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Types of Investments

There are so many different types of investments and investment products available today.  The main investment types to be familiar with are interest accounts, bonds, mutual funds, exchange traded funds (ETFs), and stocks.

Interest Accounts include savings accounts and guaranteed investment certificates (GICs) obtained generally at regular banks but also at online banks which pay higher interest.  You put your money in the account and you are paid interest on it.

Bonds are issued by companies and governments and are available from bond dealers such as banks and brokers.  When you buy a bond you are lending your money to the company or government for a fixed period of time and for a fixed return.

Stocks are offered by companies and are traded on the stock markets.  They are available from brokerages (e.g., online discount brokerage).  When you buy stocks you are buying an actual part of the company and as such you own a part of the company and all the associated risks and rewards.

Mutual Funds consist of a selection of stocks managed by a fund manager.  When you purchase a mutual fund you are indirectly purchasing a portion of the funds portfolio of stocks.  Mutual funds are available from banks and mutual fund companies or brokers.

Exchange Traded Funds (ETFs) are similar to mutual funds except they are traded on the stock exchange and typically have lower management fees because they contain a set index of stocks and therefore are not actively managed.

Low Fee Mutual Funds, a relatively new offering, are index mutual funds which offer low fees and returns comparable to ETFs, but with the convenience of a mutual fund.  An example of a low fee mutual fund is the TD e-series mutual funds.