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How to start investing in stocks, index funds, crypto, NFTs – and more – The Globe and Mail

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Before investing your hard-earned cash, here’s what to know about purchasing stocks, mutual funds, exchange-traded funds, cryptocurrency and NFTs.Illustration by Melanie Lambrick

If you’re new to the world of investing, the vast array of options available – including stocks, mutual funds, exchange-traded funds, cryptocurrency and non-fungible tokens – may be intimidating. But investing doesn’t have to be complicated. Here’s what you need to know before investing your hard-earned cash.

The basics

How does investing work

Even newbie investors have probably heard the first rule of investing: Buy low, sell high. That’s the name of the game in a nutshell. Investment assets like those mentioned above continually fluctuate in value. You purchase assets at a given price with the hope that they will increase in value. The greater the increase, the higher your investment returns.

Of course, an element of risk is baked into the process. There’s no guarantee that your investments will always increase in value; in fact, they will likely dip or even tank at times. The key to being a successful investor is to sell assets when they are up, not down.

This can be a difficult task for some investors, who can’t stomach losses and jump to sell after a crash, thereby locking-in their losses rather than waiting for the markets to recover (as they eventually tend to do). Such investors are said to have a low risk tolerance, which they should take into consideration when deciding what assets to invest in, as explained below.

How to choose investments

Some investments (such as stocks and cryptocurrency) can be quite volatile, with big swings up and down in value. Other assets (such as bonds) are less risky but offer far more modest potential returns than their riskier counterparts. (Then there are no-risk savings-type investments, such as high-interest savings accounts and guaranteed investment certificates – GICs – where your principal investment cannot decrease in value and you earn a set, but often low, percentage in interest.)

Most experts advise investing in a mix of asset types to mitigate risk. That mix is called your asset allocation, and simply refers to what portion of your investment portfolio should be devoted to higher-risk assets as compared with lower-risk ones.

Risk tolerance in investing comes down to age and attitude

To determine your asset allocation, take an investment risk tolerance questionnaire – a standard tool offered by financial advisers and investment firms. These questionnaires measure your attitude to risk in general and your ability to tolerate the ups and the downs of your investments.

Questions will include your age, investment experience, general financial situation, whether you are investing for the short or long term, and other factors. Once your risk tolerance has been determined using the answers to the questionnaire, you can choose an appropriate asset allocation to match your risk level.

If, for example, you have a very high risk tolerance, you might opt to invest 80 per cent or more of your portfolio in stocks (also called equities) or other risky investments and use the balance of your investment portfolio for safer options such as bonds or other fixed-income assets.

If, on the other hand, you are quite risk averse, you may want to flip that around and limit stocks or other volatile investments to only 20 per cent or less of your portfolio. Many investors opt for a balanced asset allocation of stocks versus fixed-income assets. That could be 60 per cent stocks, 40 per cent fixed-income (60/40), or perhaps 40 per cent stocks and 60 per cent fixed income (40/60), depending on their individual situation.

How do I invest with only a little money?

Many wealth advisers and financial planners will take on only those clients who meet a certain threshold in investable assets – say $100,000, $500,000, $1-million, or more.

But you don’t actually need an adviser to start investing; you can do it on your own by opening an online brokerage account or using a robo-adviser. There are many to choose from, including online brokerage services operated by the big banks and fintechs such as Wealthsimple or Questrade.

So, how much money do you need to start investing online? Some robo-advisers or brokerage accounts have no account minimums, while others may require a balance of about $1,000 before you can start investing. In fact, you could potentially start by buying a partial unit of an ETF for $1 – although that wouldn’t make much sense if you’re paying more than that in trading costs or other fees.

Speaking of fees, that’s something to be mindful of regardless of your method of investing. After all, every dollar you pay in fees is a dollar off your investment returns. Rob Carrick, The Globe and Mail’s personal finance columnist, put together an excellent overview of the various investing fees charged by financial planners and online DIY brokerage services for advice, commissions, fund management, and other costs. As with all services, you want to be sure you’re getting value for your money – and not paying more than you need to.

Mr. Carrick also produces an annual online brokerage ranking and robo-adviser guide, which can help you decide which service is best for your needs.

What is the best investment for beginners?

