Before you invest, take time to understand how the investment works, what it costs, and what risks are involved. Whether you’re working with an advisor or making decisions on your own, doing your research helps you make informed choices and avoid surprises.
Start by asking key questions:
How does the investment make money? Does it pay interest or dividends?
What fees or commissions will I pay to buy, hold, or sell it?
What needs to happen for the investment to go up—or down—in value?
How easy is it to sell if I need access to my money?
Are there penalties or restrictions if I sell early?
Does this investment fit my goals and comfort with risk?
If you’re investing in a company, it’s important to understand how that business operates and whether it’s financially healthy. Look into:
How long the company has been in business.
Whether it’s making or losing money.
What could affect its performance—such as market trends, competition, or legal issues.
Whether financial statements show red flags, like rising expenses without increased sales or negative cash flow.
Who manages the company and whether there are any ongoing legal concerns.
If you’re unfamiliar with financial statements, ask your advisor or accountant to walk through them with you.
When researching investments, it’s important to use trusted sources that give you clear, accurate, and complete information. Whether you’re working with a registered financial advisor or doing your own research, these documents can help you understand how an investment works, what it costs, and what risks are involved.
Here are some key sources to look for:
A prospectus is a detailed document that companies must prepare when offering securities to the public. It includes:
Information about the company’s business and financial health
A description of the investment being offered
Major risks that could affect the company or investment
How the company plans to use the money it raises
You can ask your advisor for a copy or find it on the System for Electronic Document Analysis and Retrieval (SEDAR+).
Some investments—called exempt market securities—can be sold without a prospectus. These are riskier and come with fewer protections. If you’re considering one, make sure you qualify and understand the risks, resale restrictions, and limited information available.
This document gives you key facts about an investment fund. It’s shorter than a full prospectus and easier to understand. It includes:
The fund’s goals and investment strategy
What the fund invests in
Who manages the fund
Risks and suitability
Fees, operating costs, and tax considerations
You can request a simplified prospectus from your advisor or the fund company.
These are short, easy-to-read summaries that help you understand mutual funds and exchange-traded funds (ETFs). They’re designed to give you the most important information at a glance.
Fund Facts include:
How much it costs to buy and own the fund
What portion of your fees go to your advisor or dealer
The fund’s risk level, from low to high
What the fund invests in, including foreign holdings
How the fund has performed over time
Mutual fund companies must give you Fund Facts before you buy a conventional mutual fund.
ETF Facts include:
The ETF’s management expense ratio (MER), which combines management and operating fees
A snapshot of how the ETF’s investments are allocated
The ETF’s risk level
Historical performance since the fund’s launch
Your dealer must provide ETF Facts within two business days of your purchase. You can also find them on the fund company’s website or ask your advisor for a copy.
You can also find helpful information from:
Annual reports and financial statements
Management’s Discussion and Analysis (MD&A), which explains company performance and future plans
Analyst reports, financial news, and newsletters
Always check the credibility of your sources. If something sounds too good to be true, take a pause and ask questions, or reach out to a registered financial advisor for help.