Lender investors, in effect, loan their money to an institution in return for interest payments. This “loan” might be in the form of a bond, GIC or Treasury bill.

Owner investors actually become partial owners of the companies in which they invest. As such, they are paid a portion of the company’s earnings. These investors typically buy equity investments, like stocks or real estate.

Lending Investments

(Cash/Cash Equivalent and Income)

Savings Account

  • An account held with a financial institution
  • Safe vehicle for short-term savings of any amount
  • High liquidity (easy to cash)

Canada Savings Bond (CSB)

  • A special type of bond issued by the federal government, purchased through financial institutions
  • Available only at specific times
  • Pay a fixed interest rate, subject to periodic adjustment by the government
  • Safe, guaranteed by the government and highly liquid (although the new Canada Premium Bond is only cashable once a year on its anniversary date)
  • Unlike other bonds, cannot be traded
  • Available in various amounts and for as little as $100

Government Treasury Bill (T-Bill)

  • Short-term investment: terms of one month to a year (considered a cash-equivalent)
  • Safe, government-backed
  • Don’t pay a specified interest rate, rather T-Bills have a face value; you purchase them at a “discount” (less than the face value) and then redeem it at face value; the difference is your return
  • Available in different amounts starting at $1,000
  • Can be purchased from most financial institutions

Term Deposit / Guaranteed Investment Certificate (GIC)

  • Term investments offered by financial institutions for a set period
  • Terms range from less than a month to 10 years.
  • “Market-linked” GICs guarantee principal, but returns are linked to some stock market index
  • Terms range from less than a month to 10 years
  • Available in various amounts

Bankers’ Acceptance (BA)

  • Short-term debt issued by corporations that is guaranteed by a bank
  • Highly liquid (terms to maturity of less than a year)
  • Considered safe, low-risk
  • Purchased at a discount on the “face value”, the amount you will receive when the debt matures
  • Offer a fixed return, based on the difference between the discounted purchase price and the face value
  • Largely used by high net worth individuals, as they are typically available in amounts of $100,000 and up

Commercial Paper

  • Similar to BAs, but without the guarantee of a bank
  • Available through financial institutions

Government Bond

  • Issued by the federal and provincial governments and available through most financial institutions
  • Set at fixed interest rate, for a specified term
  • Safe (guaranteed to maturity by the issuing government) and liquid
  • Come in terms of one to 30 years
  • Can be sold in the bond market before maturity

Corporate Bond

  • Issued by a corporation and available through a brokerage house
  • Set at fixed interest rate, for a specified term
  • Backed by specific assets of the issuing company
  • Come in terms of one to 30 years and in various types
  • Can be sold in the bond market before maturity

Type of corporate bond, but not secured by specific company assets. Simply based on the general reputation of the issuing company.

Mortgage-Backed Securities

  • Fixed-rate investments that represent an ownership share in a pool of mortgages insured by the federal government’s Canada Mortgage and Housing Corporation
  • Minimum investment of $5,000; terms range from one to 10 years
  • Receive a monthly payment that is a blend of principal and interest accruing from the pool of mortgages

Owner Investments


Stocks are issued by corporations where the investor becomes a partial owner of the corporation by buying shares (also called stocks) of the company. There are two main categories of stocks: “common” and “preferred.” These are described in more detail below. Stocks are traded on stock exchanges, or over-the-counter markets. Share prices and returns on stocks fluctuate with the market, and there is no guarantee of income.

Common Shares / Stock

  • With common shares, investors typically have voting rights
  • Common shares are usually purchased for potential capital appreciation
  • If the company makes money, investors share in the profits; if the company suffers a poor year or the markets decline, their share values may fall and dividends are unlikely
  • Blue Chip Stocks are typically stocks of large, stable and actively traded companies with a record of regular dividend payments
  • Penny Stocks are low-cost common shares (typically under $1), usually purchased for speculative purposes and issued by start-up or unproven corporations seeking capital for expansion
  • Small-, Mid- and Large-Cap Stocks are the results of corporations of all sizes issuing common shares to raise money; generally, the smaller the corporation, the higher the risk

Preferred Shares / Stock

  • Are regarded as bond-like investments
  • Normally purchased by investors who want a steady stream of dividends, rather than capital appreciation
  • Pay a dividend that is higher-yielding than common shares
  • Value and share price influenced more by interest-rate trends than by company’s earnings
  • Don’t typically give voting rights
  • They are preferred because you get a preferential claim to the assets/profits ahead of common shareholders

Precious Metals

  • Gold, silver and other precious metals
  • Held in form of bullion (the actual metal) or certificates of ownership


  • Bulk goods such as grains, metals, oil and foods
  • Traded on commodities exchanges.