The KISS rule (keep it simple, stupid) is almost universally applicable when attempting novel pursuits, and beginner investors would be wise to follow it. As investment reporter John Heinzl wrote in a 2017 column, newbies should not jump into stock investing right out of the gate: “Managing a stock portfolio requires a fair bit of knowledge and emotional discipline, and while I think most people can do it if they put in some modest time and effort, it would probably overwhelm most beginners and could lead to costly mistakes.”

Instead, he recommends opting for the easiest, lowest-stress DIY investing methods – namely, low-fee mutual funds or exchange-traded funds (ETFs) with a balanced asset allocation. “A balanced mutual fund will give you exposure to stocks and bonds in one convenient package,” he says. Same goes for all-in-one asset allocation ETFs.

Alternatively, he suggests using a robo-adviser that will set you up with a portfolio of ETFs to match your risk tolerance and goals. “All of these options will give you a nice combination of diversification and low costs – two of the most important ingredients in a successful investing plan,” he says.


There are many ways to invest: Mutual funds, index funds, cryptocurrency, NFTs, stocks and more. Picking an investment depends on your personal risk tolerance.Inside Creative House/iStockPhoto / Getty Images

Investment types

How to invest in mutual funds

Mutual funds are a basket of investment assets that you can buy through a financial adviser, a bank’s in-house adviser, directly from the investment management firm, or through a brokerage account. Mutual funds are popular investments because they group together a variety of stocks, bonds or other securities in one package, and this diversification can mitigate risk. The idea is that even if some of the assets in the fund aren’t performing well, others will do better, so your overall returns are respectable. Mutual funds are also a simple, accessible way to make contributions to your investments on a regular basis with no trading commissions or fees.

There are thousands of mutual funds you can buy in Canada. If you are working with an adviser, they will help you choose a selection of funds to match your asset allocation. (Keep in mind that if you deal with a bank’s or investment firm’s in-house adviser, they have a vested interest in selling you their own branded products. If you’re going the DIY route with a brokerage account, you can purchase whatever investments you want from a variety of firms.) If, for example, your risk tolerance leads you to a 60/40 stock/bond asset allocation, you might put 20 per cent of your money into a Canadian equity fund, 20 per cent in a U.S. equity fund, 20 per cent in a global equity fund and 40 per cent in a Canadian bond fund.

As markets go up and down, the total value of each of your individual mutual funds will stray from your original allocation. To make sure you maintain your preferred risk profile, you’ll need to rebalance your portfolio every so often – at least once a year – which means you sell off some assets and/or buy others to get back to your preferred allocation. (If you’re working with an adviser, they will do this for you.)

As explained above, there are also mutual funds that include a ready-made mix of stocks and bonds, with names like Income/Conservative (more bonds than stocks), Balanced (40/60 or 60/40), and Growth/Aggressive (more stocks than bonds). These funds are convenient because they are automatically rebalanced – a great benefit to beginner investors who might prefer this hands-off approach.

You can find mutual fund fact sheets online that identify the type of investments included in the fund, as well as the management expense ratio (MER) – which represents the percentage trailer fee that goes toward the ad

viser/firm as well as the fee paid to the fund manager. This is important because MERs on mutual funds in Canada can be quite high – typically more than 2 per cent. To be clear, that’s a reduction of two percentage points (or more) in your investment returns, since the statements you receive outlining the value of your holdings at any given time have already deducted these fees.

If you feel you get good service from your adviser – perhaps they provide financial or tax planning advice, or keep you from buying or selling off assets at the wrong time – that fee may be worth it. But if your adviser acts mainly as a fund seller and is short on other advice or services, consider buying mutual funds on your own through an online brokerage account. Look for the series D version of funds, which have a much-reduced trailer built into the MER to reflect the fact that they’re designed exclusively for the do-it-yourself crowd. For example, while the “A” series of a mutual fund you buy from your adviser might have a trailer fee of 1 per cent, the “D” series trailer fee could be 0.25 per cent.

Similarly, you could consider investing in passively managed index funds or exchange-traded funds (see below), which have even lower MERs than “D” series mutual funds.

