than other investments, such as real estate, art or jewellery. This means investors can buy or sell their investment for cash with relative ease.

Advantageous tax treatment. Dividend income and capital gains are taxed at a lower rate than employment income and interest income from bonds or GICs.
2. Preferred shares
Preferred shares can offer investors the following benefits:

Reliable income stream. Generally, preferred shares come with a fixed dividend amount that must be paid before any dividends are paid to common shareholders.

Higher income. Compared to common shares, preferred shares tend to pay higher dividends. (Note: preferred-share dividends come with the same advantageous tax treatment as dividends on common shares.)

Variety. There are many types of preferred shares, each with different features. For example, some allow for unpaid dividends to accumulate, while others can be converted into common shares.
The Advantages of Dividends
Dividends are a way for companies to distribute a portion of their profits to shareholders. Typically, dividends are paid in cash on a quarterly basis, although not all companies pay dividends. For example, companies that are still growing might choose to reinvest their profits back into their business to help grow it.

For investors, dividends can offer advantages in areas such as:

Returns. Receiving dividend payments on your stock can increase the total return on your investment.

Volatility. Dividends can help lower volatility by helping support the stock price.

Income. Dividends can provide investors with investment income.

Stability. Companies that manage their cash flow effectively tend to maintain consistent or growing dividend payments. Business stability and earnings growth often leads to a higher share price over time.

Taxation. Canadian dividends are taxed at a lower rate than interest income from bonds or GICs.

Example: This table shows how the after-tax yield of a dividend is higher than the after-tax yield of interest from a fixed-income product because of tax credits. This example uses the highest marginal tax bracket for an Ontario resident in 2018.
Fast Fact: Did you know that you can automatically reinvest your dividends?
You can choose to have RBC Direct Investing automatically reinvest the cash dividends you earn on eligible securities into shares ² of the same securites on your behalf. Read more about how a Dividend Reinvestment Plan (DRIP) works.
The information provided in this article is for general purposes only and does not constitute personal financial advice. Please consult with your own professional advisor to discuss your specific financial and tax needs.
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RBC Direct Investing Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. RBC Direct Investing Inc. is a wholly owned subsidiary of Royal Bank of Canada and is a Member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. Royal Bank of Canada and certain of its issuers are related to RBC Direct Investing Inc. RBC Direct Investing Inc. does not provide investment advice or recommendations regarding the purchase or sale of any securities. Investors are responsible for their own investment decisions. RBC Direct Investing is a business name used by RBC Direct Investing Inc. ® / ™ Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. Used under licence. © Royal Bank of Canada 2019. All rights reserved.

¹ Dividends earned pursuant to DRIP may be subject to requirements imposed by the Income Tax Act (Canada). It is your responsibility to ensure that any associated tax requirements or obligations are satisfied.

² The list of DRIP eligible securities is subject to change at any time without prior notice. RBC Direct Investing will purchase whole shares only. Some exclusions may apply. Some eligible securities such as preferred shares and voting class common shares will not reinvest into additional units of the same security but rather the underlying non-voting common share or similar security.

The views and opinions expressed in this publication are for your general interest and do not necessarily reflect the views and opinions of RBC Direct Investing. Furthermore, the products, services and securities referred to in this publication are only available in Canada and other jurisdictions where they may be legally offered for sale. If you are not currently resident of Canada, you should not access the information available on the RBC Direct Investing website.
> Next: Stocks: Understanding the Risk-Return Relationship

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Stocks can be a valuable part of your investment portfolio. Owning stocks in different companies can help you build your savings, protect your money from inflation and taxes, and maximize income from your investments. Let's look at these three benefits in detail. Build.

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This video talks about investing in Mutual Funds and the multiple benefits they can provide. Mutual Funds are personally one of the best investments one can make because of the low risk and diversification it allows. In a mutual fund, once you purchase a share, you have a stake in one small fraction of all investments in the fund. This is a perfect investment for those who don't have a lot of knowledge in investing as it is typically managed by financial professionals. When the value of the shares goes up in value, the fund shares do the same and are calculated whenever the market closes.

