Overview
Investing doesn't have to be complicated to be effective. Just as your daily food intake draws from the four basic food groups - grains, fruit and vegetables, dairy, and meat - your investments can be slotted into three fundamental categories or asset classes:

1. Cash (money market)
2. Bonds (fixed income)
3. Stocks (equities)

Your investment objectives differ from those of other investors, so your portfolio should hold a personalized proportion of cash, bonds and stocks, or their equivalents. A given portfolio could be 100% cash, or 100% equities, or anything in-between. The precise mix is determined by what you want your portfolio to do for you.

While you can build an effective portfolio using individual cash, bond and stock selections, you may decide that a packaged approach makes more sense for you. Mutual funds and managed accounts bring professional money management to your portfolio and eliminate the need to pick individual stocks and bonds.

Take a closer look at the investment components that you can choose from when constructing your personal investment portfolio and consider which investments make the most sense for you.

• Cash
• Bonds
• Stocks
• Mutual Funds
• Managed Accounts
• Alternative Investments

Cash and Cash Equivalents
Considered a money market investment, cash is a secure, liquid place to park your money for a short while, usually for less than a year.

Short-term investments make perfect sense when you have short-term goals, like purchasing a house or business, or paying for next year's education expenses.  Invest in cash when you cannot afford to be caught in a short-term stock market decline. Another reason to hold cash is to have buying power in reserve for future bargain hunting in the stock market.

Real world cash investments go by names like treasury bills, bankers acceptances, Canada Savings Bonds, money market mutual funds, and bonds and guaranteed investment certificates (GICs) that mature within one year. From 1950 - 2002, the average rate of return on cash was 6.3% a year, with no losing years.

To learn more about Canaccord Capital's range of money market investments, contact your Investment Advisor or fill out our Investment Advisor contact form.

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Bonds
Think of a bond as a personal loan that you make to the government, or to a corporation. A bond is a fixed income investment, as are term deposits and GICs. When you invest in a bond, you agree to lend your money at a fixed rate of interest, with repayment of your principal on a fixed date. Typical maturity dates range from 1 to 30 years into the future.

The three primary reasons you would buy bonds include:

1. Cash flow to you in the form of interest payments twice a year
2. In the case of government bonds, the guaranteed repayment, plus interest
3. To balance your portfolio and reduce its sensitivity to stock market fluctuations

From 1950 - 2002, five-year GICs produced an average rate of return of 7.2% a year, with no losing years. Long-term Canada bonds (18-year term) returned an average rate of 6.7%, with 13 negative years during the 52-year period.

Unlike GICs, even government-guaranteed bonds fluctuate in price as interest rates change. While fluctuation is not loss, if you are investing in bonds you must consider the effect of inflation on your after-tax interest and eventual principal repayment. Do this to ensure that you are not losing purchasing power over time.

To learn more about Canaccord Capital's range of fixed income investments, contact your Investment Advisor or fill out our Investment Advisor contact form.

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Stocks
The term stock or equity refers to an investment in common shares. When you own stock, you are a co-owner of a business, profiting if the business prospers, and suffering if the business flounders.

Because equities have historically outperformed cash and bonds over the long-term, consider stocks and stock-related assets if you want to compound your capital at the highest available rate over long periods of time, generally five years or more. If you are investing for your retirement, or for post-secondary education expenses, or for income that rises over time and attracts less tax than interest income, equities may make good sense.

Equities are more variable and unpredictable, however, than either cash or bonds. Over short holding periods, stock prices can be quite unstable. On the other hand, you may find short-term volatility desirable if you consider trading profits more important than long-term compounding. In both cases, diversification is required to spread your risk over a variety of different stocks.

From 1950 - 2002, the Canadian stock market returned on average 10.5% per year. Adjusted for currency, the US stock market returned 12.3% over the same period. During these 52 years, both the Canadian and the US market suffered 12 losing years, about 23% of the time.

To learn more about Canaccord Capital's range of equity investments, contact your Investment Advisor or fill out our Investment Advisor contact form.

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Mutual Funds
You may not be completely comfortable investing in your own stocks, bonds and money market investments. If so, you may prefer to build your portfolio with mutual funds. Just as you may tailor a precise asset mix for your needs with individual investments, you may also buy mutual funds that target specific asset classes and sectors within those asset classes, both domestic and international.

In brief, mutual funds give you the convenience of instant diversification and professional money management. If you are too busy to manage your investments, turn to the convenience of mutual funds. Historical rates of return vary by asset class, and are typically similar to the underlying market indices.

To learn more about Canaccord Capital's range of mutual funds, contact your Investment Advisor or fill out our Investment Advisor contact form.

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Managed Accounts
For investors ready to graduate from mutual funds to more sophisticated money management programs, Canaccord offers three types of managed accounts. All three programs give you the managed money services once offered only to the very wealthy. Fully discretionary, your portfolio managers invest according to your wishes, both to reduce unnecessary risk and to provide solid returns comparable to established market benchmarks.

Your managed accounts may hold either individual or pooled investments, personally selected by the portfolio managers on the basis of intensive economic and fundamental stock research.

To learn more about Canaccord Capital's managed accounts, contact your Investment Advisor or fill out our Investment Advisor contact form.

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Alternative Investments
Just as sugar and spice do not fit neatly into the four food groups, there are a number of investments that are difficult to classify. Alternative investments range from vehicles that combine features of bonds and stocks (income trusts), stocks and options (structured products), tax-driven products (limited partnerships), to investments wrapped within insurance policies (universal life).

Additional alternative investments include hedge funds, which are designed to offset swings in the stock market, and options, which can be used both to protect your portfolio and as source of profit, if skillfully traded. You may encounter split shares, which divide common shares into separately traded growth and income components.

Alternative investments make sense once you have built a diversified portfolio. First lay a solid foundation for yourself. Then explore the sugar and spice of alternative investments.

To learn more about Canaccord Capital's alternative investments, contact your Investment Advisor or fill out our Investment Advisor contact form.

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