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Complex investments explained

Flow-through shares Add to ...

Flow-through shares are designed to encourage people to invest in growing sectors of the Canadian economy.

​In Canada, companies in sectors like mining and resources can deduct exploration and development expenses. They are allowed to pass on the tax deduction to investors through a special type of common share called a flow-through share. When you buy flow-through shares, your money is locked in for up to 2 years – you can’t get your money out for any reason.

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Learn more about flow-through shares and their tax benefits from the Canada Revenue Agency.

Where to buy flow-through shares

You can buy flow-through shares from an investment firm or directly from the company that issues the shares. You can also buy them through limited partnerships or mutual funds, which offer a diversified portfolio of shares with professional investment management.

Ask about fees: Before you invest, find out about fees. You may have to pay a sales commission to your adviser and fees charged by the portfolio manager.

3 key risks

  1. Offered by new, small companies – These companies are often in the exploration stage and aren’t yet making a profit.

  2. Speculative investment – It can take years for a mining or resource company’s exploration work to pay off with a find – if it finds anything at all.

  3. Holding period – Flow-through shares have a holding period of up to 2 years. You can’t get your money out during this period, no matter how the company is doing or what you need the money for.

Flow-through shares also have similar risks to common shares. Learn more about these risks.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

Follow us on Twitter: @GlobeInvestor


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