Investment Services offered by Insure In Canada

A diversified portfolio reduces the risk of an investment in finance. Consider the probability that asset prices will not move up and down in perfect harmony. A diversified portfolio will often have less risk than the weighted average risk of its constituent assets, even if one is the least risky. As a result, any investor who is at least somewhat risk-averse will diversify; the more dangerous an investor is, the more diversified he is.

The other technique to reduce investment risk is hedging. Diversification is one of those two techniques. Diversification depends on tight positive relationships between assets’ returns and works even when correlations are positive or near zero. Hedging relies on a negative correlation between assets or shorting investments with positive correlations.

TYPES OF INVESTMENTS

The following are a few examples of investments. The information below is for necessary information only.

BANK ACCOUNTS

Many people believe that they have to save whatever they have leftover after paying their expenditures, but you should start saving first and then control your spending. In banks, 

·        you get very little interest in saving.

·        There is a slow growth rate.

·        Retirement years are a good time for this.

·        It’s great if you don’t want to take any risks.

BONDS

A bond is a security backed by debt. When you purchase a bond, you are essentially lending your money to a company or government. They promise to pay you interest and eventually return to you the amount you lent.

The main benefit of bonds is their relative safety. If you buy bonds from a stable government, your investment is virtually safe. However, this stability and security come at a cost. As bonds carry little inherent risk, they typically have lower returns than other securities.

·        The growth rate is low.

·        Useful in retirement years.

·        Useful if you want less risk.

STOCKS

You purchase stock, or what your advisor might refer to as equities, which allows you to vote at the shareholders’ meeting and to receive any dividends the company distributes to its owners. These dividends are referred to as dividends.

The value of stocks fluctuates every day, which means nothing is guaranteed when you buy a stock. Some stocks don’t even pay dividends, which means that the only way you will have money is if the stock goes up in value. In comparison to bonds, stocks offer a relatively high potential return. The price of this potential is, of course, the risk of losing some or all of your investment.

MUTUAL FUNDS

Mutual funds are collections of securities that are managed by a professional manager. When you purchase a mutual fund, you pool your money with several other investors and pay the manager to acquire the appropriate securities on your behalf. 

There are different ways for mutual funds to be invested, and the focus can be nearly anything: 

·        Stocks of large companies, 

·        small-cap stocks, 

·        bonds issued by governments, 

·        bonds issued by companies, 

·        Invest in stocks and bonds. 

·        stocks of specific industries, 

·        stocks of certain countries, etc.

Millions of investors and businesses use mutual funds because they allow them to easily invest their money and secure a better return than they would obtain going it alone. Before choosing mutual funds, you need to know about some aspects.

SEGREGATED FUND

Segregated funds combine the growth potential of a mutual fund with the security of a life insurance policy. Mutual funds with an insurance policy wrapper are sometimes called segregated funds.

The value of segregated funds fluctuates according to the market value of the underlying securities. Like mutual funds, segregated funds consist of a pool of investments in securities such as bonds, debentures, and stocks.

Investors of segregated funds are not referred to as unitholders since segregated funds do not issue units or shares. Instead, they are referred to as holders of a segregated fund contract. A contract can be registered (included in an RRSP) or non-registered. Investments registered with the CRA qualify for a tax-free contribution. Non-registered investments are subject to capital gains tax and may claim losses.

-MATURITY & DEATH GUARANTEES

Guarantees on all segregated funds include no less than a certain percentage of the initial investment at the time of death or maturity of the contract (usually 75% or higher). In either case, an annuitant or beneficiary will receive either the guaranteed amount of the investment’s current market value.

-RESET OPTION

If a segregated fund contract’s market value increases, the contract holder can utilize a reset option to lock in their investment gains. The contract term’s deposit value is recalculated to equal either the deposit or current market price, the contract term is restarted, and the maturity date is extended. Each contract holder is limited to a certain number of resets per year, usually one or two.

-PROBATE PROTECTION

If a family member or spouse is the beneficiary, the segregated fund investment may not be subject to probate and executor’s fees and could pass directly to that beneficiary. It is also possible to protect your investment from creditors in case of bankruptcy. These protections can be used both for registered investments and non-registered investments.

-POTENTIAL CREDITOR PROTECTION

For business owners and professionals who may otherwise have high exposure to creditors, segregated funds’ asset protection can be an important feature.

REAL ESTATE

This nature’s immovable property is used for farming, mineral, and water resources; – land, buildings, and natural resources.

In an INVESTMENT, a piece of real property, a building or housing in general. Also: the occupation of purchasing, selling and renting real estate, facilities and housing.

·        The maintenance cost of the property.

·        Property tax.

·        At the actual market price, it is hard to sell quickly.

Coins and currency

 Coin or currency can be bought at a high price to sell for a profit. The price may fluctuate rapidly at times.

COMMODITIES

Gold, silver, oil, platinum, copper etc., can be bought in physical form or contracts.

A future contract is meant to help farmers pre-sell their crops before harvesting. It is a contract that indicates the farmer promises to deliver the commodity at a future date. Put, and calls have occurred in commodities.

-DOLLAR PRICE AVERAGING

Don’t confuse dollar price averaging with simple averaging. For example, an investor can purchase 1,000 shares of ABC Company for $40 at the first interval and additional 1,000 shares for $20 at the next interval. This would result in an investment of $60,000 and an average share price of $30. However, this is not dollar cost averaging – it is simple averaging. The stock’s average cost will not trend towards the current market value if you do not remain consistent in your investment strategy. Using dollar-cost averaging, a person would invest a fixed amount – say $30,000 per interval. Thus, when buying ABC company stock at the first interval, a person would end up with 750 shares of stock at $40/share and 1500 shares at $20 each. This adds up to 2,250 shares and an average cost of $26.66 – closer to the current market value of $20 than the simple averaging strategy.

-CONSUMER PRICE INDEX (CPI)

AIt is a statistical estimate constructed using a sample of representative items whose prices are collected periodically to determine changes in household products and services’ price level. CPI indexes can be used to index (i.e., adjust for inflation) the real value of wages, salaries, pensions, regulate prices, and illustrate actual monetary magnitude changes.