I want to manage my finances
Determine what type of investment is best for you
In order to choose the best type of investment for you, ask yourself a few questions about liquidity, degree of tolerance to risk and potential return. But what does all that really mean?
Liquidity means how fast and easily you can withdraw your money. Before investing, it is essential to know when you think you will need your money.
A "liquid" investment is an investment from which you can withdraw money quickly. But be careful! All investments do not have the same liquidity. For example, certain investment products cannot be converted into cash before a set maturity date (e.g. 1 year, 7 years, 10 years). If you must collect your money before this date, you will have to pay fees that will reduce the return on your investment.
Degree of risk
Generally speaking, the higher the promised return is, the higher the risk. If you think that the decrease in value of your investment may keep you from sleeping at night, you will definitely be more comfortable with a low risk investment. But remember, by definition, there is always some degree of risk when you invest.
The main idea behind investing is to invest money today to obtain a financial return tomorrow. Gains you make from your investment can take the form of interest, dividends or capital gain.
Interest is the payment received in exchange for loaning money. Example: if you invest $1,000 in a guaranteed investment certificate earning 2% per year, you will receive $20 in interest after one year.
Dividends are the portion of profits that a company distributes to its shareholders. Example: Company ABC pays its shareholders 30 cents for each common share they own, every three months (every quarter).
A capital gain (or loss) is the difference between the selling price and the original purchase price of an investment. Example: You pay $12 to buy a share, and later sell it for $20. You have incurred a capital gain of $8. On the other hand, if you pay $12 to buy it and sell it for $9, you incur a capital loss of $3.