I had chosen this video because of the simplicity and visual aids the video brought to help me understand what a mutual fund is. The video was also presented by TD, a well-known bank in Canada which is also why I chose this specific video. Compared to the other videos, this video spoke about what a mutual fund is, how to invest in one, and the risks and benefits included. I think that I learned from this video that certain funds may have different objectives. Some may look for riskier stocks and some may invest in more stable companies.

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This website summarizes how to invest in Bonds in Canada. Just like the previous website, it doesn’t talk about Mutual Fund but talks about Bonds and how to invest in them. This is important for those interested in investing because Bonds offer diversification which is beneficial for your portfolio. Depending on the bond you invest in, it will pay dividends monthly which then provides a reliable cash flow. Using reliable cash flow, you can then spend more on other investments. Bonds are typically less risky than stocks but have a lower reward. There are two ways of investing in Bonds in Canada. The first way is to purchase a bond through your brokerage account. The second way to purchase bonds is directly from the government or corporation by way of a financial broker.

I had chosen this website compared to other websites because of how it focused strictly on bonds and how to purchase them. This website walked through all aspects of investing in bonds which is extremely beneficial for those interested in investing. Compared to the other websites, this website is well formatted making it easy to read and uses visual aids to help gain a better understanding. One thing I learned from this website is that bonds are almost essential when investing. Bonds having the benefit of adding diversification to your portfolio is a major benefit to those investing.

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Although Stocks and Bonds are typically mentioned together, they are different and this video does a great job explaining each investment. Prior to watching this video, you may have little to no information on stocks and bonds but after watching you will gain a better understanding of each investment. The video explains how a bond is a loan investment, which essentially means loaning money to a company, government or municipality. The video explains that a stock is an own investment, where an investor who purchases stock actually owns a piece of that company. The video then uses visual aids and examples to help gain a better understanding of each investment.

I had chosen this video compared to the other videos because this was a simple and effective video that compares the differences between stocks and bonds. Although this video did not include mutual funds, I found it important to have a video that compares stocks and bonds because they are typically two investments that are put together. People typically try to determine whether they should invest in stocks or bonds, and after watching this video, I think a decision can be made. One piece of information that was useful is when the narrator was talking about bonds and how the loan agreement ends when the bond reaches its maturity.

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What's the Difference Between Bonds and Stocks?

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This website summarizes the risks involved with investing in Mutual Funds. With Mutual Funds, the higher the investment is the more risk is involved. Emerging markets are a big part of Mutual Funds as they tend to have greater risks or a larger drop in value. The website lists six different risks; market risk, liquidity risk, credit risk, interest risk, country risk and currency risk. A way to asses a risk is by checking your returns on a year-to-year basis.
I had chosen this website compared to the other websites because Mutual Funds tend to involve more risk than bonds and stocks. This website goes into great detail about the risk of Mutual Funds and all the information you should need when investing. Out of the last 3 websites, I found this website to be the most informative and beneficial. One thing that I learned from this website is what happens if a firm goes bankrupt. Mutual funds may be covered by one of two investor protection funds. You have to file a claim within 180 days after the firm declares bankruptcy.

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The level of risk in a mutual fund Mutual fund An investment that pools money from many people and invests it in a mix of investments such as stocks and bonds. A professional manager chooses investments that match the fund's goals for risk and return. You can redeem your fund units at any time. equity Equity Two meanings: 1. The part of investment you have paid for in cash. Example: you may have equity in a home or a business. 2. Investments in the stock market. Example: equity mutual funds. fixed income Fixed income An investment that pays regular income to you. Examples: Guaranteed Investment Certificates, Canada Savings Bonds and types of other bonds. + read full definition depends on what it invests in. Usually, the higher the potential returns, the higher the risk will be. For example, stocks are generally riskier than bonds, so an + read full definition fund tends to be riskier than a + read full definition fund.

Some specialty mutual funds focus on certain kinds of investments, such as emerging markets, to try to earn a higher return. These kinds of funds also tend to have a greater risk of a larger drop in value.

6 common types of risk

Type of risk

Type of affected

How the fund could lose money

Fixed income securities

If a can't repay a bond, it may end up being a worthless investment.

5. Country risk

Foreign investments

The value of a foreign investment declines because of political changes or instability in the country where the investment was issued.

