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W ednesdsay January 26, 2000 THE O A K V ILLE BEAVER C7 Business Bond market offers many options B u t t a k e t h e t i m e to le a rn a b o u t in v e s tm e n t im plications The term "b o n d m arket" is a bit o f a m isn o m e r b ecause it includes m any products w hich, strictly speaking, are not bonds. W hat all o f them have in com m on is that they are debt instrum ents. T hat is, all o f them are like IOU s a contract which obligates the bor row er to repay the lender at some future date. F o r those seeking fixed incom e, this m arket offers m any interesting options. Before you leap, how ever, let's take a w alk through this m ar ket first so that you get to know the various offerings and their d if ferent features and characteristics. Bonds are used by com panies and governm ents to raise money. The borrow er agrees to repay your principal, as well as pay interest fo r the use o f y o u r m oney. C orporate bonds are secured. T hat m eans certain com pany assets are pledged against the loan. If the com pany is unable to repay w hat it ow es you, then you m ay still real ize som e return because you have a claim on these assets. D ebentures are also debt in stru m en ts, but u nlike bonds, they are not secured. They are ju st a prom ise to pay and are not backed by an asset w hich could be sold to cover the principal. T-bills or Treasury Bills are short-term m oney m arket instru m ents issued by the federal gov ern m e n t and so m etim es by a provincial governm ent. They are issued in large denom inations at term s o f 91, 182 and 364 days. In v e stm en t d ealers and banks repackage the T-bills into sm aller am ounts such as $1,000, $5,000, $10,000 or $25,000 for individual investors. T-bills d o n 't actually pay inter est. The return is the difference betw een the price the bill is sold at (w hich is alw ays less than the face value) and w hat it is w orth at m aturity. B anks and investm ent dealers often translate this into a percentage return so that you can c o m p ariso n shop w ith o th er investm ents. Just to confuse things a little, C anada Savings bonds are really debentures, because they are not secured by any specific asset. A lthough C SB s have been a popu lar investm ent for C anadians in the past, m any investors are now shopping around for better returns. O ther m oney m arket products av ailab le to investors include: commercial paper which is short term IOUs issued by corporations and secured by lines-of-credit; and bankers' acceptances which are debt instrum ents issued by com pa nies and guaranteed by banks. Strip bonds are bonds with the co u p o n s rem oved. Since these instrum ents do not pay interest, they are sold for less than their face value, and it is this discount w hich rep resen ts the potential yield to the investor. However, strip bonds can be risky if they are not held to m aturity because, w ith out regular interest paym ents, their prices can vary considerably. they are sold by investm ent deal ers. You can buy units o f $5,000 for a five-year term and receive a m onthly paym ent m ade up o f . interest and principal. The cash flow from these instrum ents can be less predictable than from bonds because the principal is repaid over tim e rather than at maturity. These are high quality instrum ents because they are backed by the federal go v ern m ent's housing corporation which insures the m ortgages. B efore you choose, m ake sure you have adequate advice from your investm ent dealer. This pro fessional will help you decide, first o f all, w hether bonds are suit able for you. Only then, should you begin the process o f evaluat ing individual bonds by looking at their yields, credit ratings, term s, coupon rates, and other character istics. This column was prepared by the non-profit Investor Learning Centre of Canada (ILC). You can obtain a free investor education kit from the ILC by calling toll-free 1-888-4525566. Oakville's Import Dealer Alternative Service with a personal touch Al Bacchus We ta k e th e utm ost c a re w ith your fo re ign or d o m e s tic ve hicle. We o ffe r r e a s o n a b le ra te s a n d th e b e st p ro fe s s io n a l s e rv ic e a v a ila b le . A mortgage-backed security is like a bond that is secured by a pool o f hom e m ortgages. Issued by banks and trust com panies, Mufflers from The "No-Nonsense Approach to Strategies fo r DOUBLING NET WORTH in 5 to 7 yrs Tax & fin a n c ia l p la n n in g tip s fo r in d iv id u a ls a n d e n tr e p r e n e u r s Y ear 2 0 0 0 ta x p la n n in g tip s \/ S ecu re in v e stm e n ts o ffe r in g 99 H in e -U p s from 2-W heel Alignment $ O A 9 5 from FINANCIAL INDEPENDENCE 12 RRSP p la n n in g p o in ts P rotect in v e stm e n ts from m arket c o r r e ctio n s Year 2000 m ark et fo re