How to invest in index funds or index ETFs in Canada

Index funds are mutual funds that take a passive approach to investing. Rather than paying an expert fund manager to pick and choose market “winners” in an attempt to outperform the market, index funds aim to match a market’s overall performance by holding all (or nearly all) the assets listed on a particular index – say, the S&P 500 in the case of U.S. large cap equities. The MER fees for index funds are, therefore, typically much lower than for actively managed funds (usually less than 1 per cent) because there’s less legwork involved in selecting the fund’s assets.

Similarly, there are index-tracking ETFs, which are basically the same thing as index funds except they trade on the stock market, which means there are usually per-transaction trading commissions or fees involved. But the MERs are also typically even lower than index funds (often less than 0.5 per cent).

An ETF fan asks Rob Carrick: ‘Is there still any role for mutual funds in a portfolio?’

Investing in index funds is not much different than investing in other mutual funds. You select the funds you want based on your asset allocation and purchase them either directly from the fund issuer or through a brokerage service. You’ll need to rebalance your holdings at least once a year to maintain your preferred asset allocation, or you can opt for all-in-one asset allocation ETFs if you don’t want to worry about rebalancing.

You can also invest in index ETFs through a robo-adviser, who will come up with an appropriate portfolio of funds for you based on your risk tolerance.

How to start investing in cryptocurrency

Depending on who you ask, investors should either “just say no” to crypto or embrace it full on as an essential element of a diversified portfolio. Either way, there’s no denying that cryptocurrency is an extremely volatile asset.

Between September, 2020, and May, 2022, for instance, the price of bitcoin fluctuated from a low of US$10,764 to a high of US$61,374 – and, as of July 4, 2002, sat at US$19,830. In terms of investment performance, that’s an increase of 470 per cent from low to high; and a decrease of 49 per cent from the high to May 16, 2022. Investors had the potential to either make or lose a lot of money during the past two and a half years, depending on when they bought their coins.

So, with that caveat out of the way, if you want to invest in cryptocurrency start by selecting an online crypto exchange and opening a “digital wallet” (basically, your account). Some popular exchanges in Canada include Coinbase, Binance, Bitbuy and Crypto.com. (Not all cryptocurrencies are available at every exchange, so that may help you decide which one to choose. Alternatively, you can open digital wallets at multiple exchanges.) Each exchange has its own fee structure, which you’ll also want to look into. Once you have your digital wallet set up, transfer money into it from your bank account and use those funds to purchase your crypto.

It’s worth mentioning that cryptocurrency cannot be held within registered accounts, such as registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), etc. That means that you must track and pay tax on all your crypto earnings – either as business income or as a capital gain, depending on your circumstances.

If you prefer to invest exclusively within an RRSP or TFSA to limit your tax hit, you could consider crypto ETFs, which are eligible assets for registered accounts. These ETFs – which don’t hold digital assets directly, but rather track one or more cryptocurrencies – provide an easy way to dip a toe into the cybercurrencies market.

How to invest in NFTs

NFTs, or non-fungible tokens, are digital assets that operate on the same blockchain ledger technology as cryptocurrencies, but there are major differences between them. While one bitcoin is interchangeable with another (or fungible), each NFT represents a unique asset. That might be an original piece of digital art, collectible, or even a tweet from someone famous.

Like a physical piece of artwork, collectible, etc., the value of an NFT is determined by the amount of money someone else is willing to pay for it. In other words, everything outlined above about the volatility of crypto – that goes double for NFTs. Prices can drop dramatically after an initial surge, see-sawing between bull and bear cycles within as little as a week.

Having said that, if you want to invest in NFTs, here’s how you do it. Open a digital wallet on a crypto exchange that trades ethereum, as this is the digital currency you require to purchase NFTs. Once you’ve transferred money into the wallet from your bank account and purchased some ethereum, you can start to browse NFTs on platforms such as OpenSea, Rarible, NBA Top Shot and Nifty Gateway. When you find an NFT you want to bid on, transfer your ethereum to that platform to pay for the purchase.

How to start investing in stocks

Once you’ve got the hang of mutual fund investing (or index investing, either through a mutual fund or an ETF), you might want to begin adding individual stocks to your portfolio. (Of course, individual stocks are by no means an essential ingredient for investment success, since you should already have exposure to the equities market through your fund purchases.)

