Have you ever had questions about investing that you were too embarrassed to ask? Don’t be. Making informed investing decisions includes asking questions. Here are some basic questions and answers that can help provide you with some investing confidence.
What is a mutual fund?
A mutual fundMutual fund An investment that pools money from many people and invests it in a mix of investments such as stocks and bonds. A professional manager chooses investments that match the fund’s goals for risk and return. You can redeem your fund units at any time.+ read full definition is a collection of investments, such as stocks, bonds and other funds owned by a group of investors and managed by a professional money manager. Here is how mutual funds work.
What is an advisor?
An advisor can provide advice in many areas, including: investing, financial planning, personal insurance, taxes, and estate planning. If an advisor is providing advice relating to investing in securities, they need to be registered, unless an exemption is available. Find out more about checking registration and understanding their category of registration.
How do I open an investing account?
Your local bank or registered investment firm can help you open an investing accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition. Before you open an account, figure out if you need a full-service investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition firm, discount brokerDiscount broker A stockbroker who charges lower fees to buy and sell investments, as opposed to a full-service broker. Does not provide investment advice.+ read full definition or portfolio managerPortfolio manager An investment professional who manages your investment portfolio. For example, they buy, sell and monitor investments that fit their clients’ goals and tolerance for risk.+ read full definition. This article can help you decide and help you understand the difference between a cash account and a margin accountMargin account An account you open to buy investments using money borrowed from a stockbroker. Limits apply to what you can borrow. Not available from companies registered only as mutual fund dealers.+ read full definition. You can also learn about online investment advisors which are a hybrid of a full-service investment firm and a discountDiscount When something sells for less than its normal price.+ read full definition brokerBroker A registered person who brings together someone who wants to buy investments with someone who wants to sell. Brokers often charge a fee or commission for buying and selling investments for you.+ read full definition. Here are 7 questions to ask before you invest.
What is a common share?
A common shareCommon share The most common type of stock you can buy. It represents ownership in a company and may give you the right to: – Elect directors and vote on some corporate matters. – Share in the company’s success through dividends and/or capital appreciation. – Share in any assets if the company winds up.+ read full definition is the most common type of stockStock An investment that gives you part ownership or shares in a company. Often provides voting rights in some business decisions.+ read full definition (in a company) you can buy. It represents ownership in a company and may give you voting rights – to elect directors and vote on some corporate matters. The value of the common shareShare A piece of ownership in a company. A share does not give you direct control over the company’s daily operations. But it does let you get a share of profits if the company pays dividends.+ read full definition can increase or decrease depending on the company’s success.
What is a dividend?
A dividendDividend Part of a company’s profits that it pays to shareholders in proportion to the total number of shares held. The Board of Directors sets the amount. For common shares, the amount varies. It may skip dividends if business is poor or the directors invest money in things like new equipment or buildings.+ read full definition is part of a company’s profitsProfits A financial gain for a person or company. Equals the money left over after you subtract your costs from the money you made.+ read full definition that it pays to shareholders in proportion to the total number of shares held. The Board of Directors sets the amount. For common shares, the amount varies. The company may not pay dividends if business is poor or the directors investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition money in things like new equipment or buildings. Find out more about how stocks work.
What is an ETF?
An exchange-traded fund (ETF)Exchange-traded fund (ETF) An investment fund that holds a collection of investments such as stocks and bonds, that trades on a stock exchange. It can be passively managed or actively managed.+ read full definition is an investment fund that holds a collection of investments, such as stocks or bonds owned by a group of investors and managed by a professional money manager. ETFs tradeTrade The process where one person or party buys an investment from another.+ read full definition on a stock exchangeStock exchange A market in which securities are bought and sold.+ read full definition and can be sold short or margined. You can also trade in futuresFutures A derivative contract that commits you to buy or sell a commodity, currency or stock market index at a set price on a set date in the future. Unlike an option, you can’t change your mind later; you must do what your contract says you will do.+ read full definition and optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition on ETFs. Learn more about ETFs.
What is an RRSP?
A Registered Retirement Savings PlanRegistered Retirement Savings Plan A plan that lets you save for retirement while lowering your income taxes. You choose how you want to invest your savings. You don’t pay tax on any money in your account until you take it out.+ read full definition (RRSPRRSP See Registered Retirement Savings Plan.+ read full definition) is an account, registered with the federal government, that you use to save for retirement. RRSPs have special taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition advantages. Here is how RRSPs work.
What is a TFSA?
A Tax-Free Savings AccountTax-Free Savings Account A Tax-Free Savings Account (TFSA) is a registered savings account that provides tax benefits. In most cases, investment income, including capital gains and dividends, earned in a TFSA is not taxed, even when withdrawn. There are annual contribution limits but you can carry forward any unused contribution room from previous years.+ read full definition (TFSATFSA See Tax-Free Savings Account.+ read full definition) lets you save tax-freeTax-free Money that you do not pay tax on.+ read full definition for any goal. You earn contribution roomContribution room The amount you can put into a savings plan like a Registered Retirement Savings Plan (RRSP). If you do not put the full amount into the plan each year, you will have extra, unused contribution room that you can use in later years. Example: Let’s say you can contribute $12,000 to your RRSP this year,…+ read full definition every year (even if you do not set up a TFSA. You can hold a wide range of investments in a TFSA, including cash, GICs, bonds, stocks and mutual funds. Visit our TFSA hub for more TFSA basics.
What is an initial public offering?
An initial public offering (IPO)Initial public offering (IPO) The first sale of shares that a company offers to the general public. Also called a Primary Distribution.+ read full definition is the first sale of stock by a private company to the public. It’s often called “going public”. Find out more about the 5 reasons companies go public.
What is a prospectus?
Generally, securities offered to the public in Ontario must be offered with a prospectusProspectus A legal document that sets out the full, true and plain facts you need to know about a security. Contains information about the company or mutual fund selling the security, its management, products or services, plans and business risks.+ read full definition – a document that provides detailed information about the security and the company offering it. Here is information about how to get information on a company.
How do I trade on the stock market?
Before you start trading on a stock marketStock market The collection of markets and exchanges where stocks, bonds and other securities are issued or traded.+ read full definition, learn more about where to buy stocks and stock market basics. Understand your investing personality, create an investment plan, and check registration.