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This video is about how we can take advantage of dividend income by investing in bank stocks. Banks such as TD, Scotiabank, CIBC, Royal Bank, and BMO have very high dividend yields (between 4-7%). Banks are also one of the few businesses that benefit from high-interest rates, as they provide their customers with a small interest rate on savings accounts and use that money to take advantage of the high-interest rates by investing it.

I chose this video because I wanted to find a recent video that could be beneficial for stock investors. With interest rates being very high and Canadians experiencing the highest inflation rate in a very long time, I think it is important to find secure investments that will appreciate. Bank stocks are not only secure, but they also reward investors with dividends. I found this video gave some great insight into how the banking industry has seen depreciation in their stocks over the last few years, which makes for a great opportunity to invest as they start to go back to normality in the next few years.

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Buying Canadian Bank Stocks For Dividend Income

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This video is about mutual funds. It gives a summary of what mutual funds are, the benefits of investing in them, and compares them to a similar investment which is an ETF.

I chose this video to help me learn more about mutual funds and benefit from them. I was already familiar with mutual funds, but this video still taught me something that I did not know. It explains that there are management expense ratio fees when purchasing mutual funds. I knew about these fees, but I thought that the fees would be taken from the interest appreciation of the stocks, as opposed to being charged these fees when the stock is bought. So If I buy $100 in mutual funds with a 2% MER fee, I have to pay $2 right away. I thought it explained that better than other videos that I have seen and information that I have read.

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Mutual Funds & ETFs (Exchange-Traded Funds) EXPLAINED For Beginners

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This page explains what bond ratings are and how we can use these ratings to assess the risk of the bond. Canadian bonds are rated by companies called Moody’s, Standard and Poor’s, and Fitch. These ratings assess the risk level of each bond. The riskier bonds usually have higher yields. They are ranked from AAA-D.

I chose this website because I wanted a simple breakdown of the different ratings that are given to bonds. Something that I learned from this website that I didn’t get from other websites is that the cut-off for safe bonds is BBB. BB or anything lower is considered risky as they could default and lose an investor money.

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Just as individuals have their own credit report and rating issued by credit bureaus, bond issuers generally are evaluated by their own set of ratings agencies to assess their creditworthiness. There are three main ratings agencies that evaluate the creditworthiness of bonds: Moody's, Standard & Poor's, and Fitch. DBRS is a Canadian ratings agency that also evaluates the creditworthiness of bonds. The agencies' opinions of that creditworthiness - in other words, the issuer's financial ability to make interest payments and repay the loan in full at maturity - is what determines the bond's rating, and also affects the yield the issuer must pay to attract investors. Lower-rated bonds generally offer higher yields to compensate investors for the additional risk they carry.

How bond ratings work

Ratings agencies research the financial health of each bond issuer (including issuers of provincial and municipal bonds) and assign ratings to the bonds being offered. Each agency has a similar hierarchy to help investors assess a bond's credit quality compared with other bonds.

Investors typically group bond ratings into two major categories:

Investment grade

High-yield

Bonds with a rating of BBB- (on the Standard & Poor's, Fitch and DBRS scale) or Baa3 (on Moody's) or better are considered "investment grade."

Bonds with lower ratings are considered "speculative" and often referred to as "high-yield" or "junk" bonds.

Sources: Fitch, Moody's, Standard & Poor's and DBRS.

Moody's, Standard & Poor's, Fitch and DBRS append an indicator to their ratings to show a bond's ranking within a category. Moody's uses a numerical indicator. For example, A1 is better than A2 (but still not as good as Aa). Standard & Poor's, Fitch and DBRS use a plus or minus indicator. For example, A+ is better than A, and A is better than A-.

Remember that ratings are not perfect, and they can't tell you whether or not your investment will go up or down in value. Before using ratings as a factor in your investment selection process, learn about the methodologies and criteria each ratings agency employs. You might find some methods more useful than others.

Investment-grade and high-yield bonds

You need to have a higher tolerance for potential risk to invest in high-yield bonds than you do for investment grade.

Because the financial health of an issuer can change - no matter if the issuer is a corporation or a government - ratings agencies can downgrade or upgrade a rating. It is important to monitor a bond's rating regularly. If a bond is sold before it reaches maturity, any downgrades or upgrades in the bond's rating can affect the price others are willing to pay for it.

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Just as individuals have their own credit report and rating issued by credit bureaus, bond issuers generally are evaluated by their own set of ratings agencies to assess their creditworthiness. There are three main ratings agencies that evaluate the creditworthiness of bonds: Moody's, Standard & Poor's, and Fitch.