You can buy stocks through an online brokerage, a full-service brokerage firm or sometimes directly from companies themselves. Note that stock prices rarely sit still, so the price you pay for the stock may not be exactly the same as the market price listed when you put through your purchase.

To avoid this possibility, you can set up limit orders, which will wait until the stock is at or below a specified price before executing the purchase. (Similarly, a sell limit order will wait until the price is at or above a specified price.)

There are usually commission fees on stock purchases and trades, so you’ll want to find out how much your broker charges for each transaction.


There’s no easy or surefire way to make good investments in stock markets – and you should never buy (or sell) a stock based on FOMO.AlexanderFord/iStockPhoto / Getty Images

Making and keeping investments

How to make good investments in stock markets?

If there was an easy answer to this question, everyone would be killing it on the stock market. Alas, it’s not so simple. John Heinzl recommends buying dividend-paying stocks that raise their dividend payments regularly, such as banks, utilities and telecoms. These dividend payments will provide you with continued income from your investment, even if the stock’s value swings up and down.

To select stocks on a wider basis, you’ll need to do some research. That doesn’t necessarily mean looking at the stock’s past price performance – since that tells you nothing about how the stock might perform in the future. Rather, you’ll want to look at the company’s financial statements and consider its historical earnings, cash flow, and/or dividend growth, position in the market, management, etc. In other words, is it a solid company with good prospects for the future? (You can also consult the Globe and Mail’s Stock Picks, which provides information and analysis to help you make decisions.)

Some online brokerage services also offer research and analysis tools to aid stock investors. Clearly, however, this isn’t for everyone – and you need to have the time and willingness to put in the work.

One indisputable fact: FOMO is a terrible reason to buy a stock. “I think it’s inadvisable to jump on the latest fad,” advised one expert. “People have a bad habit of buying at the top and selling at the bottom.”

To that end – regardless of what stocks you invest in – never sell out of fear, Mr. Heinzl says. “Buying and holding through good times and bad is a much more effective – and less stressful – way to participate in the market’s long-term growth.”

How long should you plan to keep an investment?

When it comes to higher risk stocks, the longer you should plan to hold on to it. Why? Because if you expect to spend that money in the near term, you’re taking a huge gamble that a risky investment will produce strong returns within a short period of time. It’s just as likely that it will lose money, and you’ll have to sell at a loss.

When you buy and hold for the long term, you can ignore a volatile investment’s big swings in value and focus instead on your average annual returns. Sure, some years may be dismal, but others will do gangbusters. The important thing is that, on average, you are getting the returns that you want to meet your investment goals.

Similarly, low- and no-risk investments are meant to be held for the short term. Why would you want to forgo the possibility of better returns from higher-risk assets if you have decades to wait out any market turmoil? Indeed, some experts say the biggest mistake young investors make when saving for retirement is not being aggressive enough with their asset allocation.

How to calculate return on investment

Most investment statements, whether from an adviser or through an online brokerage service, will clearly outline your investment returns. If, however, you’d like to verify those figures or calculate them yourself, there is a very simple formula.

The current market value of your investment minus the price you paid for the investment is your return on investment. (For dividend-paying stocks, this assumes you have reinvested the dividends into the stock; otherwise, you must add the total amount you received in dividend payments to your total returns.) Generally speaking, that number is then divided by the initial cost of investment and multiplied by 100 to express the return in percentage terms.

How do taxes affect my investment returns?

While it’s not traditionally considered part of return on investment, it’s worth looking at how taxes affect your “take home” investment earnings in various scenarios. When investing outside of registered accounts, all your investment income is taxable – but not at equal rates. Interest income is taxable in full at your marginal tax rate, based on your income tax bracket.

Only half of capital gains (the return on investment when you sell or trade a stock or other equity) are taxable at your marginal rate. Dividends have a different tax formula, but the rate of tax is usually somewhere in between what you’d pay on interest and capital gains.

When you invest within a TFSA, your investment earnings are truly tax-free. You don’t pay taxes on that income while it’s in your account, or when you withdraw the funds. For investments in an RRSP account, you get a tax deduction when you make your contributions, and you don’t pay tax on the investment earnings while they remain within the RRSP.

