Bonds

Canada Savings Bonds and Ontario 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 and 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 -CDN and 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

 

Find Branch/ATM

Enter address, postal code or branch name