Many advisers do not recommend Labour-Sponsored Investment Funds (LSIFs) for the average investor. If you're still not sure whether LSIFs are right for you, ask yourself these questions:
- How much risk can I handle? LSIFs are generally high risk, speculative investments.
- How long can I stay invested? Since LSIFs invest in new ventures, it takes time to get results. Also, to get the tax break, you must lock in your money for at least eight years. For this reason, it would not make sense to invest money you will need soon in LSIFs, such as a down payment for a home.
- What kind of returns am I aiming for? Once in a while, an LSIF may produce a big winner. Many years, however, they lose money. This is not an investment for the faint-of-heart.
- Do the tax breaks offset the other drawbacks? For investors who want to speculate in new companies, the tax breaks can make LSIFs an attractive choice.
Remember: LSIFs are not for everyone
A qualified financial adviser can help you get started in determining where - and if - LSIFs fit in your investment portfolio.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.