But – and this is a big but – when you draw your money in retirement, you pay income tax at your marginal rate on the full amount of the withdrawals, both your original contributions and your investment earnings.

A good financial planner or tax adviser should be able to help you approach your investments with an eye to tax savings over the long term.

The bottom line

Wondering how to start investing? Three things to remember
  1. You don’t need a financial advisor to begin investing, or to be rich
  2. It’s best to begin with low-risk options like ETFs or mutual funds
  3. Most experts advise investing in a mix of asset types to mitigate risk

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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How Much Will Parents Invest In Their Kids' Education? "All Bets Are Off" – Forbes

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A new study finds that parents are rethinking their education spending in a fast-changing world: less on school supplies and more on tuition.

There are plenty of parents stressing a bit with the new school year looming—especially those feeling the pinch of continued inflation or fearing a looming recession. Finding room in their budgets to invest in their children’s education could be a challenge.

A new survey by the personal finance website WalletHub also found that some 66% of parents say the pandemic has changed the way they plan to spend money on their children’s education—particularly in where they think their investment will help their children the most.

“Some families have moved states for more dependable in-person learning, while others have started saving for private school after previously planning on public education—just to name a couple popular adjustments,” says Delaney Simchuk, WalletHub analyst. “Time will tell how inflation, or the next big crisis will further affect pandemic-inspired educational investment plans.”

WalletHub’s 2022 Back-to-School Report also revealed some other insights into how parents think about spending money on their children’s education.

Shifting the focus of their spending

While back-to-school sales and tax holidays might offer some relief, finding extra money to pay for the rising cost of new clothes and school supplies might prove difficult for some families under a budget crunch this year.

Case in point: merely one-third of parents who participated in the survey said they would spend more on back-to-school shopping this year compared to last year. This tallies with a recent study by Deloitte that similarly found that 37% of parents have plans to increase their back-to-school purchases over last year.

At the same time, some 46% of parents say they would apply for a new credit card for the purpose of getting a discount on school supplies this year.

“Back-to-school shopping expectations are dampened somewhat by concerns over inflation, and the comparisons versus last year are tough given that most schools returned to in-person learning last year and parents spent accordingly,” says Simchuk.

Is education worth going into debt for?

One of the more interesting questions the WalletHub survey posed to parents was whether they thought their children’s education was worth going into debt for. About 70% of parents said yes, which tells us a lot about why we as a country continue to see skyrocketing levels of student debt.

Credit card debt levels have also begun to creep back up after retreating during the first year of the pandemic.

“We’re generally unhesitant to overspend, and when the expense is as significant as education—both in amount and importance—all bets are off,” says Simchuk. “Parents want to help their children as much as possible, and a good education is a dependable road to a solid professional career.”

But a caution is appropriate here, Simchuk believes. “Parents simply should not forget that they are financial role models and putting themselves in a precarious position could actually jeopardize their kids’ future.”

It’s also a potential call to action for parents to recognize that living with debt can be stressful for their children, and that there are alternate pathways for their children to have success that don’t include going into debt to pay for a private primary education or even to cover college tuition. In the end, skills matter as much if not more than degrees when it comes to landing a great job, alongside “adulting” skills which can be strengthened by landing a great internship.

Financial literacy as an essential life skill

While parents say that taking on debt to finance a child’s education is a good investment, most (86%) believe that financial literacy training should become part of the core curriculum. In general today, personal finance isn’t widely taught in the classroom, and neither are other soft/professional skills that employers value highly.

“Parents want their kids to be prepared for life, and budgeting, saving, investing and even paying taxes are all important, practical life skills,” says Simchuk. “Many parents also recognize the importance of having some financial know-how when making big-dollar decisions regarding higher education.”

That’s a great point given that students should be thinking of their education as an investment and how they might expect to generate a positive return not just in terms of pay, but also happiness and work-life balance. Money is just one piece of the bigger picture.

The evolving economics of education

Time will tell how changing economic conditions in the coming years will impact how parents feel about investing in the different aspects of their children’s education. The WalletHub survey offers us a glimpse into how trends might already be shifting in terms of where parents prioritize spending—less on the basics and more on the perceived quality of a degree.

