Introduction to Investing in British Columbia

Investing is a way people try to earn more than the interest a savings account provides by purchasing investments.

There is more risk involved, but history shows that a disciplined, long-term investing strategy can grow a person’s savings, increasing their wealth over time.

Investing for your future is important. The information on this page is meant to be a starting point for new investors, as well as those who are new to British Columbia. We want to ensure you have the right information from a trusted resource so that you can better protect your money and make informed financial decisions for you and your family.

The information is available in seven languages. Links on this page will take you to English webpages and resources on InvestRight.org or external websites with more information on the topic.

About the British Columbia Securities Commission (BCSC)

The BCSC strives to make the investment markets benefit the public – enabling people to achieve their financial goals, enterprises to grow, and British Columbia to thrive. One of our key goals is to empower investors to protect their financial interests and become better informed about investment products and services.

The BCSC provides unbiased investing information through its investor education website, InvestRight.org. The InvestRight.org website provides investors with online tools and information to help them make wise investing decisions and protect themselves against unsuitable or potentially fraudulent investments.

Saving and Investing

Saving means putting money aside gradually for purchases and emergencies. Saving money in a typical bank account will allow you to earn interest and make small gains on your deposit over time. Putting your money into a savings account involves little to no risk.

Investing is a way people try to earn more than the interest a savings account provides by purchasing investments.
There is more risk involved, but history shows that a disciplined, long-term investing strategy can grow a person’s savings, increasing their wealth over time.

Understand Your Financial Goals

Whether you want to save or invest, make sure you understand your financial goals and time horizons. You’ll want to use the right money strategy to help you reach those goals.

If you decide investing is right for you, get started by giving careful thought to:
• your knowledge of financial markets and products.
• your financial assets and your risk tolerance.
• the amount of money you plan to invest.
• what you want to accomplish through investing.

You can work with a registered investment advisor to help you come up with a plan, and purchase investments. You can also self-manage your investments or use online investment service providers, like robo-advisors.

Types of Investment Accounts

Investment accounts are vehicles that hold cash and investments. There are two types of investment accounts:

  • registered and
  • non-registered.

About Registered Accounts

Registered accounts are accounts that are registered with the Canada Revenue Agency (CRA). Registered accounts include Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), and Registered Education Savings Plans (RESPs).

Below we provide a high-level look into these registered accounts. For more detailed information on these accounts, visit the CRA website.

About TFSAs

The TFSA is an account registered with the CRA that allows you to contribute certain amounts of tax-free money each year throughout your life. The amount contributed as well as the income gained from investments in the account is tax-free, even on withdrawal.


Opening a TFSA

You must be 18+ to open a TFSA, and you don’t need to earn an income to contribute to an account.
If you want to use a TFSA to hold investment products, a registered investment advisor can help you set up your account.

Contributing to a TFSA

Contributions to the account and administrative fees associated with the TFSA are not deductible for income tax purposes.

Various types of investments qualify for a TFSA account, giving you the ability to save more aggressively if you so choose. There are some prohibited investments and contribution limits. For the most current information, visit the CRA website.

Withdrawing Funds

You can withdraw money at any time from your TFSA without paying tax or reporting it on your tax returns. After a withdrawal, you can replace funds only if you have available contribution room. Withdrawing money does not reduce the total amount of contributions you have made in a calendar year.

Closing a TFSA

You can close a TFSA without affecting your overall contribution room for a year; however, there may be tax consequences if you don’t follow the correct process for closing or transferring funds.

About RRSPs

An RRSP is an account, registered with the CRA, that allows you to shelter your investment earnings and defer taxes until you begin to make withdrawals, usually in your retirement years.


Opening an RRSP

There are two different types of RRSP accounts that you can open on your own: individual and spousal. There are also Group RRSPs that some employers provide as a benefit. Talk to your employer if you want to know more about your company’s plan.

Contributing to an RRSP

There is a yearly deadline for contributions to an RRSP account. The contribution deadline for RRSPs is 60 days after the end of the calendar year – usually March 1 or February 29 during a leap year.

There are limits on what you can contribute to your RRSP each year. If you are a member of a pension plan, you will need to factor in your pension adjustment. The CRA also sets an annual RRSP limit.

You can also contribute to a spousal RRSP; however, the amount that you contribute will reduce your RRSP deduction limit.

Withdrawing Funds

There are tax consequences for taking money out of your RRSP before you retire, and you will lose the contribution room you used when you put the money into the account.

If you borrow from your RRSP to go to school or purchase a home, you can avoid tax consequences if you pay the money back within a specified amount of time.

