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Investing 101 for Newcomers to Canada: Understanding Investment Products (Part 2)

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Welcome back! In Part 1 of Investing 101, we learned about the many benefits of investing and how investing is different from saving. Now, in Part 2, we will introduce you to different types of investment products in Canada. These products  may play a significant role in investing to achieve your financial goals and secure a prosperous future for you and your family.

But before we dive into the world of investment products, let’s explore how investing helps build wealth:

Investing is like planting seeds that grow over time. When you invest your money wisely, it has the potential to grow faster. Instead of letting your money sit idle, investing allows it to work for you. With patience and the right investment decisions, your money may grow, giving you the opportunity to achieve your dreams and aspirations.[1]

Now, let’s explore the various investment plans and products available in Canada:

1) Registered Plans:

Registered plans are accounts that encourage saving and investing. These accounts come with tax benefits, meaning you can save on taxes while building your wealth.

How do registered plans work?  Registered plans are registered with the federal government and offer tax advantages. The money that you contribute to these plans grows tax-free, or tax-deferred, depending on the type of plan.

Get to know the different types of registered plans:

  • Tax-Free Savings Account (TFSA): The TFSA allows you to invest your after-tax dollars up to a certain limit each year, and any returns you make from your investments are entirely tax-free. You can withdraw your money anytime without paying taxes on your earnings.
  • Registered Retirement Savings Plan (RRSP): The RRSP is designed for retirement savings. Money you contribute to an RRSP is deducted from your taxable income, reducing your tax bill. Your investments grow tax-free until you withdraw the money which will be considered as taxable income.
  • Registered Education Savings Plan (RESP): The RESP is designed for saving for your child’s education. The Canadian government provides grants and incentives to boost your contributions, helping you save more for your child’s future education expenses. There is no annual contribution limit however there is a lifetime limit of $50,000 per beneficiary. To maximize your potential annual Canadian Education Savings Grant (CESG) of $500, you would need to contribute $2500 per year. Please refer to the Government of Canada website for more details.
  • Registered Disability Savings Plan (RDSP): The RDSP is specifically for individuals with disabilities. It helps them save and invest for long-term financial security.
  • Registered Retirement Income Fund (RRIF): RRIF is used to draw income during your retirement from your investment that was previously invested in your RRSP. You can convert your RRSP into an RRIF anytime. However, an RRSP must be converted to a RRIF or paid out in a lump sum by the end of the calendar year in which you turn age 71. This provides you with a regular stream of income while still offering tax advantages at retirement.
  • First Home Savings Account (FHSA). An account introduced by the federal government in 2023 as a way for first-time home buyers to save money towards the purchase of their first home. It combines the features of an RRSP and a TFSA whereby contributions to the FHSA are tax deductible and qualifying FHSA withdrawals (for the purchase of a first home) are not taxable.[2]

2) Investment Products:

Once you have a registered plan, you can choose from various investment products to grow your money further. Let’s explore some popular options:

  • Guaranteed Investment Certificates (GICs): GICs are low-risk investments offered by banks and trust companies. When you invest in a GIC, you lend money to the bank for a fixed period and, in return, you receive a guaranteed interest rate. It’s a safe option for preserving your principal amount.
  • Mutual Funds: A mutual fund is an investment vehicle consisting of a portfolio of stocks, bonds, or other securities, overseen by professional fund managers. It’s an excellent option for beginners as it spreads the risk across many investments. You also have the option to contribute smaller dollar amounts on a regular basis to help your money grow faster.
  • Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds but trade on stock exchanges like individual stocks. They offer diversification and can be a cost-effective way to invest in a broad range of assets.[3]
  • Stocks: Stocks represent partial ownership in a publicly traded company. When you buy a company’s stock, you become a shareholder, and your wealth can grow as the company’s value increases. However, stocks can be riskier as their value can go up or down based on market conditions and company performance.
  • Bonds: Bonds are like loans you give to companies or governments. In return, they pay you interest at a fixed rate over a specific period. Bonds are generally considered safer than stocks but offer lower potential returns.

Investing in different financial products allows you to create a well-balanced and diversified investment portfolio, reducing your risk and potentially increasing your chances of long-term success.

Remember, investing is a journey that requires patience, knowledge, and a clear understanding of your financial goals. As you embark on your investment journey in Canada, make sure to research and seek advice from financial experts.

With discipline and wise choices, you can set yourself up to save and build wealth to secure a brighter and more prosperous future for you and your loved ones. Happy investing!

Why Choose TD?

150 years helping Canadians:

TD has a proud history of delivering financial solutions to Canadians for more than 150 years. TD also brings a century of experience helping newcomers navigate the unique challenges of the Canadian banking system.

With over a thousand branches, a reputation for excellence in financial services, and the ability to also serve you in more than 60 different languages, TD has become one of the largest and most trusted banks in Canada, now serving 16 million Canadians.

TD offers online support and resources of interest to newcomers on topics such as banking. basics, moving to Canada, credit score essentials, and more. TD is open longer hours for your convenience. TD has thousands of ATMs across Canada to help you take care of your everyday banking quickly and easily.

Ready to Bank?

Learn more about TD’s New to Canada Banking Package today.         

Book an appointment to talk with a TD Personal Banking Associate about the TD New to Canada Banking Package. You can book online right away, or visit the TD website to learn more.

Legal Disclaimer: Information provided by TD Bank Group and other sources in this article is believed to be accurate and reliable when placed on this site, but we cannot guarantee it is accurate or complete or current at all times. Information in this article is for informational purposes only and is not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. This information is not to be construed as a solicitation to buy. Products and services of the TD Bank Group are only offered in jurisdictions where they may be lawfully offered for sale. All products and services are subject to the terms of the applicable agreement. The information in this article is subject to change without notice. ® The TD logo and other trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.

 

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

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Breaking Business News Canada

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.

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