Stocks

Common Shares

• Investor becomes a part owner of the company
• Shares in the profits of the company if it does well
• The price for common shares is set by supply & demand forces

The Risks

• Risky investment; investor can lose all of his invested capital
• Common shareholders are last in line to get money out of what's left, when a bankrupt business is wound up
• Shares rise & fall in value in the short term

The Rewards

• Common shares as a whole have given investors higher returns than most other investments in the long run.
• To get most out of owing common shares investors need to hold them in portfolio for 5,10 or more years

Prefered Shares

• Special type of stock that regularly pays a set amounl
of the company's profits
• Dividends paid every three months
• Have a prior claim on the company assets ahead of common shareholders

The Risks

• Preferred share prices react to swings in interest rates -Risk that the company will do badly and will not pay dividends.

• Dividend income is taxed less heavily, leaving an investor with a bigger actual return (after tax)

The Rewards

• Yields on many preferred shares are higher than on other fixed income investments
• Investor can make a profit by selling preferred shares after interest rates go down

Mortgage Backed Securities

• Low risk, attractive fixed income investment, insured by CMHC
• Come with a government-backed guarantee of payment of principal & interest
• Usually issued with a five-year term
• Available in $5000 units

The Risks

• Investment returns are comparable to GIC and higher than Government of Canada bonds
• Liquid investment; can be sold on secondary market -Timely cash flow; monthly payments of interest and principal are guaranteed

The Rewards

 • Low risk investment
 

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