| CANADA SAVINGS BONDS andONTARIO SAVINGS BONDS
• A vailable every year from October to April 1
• Can offer compounded interest
• Can be cashed in for full face value plus any accrued interest before maturity
THE RISKS
Don't pay high rates of return-aren't ideal for longer term investing. Investor will not stay much ahead of inflation. Cannot be sold at a profit on the open market
THE REWARDS
• CSB are safe investment backed by the federal government
• Sold for less than face value (at a discount)
• Will be redeemed for face value on maturity
• Can be bought & sold on the bond market.
GOVERNMENT BONDS (CDN&USD)
• Can be bought at premium or discount to face value
• Can be sold in the bond market before they mature.
• Bond market in Canada is up to 35 times bigger than the stock market
THE RISKS
• If interest rates go up and investor decides to sell prior to maturity-could have capital loss
• Bond prices are affected by interest rates, issuer's credit rating, the term to maturity, bond's coupon rate
THE REWARDS
• Conservative investors who want to earn income buy government bonds & hold them to maturity
• The returns are often better than for GICs and CSBs .Don't have to wait until maturity to earn full return .Could generate capital gains
CORPORATE BONDS AND DEBENTURES (CDN ; USD)
• They come with short and long-term maturities.
• Can be sold or bought on the open market
• Cannot tum them into the company for cash until the maturity date
• Can be sold at capital gain or loss
THE RISKS
• If company goes out of business, investor may lose his/her investment
• More risky than government bonds
THE REWARDS
• Pay higher return than government bonds
• Attractive for investors who need to live on income from investments
STRIP BONDS (GOV or CORP - CND & USD)
• Government or Corporate Bonds with the coupons removed
• Strip Bonds don't pay interest
• Sold for less than face value (at a discount)
• Will be redeemed for face value on maturity
• Can be bought & sold on the bond market
THE RISKS
• React much more strongly to interest rate changes than regular bonds
• Less liquid and more volatile than regular bonds
THE REWARDS
• Compounded rate of return
• Predetermined quantity on maturity
• Ideal investment for fixed income portion of RRSP portfolio
• Taxes must be paid annually if held in non-registered (open) plans |