But some things will never change. It’s a safe bet that parents will always pursue the goal of trying to offer their children the best life possible. In that regard, investing in a great education will always be considered priceless.

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FedDev Ontario Investment Contribution to TRCA Will Support Enhanced Visitor Experiences at Bruce's Mill Conservation Park – TRCA

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August 9, 2022, Toronto, ON – Visitors to Toronto and Region Conservation Authority’s (TRCA) Bruce’s Mill Conservation Park in Stouffville, ON will enjoy enhanced experiences thanks to an investment contribution from the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) that will help to revitalize the park infrastructure.

The Honourable Helena Jaczek, Minister responsible for the Federal Economic Development Agency for Southern Ontario and Member of Parliament for Markham-Stouffville made the funding announcement today at Bruce’s Mill.

The investment contribution of up to $740,715 will support improvements at Bruce’s Mill intended to positively impact both the local community and visitors to the park, allowing more people to re-engage with their communities and nature.

These improvements include: the installation of two new picnic shelters, the addition of 15 new accessible picnic tables for community use, and the upgrading of three washrooms to improve accessibility and physical distancing components. In addition, the park access roads and parking lots will be paved and repaired.

Left to right: Aaron D’Souza, Senior Manager, Major Contracts, TRCA; Joe Petta, General Manager, Conservation Parks and Golf, TRCA; The Honourable Helena Jaczek, Minister responsible for the Federal Economic Development Agency for Southern Ontario; Michael Tolensky, Chief Financial and Operating Officer, TRCA, attend today’s announcement at Bruce’s Mill Conservation Park. Photo courtesy of Federal Economic Development Agency for Southern Ontario
Dignitaries at announcement of federal investment contribution to revitalize infrastructure at Bruces Mill Conservation Park
The Honourable Helena Jaczek, Minister responsible for the Federal Economic Development Agency for Southern Ontario (left), and Michael Tolensky, Chief Financial and Operating Officer, TRCA (right), attend today’s announcement at Bruce’s Mill Conservation Park. Photo courtesy of Federal Economic Development Agency for Southern Ontario

Quotes:

“Our government is investing in community infrastructure to support the mental and physical health of Canadians by promoting social interaction and physical activity. This Canada Community Revitalization Fund investment for Toronto and Region Conservation Authority will help revitalize the Bruce’s Mill Conservation Park’s public infrastructure. This revitalization will help draw visitors to Bruce’s Mill, where they can come together, enjoy the outdoors and be active.”
The Honourable Helena Jaczek, Minister responsible for the Federal Economic Development Agency for Southern Ontario

“The investment by FedDev Ontario will not only improve visitor experiences at Bruce’s Mill but will accommodate the increased demand for outdoor recreation and provide safe alternative recreational activities as we all recover from the COVID-19 pandemic. It is investments like these that allow TRCA to keep our parks and trails in a state of good repair while increasing community connection and improving accessibility to our visitors.”
– Michael Tolensky, Chief Financial and Operating Officer, Toronto and Region Conservation Authority (TRCA)

TRCA’s Bruce’s Mill Conservation Park

Conveniently located off Highway 404, Bruce’s Mill Conservation Park is a popular destination for the five million residents within our jurisdiction and from many tourists from around the world. In addition to picnic areas and trails, recreational facilities at the park include a professionally designed golf driving range and a BMX cycling track. To learn more visit trca.ca/bruces-mill.


About Toronto and Region Conservation Authority (TRCA)
With more than 60 years of experience, TRCA is one of 36 Conservation Authorities in Ontario, created to safeguard and enhance the health and well-being of <span data-trca-tooltip="

Watershed

The entire area of land whose runoff water, sediments and dissolved materials (nutrients and contaminants) drain into a lake, river, creek, or estuary. Its boundary can be located on the ground by connecting all the highest points of the area around the river, stream or creek, where water starts to flow when there is rain. It is not man-made and it does not respect political boundaries.” class=”glossary-term”>watershed communities through the protection and <span data-trca-tooltip="

