Canadian Investment Funds Course Unit 5

• Unit 5 of the Canadian Investment Funds Course focuses on Types of Investments.
• Unit 5 is designed for Dealing Representatives to understand the different types of investments available in financial markets and how they are used in mutual funds.
• The unit takes about 2 hours and 10 minutes to complete and is divided into several lessons.
• The unit explains how different types of investments work, their risks and returns, and their role in mutual funds.
• It is essential for professionals who provide investment advice to clients.
• The unit includes building blocks of mutual funds, fixed income securities, bonds, equities (stocks), derivatives (options & futures).

Mutual Funds

• Mutual funds are collections of different investments like stocks and bonds.
• They are managed to achieve specific investment goals.
• Investment objectives include safety of principal, income, and growth.
• Safety of principal protects the investor's original investment.
• Income provides regular, usually through bonds.
• Growth aims for long-term capital appreciation through stocks.

Fixed Income Securities

• Fixed income securities are loans where investors lend money to governments or corporations.
• The loans are offered in exchange for regular interest payments.
• These loans include treasury bills, bonds, bankers’ acceptances, and commercial papers.
• Key features include term-to-maturity, par value, and coupon rate.
• Term-to-maturity is how long until the loan is repaid.
• Par value is the amount repaid at maturity, for example, $1,000.
• Coupon rate is the interest paid to investors.
• Money market securities include treasury bills (T-bills), provincial & municipal papers, banker's acceptances, and commercial papers.
• Treasury Bills (T-bills) are short-term, government-backed, and very safe.
• Provincial & Municipal Papers are similar to T-bills, issued by local governments.
• Bankers' Acceptances (BAs) are short-term corporate loans backed by a bank.
• Commercial Papers (CPs) are short-term corporate loans, riskier than BAs.

Bonds

• Bonds are longer-term loans (over 1 year) issued by governments or companies.
• Investors get regular interest payments (coupons) and get their principal back at the end.
• Bonds can be traded in the market, and their price changes based on interest rates.
• If interest rates increase, bond prices decrease, and vice versa.
• Types of Bonds:
• Coupon Bonds pay regular interest until maturity.
• Zero-Coupon Bonds are sold at a discount but pay full value at maturity.
• Convertible Bonds can be turned into company shares.
• Callable Bonds can be repaid early by the issuer.
• Retractable Bonds can be sold back to the issuer before maturity.

Equities

• Equities are shares of ownership in a company.
• Investors can earn profits if the stock price increases.
• Companies issue Common Shares and Preferred Shares.
• Common shareholders get voting rights and potential dividends.
• Common shares' prices can rise or fall based on company performance.
• Preferred shares have fixed dividend payments and less risk than common shares.
• Preferred shares have no voting rights

Derivatives

• Derivatives are financial contracts that get their value from stocks, bonds, commodities, or currencies.
• They are used for hedging risk or speculating for profit.
• Types of Derivatives:
• Options provide the right to buy/sell an asset at a fixed price.
• A Call Option provides the Right to buy a stock.
• A Put Option provides the Right to sell a stock.
• Futures Contracts are a Legal obligation to buy/sell a commodity at a set price.
• Futures contracts are Used by farmers, oil producers, and currency traders.
• Forward Contracts are similar to futures contracts but customized between two parties.

Unit 5 of the Canadian Investment Funds Course covers Types of Investments, focusing on mutual funds and their objectives such as safety, income, and growth. It explains various investments, their risks, returns, and role in mutual funds. Essential knowledge for investment advisors.