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This picture breaks down how Canadians use their savings. Whether they prefer using a high-interest savings account, TFSA, or RRSP. (Study taken in 2019)

I chose this image because I find it very interesting that Canadians aren't taking advantage of TFSAs and RRSPs. They prefer keeping their savings in a very low-risk savings account. I would assume that this is because most Canadians are not comfortable making their own investment decisions, while not being aware of how a TFSA or RRSP works. If they knew that they could invest in mutual funds within these accounts, which is an effortless way of growing their money, maybe they would use these accounts.

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My topic: Exploring the risks and benefits of investing in stocks, bonds, and mutual funds. I hope you enjoy reading!

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My topic: Exploring the risks and benefits of investing in stocks, bonds, and mutual funds. I hope you enjoy reading!

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This picture is a chart that I made to display the impact that compounding interest has on investments. The chart shows four stocks and their average annual yield over the last 30 years. I also showed what $10,000 would be if it were invested in each of these stocks over 30 years.

This was an interesting study, and I chose to make this chart and use this image because it shows the benefits of investing money instead of putting that money in a savings account. In 30 years, $10,000 would be $10,000 if it weren’t invested.

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This video speaks about why mutual funds are a bad choice and alternatives that investors should take. He speaks about how not only do they have high MER fees, but branches will encourage them because financial advisors need to hit a target and aren’t looking out for their client’s best interests.

I chose this video because most videos speak about the positives of investments and I wanted to hear a different side so I can find some risks to investing. I agree with portions of this video, including that mutual funds have high management expense fees that are avoidable for experienced investors. I didn’t know that some financial advisors have targets, so that was an interesting fact that I received from this video.

But I don’t completely agree with this video and it’s because many Canadians are not comfortable with direct investing. They prefer getting help from financial advisors and mutual funds are a great way to invest without knowing the stock market. It is still a better alternative than putting money into a savings account, as most mutual funds will receive a return in the long run and help your money avoid depreciation.

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Mutual Funds in Canada Are AWFUL: 5 Reasons to Avoid Them!

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This video is an interview with a financial advisor from BC named Peter Cishecki. He explains a large misconception about investing in RRSPs. Many people do not use RRSPs because they believe that the tax that is saved during the year of the contribution will just have to be paid back when the money is withdrawn during retirement. As this may be true, if contributing to RRSPs properly, you could save money by deferring the taxes from a current large tax bracket into a future lower tax bracket.

I chose this video because I wanted to do more research on the accounts that our investments are in like RRSPs and TFSAs. Learning about the benefits and risks of using these accounts is important to understand. I did not realize how tax deferrals worked until I watched this video and I’m very happy to have come across it. If I contribute to an RRSP when I am in a 26% tax bracket and withdraw from my RRSP when I’m in a 15% tax bracket, I’ll be saving a lot of money in the long term.

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Common Misconception about RRSPs in Canada

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This article explains some advantages of stock investing compared to bonds and other fixed-income securities. It explains that stocks are riskier than bonds when investing short-term, which makes stocks a better option for longer-term investors. Another advantage that stocks have over bonds is dividend income. This can be a fixed amount if investing in preferred shares or a fluctuating amount if investing in common shares.

I chose this article to gain more research on stock investing. Something that I learned was about Canadian dividend advantages. Foreign stocks also have dividends, but we gain a tax advantage from Canadian dividend income that we do not receive from foreign stocks. This gives us a higher incentive to invest in Canadian companies.

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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.
KEEP IN TOUCH

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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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Website #3: Pros and Cons to Bond Investing

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Website #3: Pros and Cons to Bond Investing

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This article gives insight into bonds including the positives and negatives of purchasing them. It explains that they can be purchased in a few ways including through a financial advisor or a brokerage by purchasing an ETF.

I chose this article because I have never invested in bonds, so I am curious about how they work. I have knowledge of them being lower-risk investments than stocks (unless purchasing high-yield bonds), but I have wondered how they are bought and this article provided me with the answer to that question. Something that this website explained that was interesting was how bond investing may be a good way to create income, but many government bonds and low-risk bonds have trouble keeping up with inflation. With inflation being very high today, investing in a bond two years ago wouldn’t have provided yields to combat the dollar depreciating through inflation.

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Bonds are a type of investment product that is less volatile than other investments, such as individual stocks.

As a fixed-income product, bonds appeal to investors who may use them to reduce the overall risk in their portfolios. How bonds fit into your investment strategy will depend on your goals, risk tolerance and time frame.

