Investor Readiness Quiz

Correct Answer: False
While it is natural to seek advice from friends and family, you have a unique financial situation and investing goals. For example, your appetite for investment risk could be different. Avoid “following the crowd” – make decisions that are based on your needs and your own analysis, research, and goals.

Correct Answer: True
Risk and return are connected. In general, higher-risk investments offer higher potential returns, and lower-risk investments offer lower potential returns. This is known as the risk-return relationship. Make sure you understand the risks associated with an investment before you buy.

Correct Answer: True
Investing in only one investment vehicle or company, especially a start-up, is generally more risky than investing in multiple industries and asset classes. Having a diversified portfolio may help reduce the overall risk of an investment portfolio and limit losses, because it’s unlikely that all your investments will perform in the same way, at the same time.

Correct Answer: False
It’s natural to be nervous when markets are volatile, but creating an investment plan that works for you in all types of situations is a way to prepare for inevitable stock market ups and downs. A registered investment advisor can explain market volatility and how it applies to your financial goals.

Correct Answer: False
Many investment fraud victims are introduced to investment scams by family, friends, or co-workers, often unintentionally. Scam artists will target religious, ethnic, or other close-knit communities and befriend. This is referred to as “affinity fraud.”

Correct Answer: True
Securities industry professionals are required to register with the securities regulator in each province or territory where they do business. Registration helps protect investors because securities regulators will only register firms and individuals that meet certain requirements. Once a firm or individual is registered, they have specific responsibilities and obligations to their clients under the law.

Correct Answer: False
Investment fees impact the overall returns (or losses) in your portfolio, and different products can charge different fees. It’s important to understand the fees associated with your investments so that you can evaluate the true cost of the investments in your portfolio and the services you receive from a registered investment advisor.

Correct Answer: True
You can hold stocks and bonds in a TFSA in addition to a wide range of investments. However, there are some prohibited investments, so check with your registered investment advisor or the Canada Revenue Agency website to ensure the investments you buy qualify for the TFSA account.

Correct Answer: False
A Registered Retirement Savings Plan (RRSP) is a type of account that helps you to save money for retirement. In contrast, a mutual fund is a type of investment fund – which is a collection of investments – you might choose to hold in the account. Many people hold mutual funds in their RRSPs, in addition to other investments.

Correct Answer: True
Past performance may help you get a better understanding of how an ETF has performed versus other similar investment products in the past. However, it doesn’t guarantee an ETF will continue to perform the same in the future.