Closing an RRSP

You must close an RRSP account by the end of the calendar year in which you turn 71. You have until the end of the year to take your savings in cash or convert it into a stream of income, such as a Registered Retirement Income Fund.

If you choose to convert your RRSP into cash when you are 71, you will pay tax on it.

About RESPs

An RESP is an account registered with the CRA that you can set up to help pay the costs of a beneficiary’s (son, daughter, nephew, grandchild, etc.) post-secondary education. RESPs may qualify for various government incentives that help parents save for a child’s post-secondary education, including the Canada Education Savings Grant.


Opening an RESP

There are three types of RESP plans: specified, family, and group. A specified plan has a single beneficiary; whereas a family plan can have more than one beneficiary. You can also buy a group, or scholarship, plan.

Contributing to an RESP

An RESP is similar to an RRSP in that it is an account that can hold investments and cash. Money contributed grows tax-free until the beneficiary withdraws it. Unlike the RRSP, a subscriber’s contributions are not tax deductible. There is a lifetime contribution limit per beneficiary. The B.C. and federal governments also offer education savings grants for RESPs.

Withdrawing Funds

When the beneficiary enrolls in post-secondary education, they can start taking payments from their RESP. The beneficiary pays taxes (usually very little due to their limited income) on these payments.

If the beneficiary doesn’t go on to post-secondary education, there are other options available to you.
You may:

  • keep the fund open.
  • transfer the fund to another beneficiary.
  • transfer the funds to an RRSP.
  • close the plan.

If you hold a scholarship plan, the rules for taking money out of the plan may be different. Check with your provider about when and how you can withdraw funds. Be sure to ask about costs, too.

Closing an RESP

An RESP account can stay open for 36 years. There are circumstances when an account can be open for
40 years.

If you close an RESP, you will need to return any grant money earned, and there will be tax consequences on the investment earnings. You will also need to pay back grant money if you choose to transfer an RESP plan to an RRSP.

About Non-Registered Investment Accounts

A non-registered investment account holds cash and investments. You cannot defer taxes or shelter income from investments in a non-registered account. Interest, investment returns, and investment losses in a non-registered account are reported to the CRA against your income, factoring yearly returns into your tax.


Opening an Investment Account

To open the account, you will need to provide accurate information about your personal and financial circumstances to the firm you are dealing with. A registered investment advisor can help you set up your investment account.

Contributing to an Investment Account

There are generally no restrictions on depositing funds into a non-registered, cash account. If you borrow to invest using a margin account, you will need to meet the investment firm’s terms and conditions.

Withdrawing Funds

When you buy and sell investments to convert them to cash, you may pay fees, such as transaction fees. Always ask about fees and other charges before you buy or sell.

You must declare investment income (or losses) and interest on your taxes in non-registered accounts, even if you don’t withdraw the money. Work with your advisor to ensure the type of accounts you have and investments you own fit your financial and tax situation.

Closing an Investment Account

Before closing your account, you will need to sell the investments or transfer them into another registered or non-registered account. Be sure to ask about any fees or other charges that you may be required to pay for closing the account.

Buying Investment Products

Before investing, you should assess your own investment experience and product knowledge. Be honest with yourself and with your registered investment advisor. Overestimating your knowledge will make it more difficult for your advisor to help you.

Avoid committing to investment products or strategies you don’t fully understand. Always ask your investment advisor questions about unclear or unfamiliar recommendations, and be sure you understand the answer before investing.

It’s also important to understand that all investments come with risk. This means there’s a possibility of losing some or all of the money you have invested. Risk levels differ for each investment. Make sure you understand the risk that comes with investments you’re interested in before you buy them.

For more information on risk, visit the Risk and Risk Tolerance pages on InvestRight.

Types of Investments

Mutual Funds

A mutual fund is a pool of investments that sells its securities (called units or shares) to investors who have a common objective.

Managed by professional portfolio managers, mutual funds allow you to diversify your portfolio by investing in a number of different investments. Mutual funds can invest in equities, bonds, or other mutual funds, and may specialize by industry, sector, or country.

Mutual funds generally fall into three different categories:

  • Money market funds invest in short-term, fixed-date government bonds or corporate debt. Returns are generally low. These funds are generally lower in risk, and are often used as a cash component of a portfolio.
  • Bond or fixed income funds invest in government and corporate bonds with the goal of generating a steady income stream for investors. These funds can be volatile as bond markets move opposite of interest rates.
  • Equity funds invest in company shares. These funds have the most volatility. Returns can be high depending on the fund, but so can losses.