" GUIDE: Investing for Canadian Beginners

What is a bond?

When governments and companies need to raise funds, they sometimes issue bonds. Investors who purchase these bonds are essentially lending money to the bond issuer. In return, the bond issuer will pay back the loan, plus interest.

Bonds are appealing to some investors because they offer a fixed rate of return. Generally, short-term bonds pay a lower interest rate than long-term bonds.

Since bonds involve less risk than other investments, like stocks, the returns are typically lower. That said, some bonds pay a higher interest rate because the issuers may not be as creditworthy, so investors are taking more of a risk by buying those bonds.

Current interest rates can also affect bond returns. In a low-interest-rate environment, bonds will pay lower interest rates. Although investing in bonds may only yield low returns, there's little chance you'll lose money.

Types of bonds

Although all bonds are a type of fixed-income security, different types of bonds are available. The most common bonds include:

Government of Canada bonds: These bonds are of the highest quality since they're backed by the federal government.

Provincial bonds: Although the credit rating of provincial bonds is typically not as high as Government of Canada bonds, their yields are usually higher.

Municipal bonds: These bonds may have higher or lower yields than provincial bonds of similar quality due to their liquidity and other specific issues.

Investment-grade corporate bonds: Corporate-issued bonds with a rating of "BBB-" or "Baa3" or higher are considered investment-grade. Corporate bonds are riskier than government bonds, but often offer higher returns.

High-yield bonds: Bonds with a rating below "BBB-" or "Baa3" are non-investment grade and often referred to as junk bonds. While the high yield can be attractive, you have a much greater chance of losses than you would with higher-quality bonds.

Strip coupons and residual bonds: Federal, provincial and municipal bonds have two components: interest payments (coupons) and the principal amount (residual). These can be sold as individual securities.

Canada Savings Bond (CSB): Purchased through a payroll savings program, CSBs were guaranteed by the federal government and have a guaranteed interest rate. CSBs are no longer available for purchase.

How to buy bonds in Canada

Bonds may be purchased directly via a broker, such as your bank or credit union, or you can buy them through your own brokerage account.

Buying bonds directly

Anyone interested in buying bonds can go directly to their financial institution or licensed financial advisor. They'll have a list of bonds available for you to choose from, and you can typically purchase bonds via phone, online, or even in person.

Many bonds require a minimum purchase amount. Your broker will also likely charge you a flat fee to make the purchase, which is usually included in the quoted price.

Once you've purchased the bond, any interest payments will be deposited in the account you designate. This account is also where the money will be deposited when your bond matures. If you need to sell your bond early, you'd have to contact your broker.

Buying bonds through your brokerage

Investors with brokerage accounts can purchase bond exchange-traded funds, or ETFs, which give you access to dozens of bonds in a single product. Bond ETFs are designed for different purposes, so you can choose a type or timeline that meets your needs.

Bond ETF prices will fluctuate depending on current market conditions. Most brokerages charge a fee for buying and selling ETFs. Bond ETFs also charge a small management expense ratio.

Interest payments typically happen monthly and are paid directly into your brokerage account. When bonds mature, the ETF manager will purchase new bonds to generate additional income.

Pros and cons of bonds

Although bonds are typically low-risk investments, they still come with advantages and disadvantages. Consider both before deciding how to invest.

Pros of bonds

Low risk: Government and investment-grade bonds have high ratings. It's less likely you'd lose your money when investing in them compared to investing in stocks that could decrease in value.

Fixed income: Since bonds pay regular interest, they can provide investors with a steady income.

Different options available: As bond ETFs have become more popular, it's now possible to purchase a variety of bonds for a single price.

Cons of bonds

Low interest rates: Since bonds are safe investment products, the rate of return is lower than other types of investments.

May not keep up with inflation: Depending on the current interest rate environment, the return you get from bonds may not beat inflation. In other words, you could lose money by investing in bonds instead of another investment with the potential for more growth.

Some risk: Lower-quality bonds with a higher yield come with more risk.

Are bonds a good investment right now?

Investing in bonds may be a good idea if you want some fixed income in your portfolio to offset more volatile investments, such as stocks and ETFs.

The length of time before you see yourself needing bond income is also a consideration. Generally speaking, younger investors might not have as many bonds in their portfolio because they have many years of investing ahead of them before they need to access their funds in retirement. However, people who are retired or approaching retirement may want a higher allocation to bonds since they might need regular access to fixed income, and since they have less time to bounce back from any decreases in the value of more volatile investments.

