Investment Basics

You can lend money to a borrower, such as a company or government, who will generally pay you interest for using your money. When you buy a Guaranteed Investment Certificate (GIC), Treasury Bill, or shares of a money market or bond mutual fund, you're essentially lending money, in exchange for interest on your investment.

The building blocks of investing :

A share of stock represents ownership in a company. When you own shares in a mutual fund that invests in stocks, you essentially own a small percentage of all the stocks that the fund owns. Mutual funds that invest in stocks are designed to provide growth in their unit prices. Of course, the share prices of stocks can move up and down in value and, although past performance is no guarantee of future results, in the past they have historically provided better returns (earnings) over the long term than other types of investments.

Simply put, a bond is a loan from an investor to the company or government agency that issues the bond. Corporations, governments or municipalities issue bonds as a way to raise money. When you own shares in a mutual fund that invests in bonds, you essentially own a small percentage of all the bonds that the fund owns. Mutual funds that invest primarily in bonds are designed to pay income to their investors. Their unit prices can move up and down in value, often in response to current interest rates, but generally speaking, they move more modestly than stock funds.

These include investments like Guaranteed Investment Certificates (GICs), Treasury Bills, and other so-called "short-term debt." When you own units in a mutual fund that invests in short-term investments, you essentially own a small percentage of all the short-term investments that the fund owns. Mutual funds that invest primarily in short-term investments are designed to provide stability and some income. They generally work to keep a stable price, often at $10 per unit, but do not guarantee that they will be able to do so.

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