When you purchase a mutual fund, a Fund Facts document will be delivered to you before the dealer accepts your instruction to buy fund units. This document will include a description of the fund, as well as the performance information, risks, and costs of buying and owning the fund.


Equities (a.k.a. Stocks or Shares)

Stocks or common shares give investors an ownership interest, or equity, in a company. Investors can buy common shares on stock exchanges.

Before purchasing shares that trade on a stock exchange, you will typically need to open a trading account with a registered investment firm.


Bonds

Buying a bond means that you are lending money to a company or a government (the bond issuer). Over the term of the bond, the bond issuer will typically pay you interest on the loan.

At the end of the term or maturity date, you can expect to receive back the original amount of money loaned, plus the accumulated interest.

In general, when interest rates go down, bond prices go up, and vice-versa.


Exchange-Traded Funds (ETFs)

ETFs are pools of investments that trade on a stock exchange. An ETF can invest in equities, bonds, or commodities, and may specialize by industry, sector, country, or strategy. Each ETF has a different level of risk depending on its investment mix and/or strategy.

The ETF Facts contains key information you should know about an ETF before you make your purchasing decision. The ETF Facts tells you what the ETF invests in, how risky it is, past performance, how much it costs, and more. You can ask your registered investment advisor for the ETF Facts or find a copy on SEDAR.com.


Guaranteed Investment Certificates (GICs)

A GIC is a certificate of deposit at a bank or other financial institution for a fixed term, varying from six months to many years.

GICs are guaranteed by the financial institution that issues them and are insured by deposit insurance agencies, like the Canada Deposit Insurance Corporation (CDIC) or the Credit Union Deposit Insurance Corporation (CUDIC).


Private Investments

Both private and public companies use private investments, also known as private placements, to raise money from investors. It’s an important source of funding for B.C. companies and entrepreneurs. This market is also called the “exempt market” because those who use it do so under exemptions from the requirement under securities law to file a prospectus when issuing securities.

Private investments available to retail investors can be high-risk for a number of reasons. The onus is on the investor to gather information about the company to make an informed decision. For more information on this market, read The Private Placement Market For Retail Investors guide.


Real Estate Investments

Exempt real estate-based investments are investments that fall under securities laws that are sold in the private placement market. These investments are sold to investors without a prospectus, without the BCSC’s review or approval, and usually, without the advice of a registered dealer. Like other private investments, they can be high risk. Learn more about these types of investments by reading our online guide to Private Real Estate Investing.


Investment Fees and Charges

Fees and charges are a part of investing. Be sure to ask your registered investment advisor or firm about all the fees and other charges you will be paying when you invest. Some may be negotiable, so it’s important to read the information provided to you and ask questions if you’re not clear on what you are paying for investments and/or advisory services.

Here’s when you will learn about fees and charges:

  • When you open an account with a registered investment advisor, they must provide you with information about:
    • the fees and charges you might pay to your advisor’s firm for operating your account and making transactions.
    • compensation paid to the firm by other companies relating to an investment that you may purchase.
  • Before accepting an instruction from you to buy or sell an investment product, your advisor must tell you what you will have to pay.
  • After you buy or sell an investment, your investment advisor’s firm must provide you with information on the fees and other charges you paid.
  • In your monthly or quarterly account statements, your investment advisor’s firm must tell you which investments might be subject to a deferred sales charge, if you sell them.

For more information on investment fees and charges, visit the Fees and Charges page on InvestRight.

Working with a Registered Investment Advisor or Firm

Working with a registered investment advisor is a choice and, if you want to work with one, there are different types of advisors that can provide an array of services. Generally, an investment advisor that sells securities – stocks, bonds, mutual funds, or ETFs – must be registered with a provincial securities regulator, like the BCSC, to sell and advise on these types of investment products.

Registration helps protect investors because securities regulators only register individuals and investment firms if they are qualified and meet certain requirements.

There are different categories of registration, each allowing people and firms to sell and advise on different investment products. For example, a person only registered as a representative of a mutual fund dealer can only sell and provide advice on mutual funds. Whereas a person registered in multiple registration categories may sell and advise on a broader range of investment products.

You may also be considering using a robo-advisor or investing on your own (a.k.a. do-it-yourself or DIY). Ensure those providing you with an investment service (robo-advisor, website, or app) to manage your portfolio are registered.

Do a Background Check

You should do a background check on anyone who claims they are registered to sell investments.
You can complete a check in four simple steps.