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What is a Bond and How do Bonds Work in Canada? - NerdWallet

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Bonds are a type of investment product that is less volatile than other investments, such as individual stocks. As a fixed-income product, bonds appeal to investors who may use them to reduce the overall risk in their portfolios. How bonds fit into your investment strategy will depend on your goals, risk tolerance and time frame.

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This article summarizes the positives and negatives of a TFSA. TFSAs have many benefits including tax-free interest on investments within the account and a contribution room that builds every year. Some of the disadvantages of a TFSA include no income tax reduction and unlimited withdrawals (this could be a positive feature for some, but some people appreciate barriers that stop them from touching until retirement or another financial goal).

I chose this article because I could not think of any negative aspects of a TFSA. I always thought that TFSAs had no negative qualities. One negative quality that was mentioned was that there is no protection from creditors. If you go through a bankruptcy or lawsuit, they have the right to take money from this account. An RRSP has protection, but TFSA does not.

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Tax-Free Compounding:

Investments inside a TFSA grow tax-free. This lets your investment compound faster without the drag of annual taxes. How much is this tax-free compounding worth? Potentially $100,000's.

Someone who contributes about $3,500 to their TFSA each year for 40 years will have an additional $358,963 in tax-free growth!

Check out the two charts below for more details.

No Barrier To Withdrawals:

TFSA withdrawals can be made at any time and without any withholding tax.

Share Contribution Room With A Spouse:

Because TFSA contributions are made with post-tax dollars the government doesn't care if gift money to your spouse to make contributions to their TFSA. This means you can share contribution room with your spouse and maximize their tax-sheltered space too. (You cannot do this with an RRSP, unless you want to get audited that is)

Contribution Room Is The Same, Regardless Of Income:

Regardless of your income, the contribution room for a TFSA is the same. This is great for low and moderate income earners. For these households it's possible to tax-shelter a higher % of their income. The average Canadian family can shelter 32% of their income in tax sheltered accounts. Thanks to the TFSA, this increases for low income earners.

Contribution Room Returns The Next Year:

When you make a withdrawal from your TFSA the contribution room will come back the following year on Jan 1st. This means you can use a TFSA to save for short/medium term goals like a down payment or a wedding.

No Mandatory Withdrawals:

There are no mandatory withdrawals with a TFSA. You can let a TFSA grow tax-free for your entire lifetime. RRSPs have forced withdrawal rates after age 71.

Withdrawals Won't Impact Government Benefits:

Making a withdrawal from a TFSA won't count as income. This means there is no impact on government benefits.

This is especially helpful for low-income seniors who receive benefits with high claw back rates, sometimes as high as 50% to 75% of the next dollar earned (read more about high marginal effective tax rates for retirees).

No Tax Upon Death:

Because TFSAs are tax-free there is no tax upon death. This means you can transfer your assets to your children without any impact from taxes.
Related Posts:

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Understanding TFSAs: The 8 Benefits (And 3 Drawbacks) of TFSAs | PlanEasy

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Investments inside a TFSA grow tax-free. This lets your investment compound faster without the drag of annual taxes. How much is this tax-free compounding worth? Potentially $100,000's. Someone who contributes about $3,500 to their TFSA each year for 40 years will have an additional $358,963 in tax-free growth!

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

Something that surprised me was the RRSP tax deferral. I knew that RRSPs gave contributors tax benefits, but I never realized that we eventually will pay those taxes when we withdraw from the RRSP. It makes a lot more sense now that we should try saving contribution room for when we are in a high tax bracket, as when it’s being withdrawn during retirement, we will be in a lower tax bracket and it will save money.

Another surprising fact was how more Canadians were using savings accounts over investment accounts like TFSAs and RRSPs. If educated better, I believe that they would be more comfortable investing their money instead of letting it sit in an account with low interest.

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

It is very interesting to me because I’m frugal with my money, which helps me save. If I am going to save my money, I want it to grow. Investing in different assets is the best way to make that money grow. Other areas that I have researched in the past on how to grow my money are real estate investing and starting a business. I feel like stock market investing is the easiest way to invest my money, but it comes with a risk. This assignment was a good way to see the risks and benefits so I can make wise decisions about how I invest in the future.

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?

There were so many facts that I could pass on that I learned from this assignment. If I had to choose one, it would be to invest in Canadian banks. These seem like great investments to expect appreciation, build compound interest, and receive dividends. Not only do they provide high dividend yields but investing in Canadian companies gives tax benefits that we don’t receive from U.S. stock dividends. Finding companies that will continue to grow could be hard, but I feel like we can trust that our banks will grow through investing money that consumers are storing in their accounts.