There are many investments that create a steady stream of income and have the potential to go up in value. All of these products are considered higher risk, because many of them do not guarantee what you’ll get. Or, they guarantee a return only if you hold them until their maturity date.
Examples: Preferred shares, mutual funds with systematic withdrawal plans (SWPs), bonds, or income trusts. You can also buy Guaranteed Investment Certificates (GICs) whose return is linked to how well the stock market does.
This chart compares some higher-risk income investments.
Where can I buy these higher-risk income investments?
- A stockbroker
- The Internet, using a Canadian discount broker.
You can also buy GICs from a bank, trust company, or credit union. To learn more about market-linked GICs, read What you should know about index-linked deposits sold in Canada (PDF).
Tip: You may want to get professional advice before you buy any of these investments. The more complex the products are, the harder it is to choose the right ones. Be sure to consider the level of risk, your investment goals, costs, and fees. And, you’ll want to plan what you'll do with your money when you get it back at maturity.
Building an income portfolio: Ming's story
Ming has $20,000 extra dollars to invest. He can’t put any more money in his Registered Retirement Savings Plan (RRSP). Find out how he invests his extra savings to get both income and growth. Read Ming's story: Building an income: Ming's story
Remember: The risk varies on any investment you buy from a stockbroker.
It’s a mistake to think that all bonds are low risk, or all mutual funds are high risk. You have to look closely at each one to see if it offers the kind of income you’re hoping for, at a level of risk you find comfortable. Also remember that some investments have higher costs. That means they have to make higher returns to cover those costs.
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.