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What is it?
Stocks represent small pieces of ownership of a company. When you purchase stocks in a company, you are acquiring a stake in that company. Each share accounts for a unit of stock, and the more shares you purchase, the larger your ownership interest in the company becomes.
Stocks are used in companies to raise funds, which are then allocated to various business endeavors. These funds are essential for financing ongoing business operations, initiating new projects, and facilitating expansion, including potential mergers and acquisitions.
What can I use it for?
Stocks carry more risk than other investments, but also have the potential to reap higher rewards. If you choose to invest in stocks, you can earn money in two ways:
You sell a stock for more than you paid for it
Through dividends. Dividends are regular payments to shareholders, however, not all stocks pay dividends.
Why invest in a stock?
Participate in a company’s success
If the company you invested in is doing well, its stock price will go up in value. Higher returns help grow your money and can also offset the impact of inflation as it can affect your investments over time.
Take advantage of lower tax rates
If your stocks are held in a registered account like a RRSP, RESP, or TFSA, your capital gains aren’t taxable.
Receive dividend income
If you own dividend-paying stocks, you may receive extra income in your portfolio each quarter. Dividends are paid to shareholders out of the company’s earnings.
How does it work?
Stocks are bought and sold on stock exchanges. When a company goes public through an initial public offering (IPO), its stock becomes available for investors to buy and sell on an exchange. Typically, investors will use a brokerage account to purchase stock on the exchange. A brokerage account is an investment account that allows you to buy and sell a variety of investments. Your registered account can be used for this purpose (such as TFSA, RRSP, RESP, etc.).
There are two types of stocks:
Common stocks are what are typically being bought and sold day-to-day on the stock market. Often these stocks come with voting rights for the shareholder.
Preferred shares offer shares in the company and regular income from dividend payments, but the shares do not come with voting rights.
There are many factors when it comes to determining the price of a stock and the returns you earn from it. For the most part, the price you pay for a stock is based on how well the markets expect the company to do in the future. This is influenced by the overall health of the company, macroeconomic trends such as state of the economy, supply and demand, and interest rates, as well as investor sentiment (the confidence of other investors and positive/negative media coverage).
Is this right for you?
✔ Right for you if you:
You’re okay with unpredictability. You’ll need to keep our risk tolerance and capacity in mind. While stocks have historically the highest growth, they also have the potential to have high losses. Markets can be unpredictable, so make sure you understand what your goals are with stocks.
You have long-term goals. Stocks are often a good choice for those with long-term financial goals, such as retirement planning or building wealth over several years. Over the long run, stocks have provided the potential for significant capital gains.
You want to diversify. Stocks can play a crucial role in diversifying your investment portfolio. They can help spread the risk and reduce portfolio volatility.
May not be right for you if you:
You have short-term financial needs. If you have immediate financial needs or expect to acquire access to your funds in the near future, stocks may not be the best choice. Stock prices can be highly volatile in the short term, so you could be forced to sell at a loss if you need the money right away.
You have low risk tolerance. Stocks are riskier than some other investment options, like bonds. If you have a low risk tolerance or are uncomfortable with the potential for significant fluctuations in your investment’s value, you may want to consider more conservative investments.
You don’t have time or the expertise. Being successful with stock investing often requires time for research, analysis and monitoring. If you don’t have time or the knowledge to research stocks on the market, you might want to consider other investment options like ETFs, which provide diversification without the need for stock picking.
Accounts for your stocks
You've settled on stocks, and it aligns perfectly with your financial objectives. It's time to choose the right account to invest your funds in and watch them flourish. Discover the array of options that Conexus in partnership with Credential Securities, provides access to – there's a wealth of opportunities waiting for you!
An RRSP is a government-registered retirement savings plan that offers tax benefits today by reducing your current income tax, and it allows your money to grow tax-free until retirement when you'll likely be in a lower tax bracket. It's a smart step for your financial future.
If you're 18 or older in Saskatchewan and have a valid social insurance number (SIN), the TFSA is your gateway to saving and earning money without the burden of taxes. With a TFSA, your contributions and the income you generate within the account are tax-free, even when you decide to make withdrawals. It's a lifelong opportunity to grow your wealth while keeping more of what you earn.
Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. The information contained on this webpage was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.