I am Liam, and today we are diving straight into how you can make your money work for you through investment alternatives.I am Maya, and we will begin with the foundation of low risk investing, specifically focusing on Guaranteed Investment Certificates or G I Cs.I am Chloe, and I will explain how to navigate the world of stocks, mutual funds, and the growing field of ethical investing.And I am Noah. We are going to look at the math behind risk and return so you can make informed decisions. Let’s get started with the basics of personal finance.When you start earning money, you have a choice. You can spend it, let it sit in a low interest savings account, or invest it. Investing is the act of committing money to an asset with the expectation of obtaining a profit. For many people in Canada, the first stop is a G I C. A Guaranteed Investment Certificate is a very safe investment. You are essentially lending your money to a bank for a set period, such as one year, three years, or five years. In exchange, the bank guarantees that you will get your original money back, plus a specific amount of interest. The big pro here is security. Your money is protected. However, the con is that the rate of return is usually lower than other investments, and your money is often locked away until the term ends. If you need that cash for an emergency, you might face a penalty. It is a great tool for short term goals where you cannot afford to lose a single penny.Now, if you are looking for more excitement and higher potential growth, we need to talk about stocks. When you buy a stock, you are buying a piece of a company. You become a partial owner. If that company does well, the value of your stock goes up. You might also receive dividends, which are a share of the company’s profits paid out to you in cash. The pros of stocks are significant because over the long term, they historically provide a much higher return than G I Cs or savings accounts. But we must be honest about the cons. Stock prices are volatile. They can go up and down based on news, the economy, or even just public mood. You could lose money if the company performs poorly. For a high school student, the tip here is to think long term. Do not worry about the daily ups and downs; focus on the quality of the business you are buying into.Many people find picking individual stocks to be too risky or too much work. That is where mutual funds come in. Imagine a giant bucket where thousands of investors pool their money together. A professional fund manager then uses that huge pile of money to buy a diverse mix of stocks, bonds, and other assets. This is called diversification. The main pro of a mutual fund is that it reduces your risk. If one company in the bucket fails, the others can help keep the total value stable. Another pro is professional management; you have an expert making the decisions for you. However, the cons include management fees. You have to pay the manager a percentage of your investment every year, which can eat into your profits over time. You also have less control over exactly which companies are in the fund.We also need to consider where our money is going from a moral perspective. This is where ethical funds, or E S G funds, come into play. These are mutual funds that specifically choose companies based on their environmental, social, and governance records. For example, an ethical fund might avoid companies that produce tobacco or fossil fuels and instead focus on renewable energy or companies with fair labor practices. The pro is that you can grow your wealth while supporting values you believe in. The con is that sometimes these funds have higher fees because it takes more research to screen the companies. But for many modern consumers, the peace of mind is worth it. It is about making an impact with your capital.Finally, let us look at bonds. A bond is like a giant I O U. When you buy a bond, you are lending money to a government or a corporation for a set period. In return, they promise to pay you back with interest. Government bonds in Canada are considered very safe because they are backed by the government’s ability to tax. The pro is steady, predictable income. The con is that like G I Cs, the returns are often lower than stocks. If interest rates in the general economy go up, the value of the bonds you already own might go down. It is all a balance. A smart investor usually has a mix of these different tools to ensure they have safety, growth, and liquidity. Remember, the best time to start learning about these is now, while time is on your side. Read the rest of this lesson to see the specific math on how these returns compound over twenty years.
