Income investments make payments of interest or dividends at set times. Before you choose a specific income investment, get the answers to these 4 questions.
1. How much risk is involved?
Some income investments are considered low risk. They guarantee you’ll earn some income. These include:
Other income investments, such as preferred shares, may grow in value as well as provide income. They can also lose value. And, the income stream isn’t guaranteed as it is with low-risk income investments.
2. How much income will you get?
This is often based on interest rates. Usually, the longer you invest in 1 of these income products, the more you make. But this isn’t always the case.
3. When can you take your money out?
If you may need quick access to your money, you likely won’t want an investment that locks in your money until a set date. For example, some Guaranteed Investment Certificates (GICs) lock in your savings. Others let you cash in any time, but you pay a penalty for taking your money out early.
4. Are there any fees?
Some investments that pay interest don’t charge fees when you buy. Others do. Find out if there are any account fees and other costs.
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
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