You work hard for your money, so you should get your money working hard for you.
There are many ways to invest. Choosing the right financial instruments depends on your stage of life, your risk threshold, and your personal financial goals. Effective investing strikes a balance between the potential return you want with the level of reasonable risk you are prepared to accept. Investing isn’t a gamble. It’s a matter of making informed decisions and carefully managing your money. Many investments are also based on compounding interest, so it’s important as a public servant that you put your money to work as early as possible in order to make the most of it.
There are many investment options available and we recommended that you seek professional advice when considering your financial future. Connect with a Tradex advisor to customize a plan that will achieve your financial goals.
Cash and Equivalents
Cash and equivalents include money in your bank account and “cash-like” investment options such as treasury bills and money market funds. Your money is generally very safe in these options, and you have easy access to it, but the rates of return tend to be low.
The Tradex Investment Savings Account is a good example of this type of investment. It’s a place to park your money for shorter terms, perhaps while you are investigating other options or saving for a short term objective.
Fixed Income Securities
Fixed income securities are based on debt. When you buy a bond or another fixed income security, you are lending your money to a government or company for a certain period of time. In return, you receive the face value of the investment and interest at the end of the bond’s term.
These options are generally low risk and provide a better rate of return than cash equivalents because you are taking some risk by lending out your money for a longer period of time.
Fixed Income options through Tradex include Guaranteed Investment Certificates (GICs) and the Tradex Bond Fund.
Stocks or “equities” are basically a stake in a business. When you purchase equity, you become part owner of the business you are investing in. Compared to fixed income securities, stocks can provide relatively high returns, but you are at risk of losing some or all of your investment.
The long term returns realized from the various asset classes can vary significantly and are related to the risk.
You can purchase stocks through our partner’s online brokerage service Qtrade Investor.
A mutual fund is a collection of stocks and/or bonds. The fund is similar to a company that unites the contributions of many individuals and invests their money in a diversified portfolio of stocks, bonds and/or other securities. Each individual investor owns shares or units that represent a fraction of the total holdings of the fund. The majority of the income earned by the fund is distributed over the year to the fund’s unitholders. This income is generated by the holdings of the fund as its stocks and bonds provide dividends and interest. Usually the capital gain produced by sales of the fund’s securities is passed on to the investors as well. In some cases, individuals can recognize additional profit by selling their units in the event that the fund holdings have increased in price and the fund manager has not sold the assets already. In this last case, the investor loses any stake in further increase that the fund benefits from, as they have sold their units.
By investing in mutual funds you get the huge benefit of professional management of your money. You also benefit from mutual funds through diversification. You are investing in units of a pool of many assets and, in theory, losses on a few of the assets in the pool are less likely to affect the value of your shares than if you had owned stocks directly in a falling asset.