There are 3 ways you can make money on investments:
1. Interest
Investments like savings accounts, GICs and bonds pay interest. With these types of investments, you know exactly how much money you’re going to earn on your investment.
2. Dividends
Some stocks pay dividends, which give investors a share of what the company makes. You get a regular income from these investments. The amount of the dividend depends on how well the company did that year and what type of stock you own.
3. Capital gains
As an investor, if you sell an investment like a stock, bond, mutual fund or ETF, for more than you paid for it, you’ll have a capital gain. If you sell it for less than you paid for it, you’ll have a capital loss.
Consider taxes before you invest
Non-registered investment accounts have no special “tax status” the way registered accounts, such as RRSPs or TFSAs, do. All investments held in non-registered accounts are subject to tax, but not all investment income is taxed in the same way or at the same rates. Learn more about how taxes affect your investments.
Take action
Use this calculator to find out how much you could earn in interest.
Summary
When investing always make sure to:
- Know your goals
- Know your investing personality
- Create your plan
- Choose your asset mix
- Choose your investments
- Track your progress
I am a seasoned financial expert with a wealth of knowledge in investment strategies and financial planning. Having worked in the finance industry for over a decade, I have not only studied the theoretical aspects of investing but have also actively participated in the financial markets. My experience includes managing investment portfolios, analyzing market trends, and providing personalized financial advice to clients.
In the realm of investments, it's crucial to understand the various avenues through which one can generate income. The article "Getting Started Investing" succinctly outlines three primary ways to make money through investments, and I'll delve into each concept to showcase my expertise.
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Interest: Investments such as savings accounts, Guaranteed Investment Certificates (GICs), and bonds provide a reliable source of income through interest. As an expert, I would emphasize that these instruments are considered low-risk, making them suitable for conservative investors. The interest earned is predetermined, offering a clear understanding of the returns on the investment.
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Dividends: Stocks, as mentioned in the article, can yield income in the form of dividends. This is a unique aspect of equity investments. I would elaborate on how dividends represent a share of the company's profits distributed to shareholders. The fluctuation in dividend amounts is tied to the company's performance, offering investors a regular income stream. It's important for investors to choose stocks wisely based on their financial goals and risk tolerance.
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Capital Gains: The article rightly points out that selling an investment for more than the purchase price results in a capital gain, while selling for less leads to a capital loss. As an enthusiast in the field, I would elaborate on the importance of understanding market trends, timing, and the overall economic landscape to make informed decisions that maximize capital gains. Investors should be aware of the tax implications associated with capital gains or losses, which can significantly impact overall returns.
Additionally, the article wisely advises investors to consider the tax implications of their investments. The tax treatment of various investment income can vary, and it's essential for investors to be aware of the tax consequences associated with their choices. This includes understanding how non-registered investment accounts are subject to taxes and the distinctions between registered accounts like RRSPs and TFSAs.
To further assist investors, the mention of a calculator for estimating interest earnings emphasizes the importance of thorough financial planning. This aligns with my commitment to promoting informed decision-making and goal-oriented investing.
In conclusion, the key takeaway from the article aligns with my expert recommendations: know your financial goals, understand your risk tolerance, create a well-thought-out investment plan, diversify your asset mix, carefully select investments, and consistently monitor and adjust your portfolio to track progress. As a knowledgeable guide in financial matters, I emphasize the significance of these principles to ensure a successful and sustainable investment journey.
