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.

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.

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.

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 sedarplus.ca.

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).

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 Guide.

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.