1

Use the Canadian Securities Administrators’ (CSA) National Registration Search tool to check registration.

2

Check to see if the individual, firm, or service you are considering has ever been disciplined for bad practices. You’ll be able to find a record of the violation and the discipline they received using the CSA’s Disciplined List.

3

Search the Internet. When doing a search, pay close attention to information about wrongdoing or bad practices of any kind in the results. Combine the search result information with information returned from the other sources described in these steps.

4

If you are considering working with an investment advisor, conduct a formal interview to see if they are the right fit for you. If you plan to use an investment service (robo-advisor, website, or app), do your research and ask questions before committing.

You can also contact BCSC Inquiries. They can help you conduct different searches or point you to investor education information over the phone.

Investment Fraud

Losing your savings to investment fraud can be devastating. Protect yourself and others from investment fraud by looking out for these five investment fraud warning signs.

Fraud Warning Signs

1
1

The Trust Trap

Sometimes, someone we know promotes a fraud without even realizing what it is. We tend to let down our guard with people we know and trust. Yet after they have lost their investment, many fraud victims report having done just that.

2
2

High Return, No Risk, Guaranteed

Fraudsters aim to hook you with promises of higher than normal investment returns. They may suggest that their “risk-free” investment is backed by “assets” of some kind, or “held in trust”.
If it sounds too good to be true, it is.

3
3

Fear of Missing Out

Fraudsters are skilled at making it sound like their offer is making others rich while you sit on the sidelines. They may say their opportunity is known and available to only a select few. But most legitimate investments are available to anyone with the savings to invest. Sometimes, the best investment is the one you don’t make.

4
4

Pressure to Buy

Fraudsters are experts in high-pressure sales tactics and can have you signed up before you know it. They may tell you there’s no time to ask for advice and that you have to sign quickly if you want to get in. If you ever feel you’re being rushed, can’t change your mind, or back out—remember, it’s always okay to say no.

5
5

Questions Not Answered

Fraudsters work hard to override your instincts with complex documents and arrangements that seem legitimate but don’t actually make sense. They may dismiss your questions and fall back on arguments that are overcomplicated, inconsistent, and filled with jargon. If you can’t understand it and can’t get your questions answered, walk away.

Protect Yourself from Fraud

Always take the time to research an investment offer, and the person selling it, before you invest.

Check Registration

Do a background check to ensure the company or person selling you an investment is registered. If you encounter an unregistered investment advisor, service, or website, you should call the BCSC to report it.

Research the Investment

  • Review Investor Alerts and the BCSC’s Investment Caution List. These sources will let you know if securities regulators are warning people about the company or individual selling an investment.
  • Look at the National Cease Trade Order (CTO) Database. A CTO against a company prohibits residents in the province where it is active from trading in the securities of that company.
  • Look for news or information online about an individual or firm. You may find out about unhappy investors, civil or criminal court cases, or rumours that you should investigate further.

Get Help

  • Hire or consult with a registered investment advisor.
  • Do some independent learning – the more knowledge you have, the better questions you will ask.

Report Suspicious Investments

  • Bring suspicious investment activity to the attention of the BCSC. You can report anonymously through the online complaint form or contact the BCSC directly.
  • Remember to keep records in case you need to make a complaint or take legal action.

BCSC Inquiries

BCSC Inquiries staff help investors with their questions regarding advisors or investments.
Telephone: 604-899-6854 or 1-800-373-6393 (toll free across Canada)
Email: [email protected]

BCSC Inquiries staff can help you:

  • check if your investment advisor is registered.
  • identify the self-regulatory organization responsible for overseeing an investment firm.
  • research a public or private company.
  • understand a cease trade order or other administrative sanction imposed by the BCSC.
  • determine if old stock certificates have value.
  • register a complaint about a company or individual within the BCSC’s jurisdiction.

If BCSC Inquiries is not the appropriate group to handle your submission, we send your calls to the proper BCSC division or another agency for follow-up.

Online Complaint Form

The BCSC investigates complaints about the sale, recommendation, or marketing of securities in British Columbia.

When you report an investment opportunity that you know or suspect is not right, you enable the BCSC to investigate the matter. Wrongdoing in the securities or investment industries can include unregistered people or businesses offering investment products, a person or business buying and selling securities with your money without permission, advertising “insider” investments or “hot tips”, and more.

You can submit a tip or file a complaint anonymously by clicking the button below.

FILL OUT COMPLAINT FORM

Stay Informed

You can stay up-to-date and informed about our latest investment news, trends, tools, and resources by signing up for email newsletters from BCSC InvestRight.