ca sts S om e o f "Our B est Id eas" %/ H ow to d e v e lo p a rea listic · Safety C hecks 585 Speers Road SUPER -7AUTOS at 4th Line & Speers Road Import M Specialists MAZDA ACURA NISSAN TOYOTA q bmv Oakville ·845-2269 h ig h e r retu rn s th a n GICs fin a n c ia l p la n R O B E R T B IN N IN G T O N , B.Comm, C.A. FINANCIAL CONSULTANT, RETIREM ENT SPECIALIST Providing ongoing financial advice to individuals and entrepreneurs since 1991 P R I V A T E C l I F N T IN V E ST M E N T S 7 X 1 The Leading Indicator. W ood G undy Private Client Investm ents is a division of CIBC W orld M arkets Inc., a subsidiary o f C anadian Im perial Bank o f C om m erce a n d M em ber CIPF, G uaranteed Investm ent C ertificates (G IC s) are term d ep o sit in stru m en ts, not bonds. They are usually issued by a finan cial corporation like a trust com pa ny or a bank. They are for specific periods, pay interest, and are usu ally held to their m aturity dates by investors. WE INVITE YOU TO ATTEND ONE OF OUR SEMINARS to be held on the following dates: For individuals: February I, or February 15, 6:30-8 p.m . For entrepreneurs: February 2, or February 16, 6:30-8 p.m . P l e a s e C a ll ( 9 0 5 ) 5 2 6 - 4 7 9 9 , o r TOLL FR E E 1 - 8 0 0 - 2 6 3 - 2 1 6 7 to r e s e r v e y o u r se a t A U a tt e n d e e s w i l l re c e iv e a C O M PL IM E N T A R Y C O P Y o f P e te r L y n c h 's t h i r d b o o k le t f e a t u r i n g COM M ON SE N SE IN V E ST M E N T S T R A T E G IE S NOTE: IF YOU WOULD LIKE A MORE INDIVIDUAL APPROACH, A PRIVATE MEETING CAN BE ARRANGED. For All our RRSP Needs ^ & Variable Rate Savings RRSP "Your Choice" Term Deposits 5 Yr. Accelerater Term Deposit Premium Choice Investment Certificates The Family Of Ethical Mutual Funds" 100 Of The Top Name Mutual Funds" Index-Linked Term Deposits First Ontario Fund' Performance.Com 5 Year Equity-Linked Term Deposit 3 Year "Your Choice" Term Deposit Canada Savings Bonds (CSBs) are another debt instru m ent issued by the C anadian gov ernm ent. They are not like m ost bonds, because they can be cashed in at any tim e and only by the orig inal purchaser. W hen you cash in a C SB , you get back the face value o f the bond and the interest that has accrued, or accum ulated, up to th at date. s, s . - Women Who Excel The Tues. Feb. 22nd m eeting of Women Who E xcel , will discuss B usiness W om en & Juggling Roles. The cost is $27 and GST ($28.90) for m em bers and $32 and G ST ($34.25) for non-members. Tea, coffee and other beverages are extra. Reservations can be made by cheque, VISA or M A STER CA RD by calling 905-547-7135 or 1-800-363-0268. For more detailed inform ation, call our 24-hour infor m ation line 905-521-5600, code 3925. The W O M E N W H O EXCEL 11th M em bership D irectory is com ing out at the Feb. 22nd, 2000. meeting. For m em bership, directo ry, and advertising inform ation, call 905-547-7135. The group's e-mail is w o m en.w ho.excel@ hw cn.org. T he H om e Page is http://w w w .hw cn.org/Inform ation/ business/excel/index.htm l. W O M EN W H O EX C EL, the largest w om en's business netw ork ing organization in the HamiltonW entworth and Halton Regions, is a m em ber o f the H am ilton, Burlington and Oakville Cham bers o f Com m erce. (M eeting locations and topics are subject to change -- please call to check.) E L C O M Em A G O N ltd r r s ii n c e S A ^ I £ 1930 B u s in e s s / PROFESSIONAL W elco m e W e lc o m in g n e w b u sin e ss, p ro fe s sio n a ls a n d e x e c u tiv e s to the O a k v ille b u sin e ss c o m m u n ity . O u r c o m p lim e n ta ry p re se n ta tio n in c lu d e s g ifts, m ap s, a b u sin e ss d ire c to ry , an d o th e r h e lp fu l in fo rm atio n . W e a ls o o ffe r an e x c itin g b u sin e ss sp o n s o rs h ip p ro g ra m , in c lu d in g c u rre n t p ro m in e n t b u sin e sse s: A decco A n E n g lis h G a rd e n F lo w e r S h o p p e B D O D unw oody LLP B re n d a D u n s d o n . 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To D iscuss Your RRSP Needs Call Or V isit The Branch At 6 0 Lakeshore Road W est 8 4 4 -4 8 8 1 AVESTEL FAM ILY SA V IN G S C R E D I T U N I O N www.avestel.com **M utual Funds and Ethical Funds are offered through C redential A sset M anagem ent Inc., a w holly-ow ned subsidiary o f C redit U nion Central o f C anada and are not insured nor guaranteed, their values change fre quently and past perform ance m ay not be repeated. *First O ntario Fund is a L abour Sponsored Investm ent Fund (LSIF). Im portant inform ation is contained in the prospectus available from your C redit Union. First O ntario Funds are not insured nor guaranteed. T o r e c e iv e a c o m p lim e n ta r y p resen tation , or for m ore in form ation about sp o n so rsh ip , p le a se call Wendy Budisavljevic (905) 849-6061 www.welconiewagon.ca ©Copyiighi