  • A security whose value depends on the market value of something else, such as a stock or commodity
  • They are complex investments used by sophisticated investors for speculative purposes or to help manage risk (as a hedge against changing market conditions)
  • “Options” and “futures” are examples of derivatives; an option gives the investor the right to buy or sell a specific security at a given price before a specified date; a futures contract obligates the investor to buy or sell a specified amount of an asset at a set price on a certain date

Mutual Funds

A mutual fund is an investment product — made up of several investors’ contributions — where a professional fund manager invests in a variety of securities. This pool of wealth might be invested in a specific market or geographic sector, in blue-chip companies or in small company stocks. There are also “green” funds that only invest in environmentally friendly companies. The manager monitors the investments on an on-going basis.

Because mutual funds are overseen by a manager, investing in them frees up individual investors from having to continually research and manage their own investments. Mutual funds are also appealing because they:

  • Offer access to a wide range of investments
  • Are widely available (most financial institutions have a broad assortment on offer)
  • Are easy to buy (you can buy mutual funds through regular account withdrawals at most financial institutions)
  • Give you the opportunity to have “instant diversification”

All mutual funds charge the Management Expense Ratio (MER), which is the annual cost of managing and operating the fund. But there are other fees, too. It’s important to inquire about fees that include:

  • Acquisition or disposal fees (“no load” mutual funds are those that don’t charge this fee)
  • Initial fee (this “front-end load” is charged when you buy a mutual fund)
  • Selling fee (this “back-end load” is charged when you sell a mutual fund)

Real Estate

Some people put their money to work in other areas of investments. One of the most common is real estate. With this type of investing, owners may be able to earn rental income and — assuming real-estate prices continue to rise — see their capital investment appreciate over time.

Ways to invest

  • Buy a house, live in it, possibly spend some time and money improving it, and sell it later at a profit
  • Buy income property (such as an apartment block or a commercial building) and rent it out
  • Buy land and hold it until it rises in value


  • Excellent protection against inflation


  • Can be difficult to convert into cash
  • It’s a specialized type of investment that requires study and knowledge of the market

Capital gains
If you’re venturing into real-estate investing, you need to brush up on the concept of capital gains.

Capital gains are profits realized from the sale of a capital asset such as a share, bond or real estate (if the real estate is not your principal residence). If a share is bought at $26 and sold at $30, there’s a capital gain of $4. These profits are tax-deferred, which means you don’t have to pay the tax on them until the asset is sold.

In 2000, the Government of Canada reduced the capital-gains inclusion rate from three-quarters to one-half. The inclusion rate is the portion of a capital gain that is subject to income tax. As a result, Canada’s typical top tax rate on capital gains is now about two percentage points lower than in the United States.

If you buy property for the sole purpose of renting it out (rental property), you will be required to pay capital gains tax if there is a capital gain on the property. For instance, if you bought property for $200,000, and at the time of sale, it is worth $250,000, you will be taxed on the $50,000 gain on the property. If however, you are selling your principal residence, and make a profit on the sale, you will not be subject to capital gains tax.

Retirement Plans

Saving for retirement is all about balancing what you need for today with what you will need for tomorrow.

Getting it right starts with having a plan. Canadians have three possible sources of retirement income to consider: employer-sponsored retirement plans, government benefits, and their own savings and investments.

What they are and how they work

  • Plans that help individuals set aside money to be used after they retire
  • Federal income tax is not immediately due on money put into a retirement account or on the interest it makes
  • Income tax is paid when money is withdrawn
  • Penalty charges apply if money is withdrawn before retirement age
  • Income after retirement is usually lower, so tax rate is lower

Types of Retirement Plans

  • Employer-sponsored retirement plans
  • Government pensions
  • Your own savings and investments