Stocks and bonds have a higher risk than savings accounts, Guaranteed Investment Certificates (GICs), or Canada Savings Bonds (CSBs). They are often considered to be a better choice for more experienced investors or for investors who work with an adviser.

Before you buy stocks, you must have an investment account. You can open an account at a financial institution such as a bank or investment company.

Five things you should know before you buy stocks and bonds:

1. Understand the risk. Stock prices can change often and for many reasons. The price of bonds can also change. So, you have to consider the chance that you might lose money when you buy and sell either stocks or bonds. 

2. Watch out for hot tips. You may hear a friend, or someone from work, say that you could make a lot of money with a certain stock or bond. Someone you don’t know may even call you to tell you about a hot tip. If all these hot tips were true, there would be a lot more rich people. In fact, people lose a lot of money this way. Pass up these tips and, instead, get good advice from a registered adviser you know and trust.

3. Don’t buy when the price is at a high point. People often hear stories about a stock that is climbing higher and higher in price. More people may decide to jump in and buy the stock, driving prices up more. The price can fall just as fast, though, as investors start to sell to cash in on the big gains. Be careful not to get caught up in this kind of stock buying.

4. Don’t rush to sell if the price drops. Some people make the mistake of selling as soon as a stock or bond price falls. Remember: you don’t lose money on a stock or bond until you sell it. If you hold on, the price may come back up. Again, an adviser can help you decide when it’s time to sell.

5. Know what can affect the price of your investment before you buy it. Some people buy stocks and bonds without really knowing the kinds of things that can affect their value. For example, changes in the economy can affect stocks. Changes in interest rates can affect bonds or mutual funds that invest in bonds.

 

Tip for young investors: In Ontario, you will likely have to be at least 18 years of age to open an investment account. If you are under age 18, your financial institution may suggest that your parents open an account “in trust” for you.  When you turn 18, the account can be transferred to your name.

Remember: Prices of stocks and bonds may go up and down a lot.

Don’t buy these investments if you don’t understand them. Or, work with a professional adviser who can help you choose the right stocks and bonds for you.