Assessing risk

One way to assess a fund's level of risk is to look at how much its returns change from year to year. If the fund's returns vary a lot, it may be considered higher risk because its performance can change quickly in either direction.

How your investment is protected

Because mutual funds are securities - and not deposits - they're not protected by the Canada Deposit Insurance Corporation (CDIC) or other deposit insurance. But other safeguards are in place to protect investors:

third-party custodian - holds the assets of a mutual fund. This is usually a trust company or chartered bank

independent auditor - reviews and reports on the fund's financial statements Financial statements Reports that sum up a company's financial data and tell you how it is doing. The four basic statements are: the statement of financial position (balance sheet, statement of profit or loss (income statement), cash flow statement, and statement of changes in equity. + read full definition each year.

If a firm goes bankrupt

Your mutual funds may be covered by one of two investor protection funds. You must file a claim within 180 days after the firm declares bankruptcy.

These investor protection funds do not cover losses from other causes, such as changing market values of securities, unsuitable investments or the default of an issuer of securities.

1. Canadian Investor Protection Fund (CIPF)

The CIPF provides protection of up to $1 million to eligible customers of a firm that is a member of:

2. MFDA Investor Protection Corporation (IPC)

The IPC is an investor protection fund of the Mutual Fund Dealers Association of Canada (MFDA). It provides protection of up to $1 million to eligible customers of MFDA members.

Key point

The level of risk in a mutual fund depends on what it invests in. Usually, the higher the potential returns, the higher the risk will be.

Take action

Minimize your overall risk by holding a variety of investments. Before you decide on a mutual fund, figure out how it fits with the rest of the investments you own.

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Like most investments, mutual funds have risk - you could lose money on your investment. The value of most mutual funds will change as the value of their investments goes up and down, so the risk of the fund depends on what it invests in.

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This image demonstrates a clear comparison of Bonds and Stocks. If you were in a situation where you wanted to invest in a stock or bond, but don't know which one you want, this image helps you get a breakdown of each. Just getting a glance at the image, you can already see that bonds have a lower risk with a lower reward and stocks have a higher risk with a higher reward.

I had chosen this image compared to the other images because this image provided multiple differences between each investment. This image also allows you to make quick decisions if you wanted to invest in a stock or bond quickly.

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I had chosen this image because it shows the full cycle of a Mutual Fund. Those that have never heard of a mutual fund can look at this image and get somewhat of an understanding. The image shows the beginning, middle and ending parts of investing in a mutual fund which can help a lot of beginner investors.

I had chosen this image compared to the others because this image lets you see each step in the mutual fund cycle. A lot of the other images showed the simple process of a mutual fund, excluding the steps like "invests with securities" which is less detailed than the one I had provided.

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1. What did you learn about your topic that surprised you the most?

After exploring the different benefits and risks associated with Stocks, Bonds and Mutual Funds, I learned a lot of new things that can potentially benefit me in the future. One thing that surprised me the most while researching this topic is how beneficial and easy it is to invest in Mutual Funds. Mutual Funds not only allow you to set yourself a budget on how much you want to invest but if you don't have a lot of knowledge or experience with investing you can get someone to do the work. This surprised me the most because this can benefit multiple people, although you may have to pay for someone to invest for you, you have a professional investing your money effectively.

2. Provide a real-life example of how this topic is relevant or interesting for you?

Relating to the point that surprised me the most, I can provide a real-life example that shows why this topic is relevant/interesting. For example, a person like myself where I have little to no experience or knowledge in investing can hire a professional to do all the investments for me. Although I am not able to understand how to invest by myself, I have a professional managing my money and don’t have to worry about changing things often.

3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

If I could pass my knowledge to a family member or friend, I would pass on the important information about Mutual Funds. This relates to the last two reflective questions as I find it extremely beneficial to hire a professional to help invest if you don't have much knowledge of investing. I think it is important to pass this message on because it can be a potential easy passive income. I would also suggest all the information that was provided in Image #1 as it is key information that is needed when deciding to invest in bonds and stocks. Everyone had different standards and expectations, some may have more/less risk tolerance. Based on risk tolerance and other factors, family/friends will have a better understanding of what to invest in.