Restoration

To repair or re-establish functioning ecosystems; the process of altering a site to establish a defined, native, historic ecosystem; the goal is to emulate the structure, function, diversity and dynamics of a specified ecosystem.” class=”glossary-term”>restoration of the natural environment and the <span data-trca-tooltip="

ecological services

Ecological services are defined as the overall benefits to humans arising from a functioning healthy ecosystem, which includes improved water quality and quantity, air quality, soil stabilization, flood mitigation, balanced hydrologic regimes, biological processes and biodiversity. Ultimately, the streams in TRCA’s watersheds run into Lake Ontario and have a direct influence on the water quality and habitat along the waterfront.” class=”glossary-term”>ecological services the environment provides. More than five million people live within TRCA-managed watersheds, and many others work in and visit destinations across the jurisdiction. These nine watersheds, plus their collective Lake Ontario waterfront shorelines, span six upper-tier and 15 lower-tier municipalities. Some of Canada’s largest and fastest growing municipalities, including Toronto, Markham and Vaughan, are located entirely within TRCA’s jurisdiction.

To learn more about TRCA, visit trca.ca.


Media Contact

Shereen Daghstani
Senior Manager, Communications, Marketing and Events
Toronto and Region Conservation Authority (TRCA)
Shereen.daghstani@trca.ca

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Short Term vs Long Term Investments: Gauging the saving spectrum – Economic Times

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Quick wealth creation is what financial markets consider; however, investing as a practice is a long-term process. While an investor’s capital can be invested in the short-term and long-term, both forms of investment have their merits and demerits.

Typically, short-term investments involve less risk than long-term investments. Long-term investments give the investor’s money a substantial period to grow and recover from major dips in the market.

Having clear and crisp financial goals can help the investor decide whether to choose short or long-term investments and which vehicles within those categories aim towards personalized investment gains.

Before choosing any investment strategy, the investor ideally needs to do proper research on which asset types suits their need.

What is suitable for one investor might not be in sync with another’s financial objectives, so one must consider their overall goals along with the risks one is willing to take.

Short-term investments have a validity period typically up to three years – high liquidity instruments, generally involving lesser market risks.

Also, these temporary investments are mostly used for parking excess funds for a short period. Short-term investments are highly liquid and hence are used by investors to meet expected near-future expenses.

Less risky in nature, these short-term investment products have a short tenure and give predictable returns as compared to long-term investments be it –

Treasury bills which can be redeemed within 91 days and is a high liquidity instrument.

● Gilt Funds which invest only in government securities and owing to zero credit risk, are safe investment funds.

● Ultra-short-term debt funds wherein the maturity period ranges between three to six months and provides comparatively higher returns.

● Low duration debt funds whose maturity period ranges between six and 12 months, these funds invest in debt and money market instruments.

● Money market funds that invest in money market instruments and have a redemption period of up to one year.

● Bank fixed deposits that can be renewed on maturity and their tenure can range from 14 days to 10 years. Also, liquidity can be a concern here as some banks don’t allow premature withdrawals.

● Company fixed deposits can have a tenure of more than one year

● Post office time deposits have tenures ranging from one to five years and similarly Recurring deposits can open an RD for a duration as low as six months. Sweep-in-Fixed Deposits as against low returns on savings accounts, these offer comparatively higher returns, with a minimum tenure of around 12 months.

On the other hand, long-term investments are investments that can offer high returns after several years, typically five years or more – involving more market risks.

Be it via stocks, ETFs, mutual funds, etc. Investments in stocks earn quite high returns if patience is kept high (Of course, this cannot be guaranteed but you should assess your risk-taking capacity before thinking of investing in stocks).

Having a deeper understanding of the market movements so that the investor makes wiser financial decisions and when to sell the stocks, investing in stocks and securities requires a trusted financial partner, who can provide hassle-free features to open an online Demat and Trading Account.

Another long-term investment avenue for receiving higher returns is Equity Mutual Funds where the investor gets to pick from small, mid-cap, and large-cap equity mutual funds for the long term to achieve greater financial goals.

Ultimately, the short-term investment gives levy to the investor to achieve their financial goals within a short span and with lower risk (depending on which asset you pick), if the investor has a greater risk appetite, and wants higher returns, they can select a long-term investment avenue.

To further simplify, if the investor wants to preserve their capital and is happy with moderate returns then they may choose short-term investments but, with the expectation of a higher return, the investor may invest in long-term investment avenues.

(The author is Senior Vice President, at mastertrust)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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