12) Why are federal government securities considered to be risk free?

Federal government debt obligations consist of marketable bonds, non marketable CSBs and Treasury Bills. Additionally, the federal government guarantees certain Crown Corporation debt. These debt instruments are backed by the full taxing authority of the Canadian federal government which means that there is virtually no chance of default. In addition to guaranteeing the principal, the federal government also guarantees the interest rate.

13) Why would an investor choose a Mortgage Backed Security over a term deposit or a GIC?

Although all of these investments pay approximately the same interest rate, there is a secondary market in MBS which translates into greater liquidity for the investor.

1) Why should real estate be part of my portfolio?

Research studies show that real estate offers a long term, attractive real rate of return and act as a hedge to inflation. Commercial real estate has a lower standard deviation of returns (risk) than stocks or bonds. Most importantly the returns on real estate investments are not highly correlated with the other asset classes, which results in improved diversification in a portfolio.

2) Does real estate always increase in value?

Various studies show that real estate, like inflation, tends to follow long term trends. Factors which affect the value of real estate include supply, demand, and the nature of the property itself. Investors can lose money in real estate because they do inadequate research or are overly optimistic.

1) How do I know if my fund manager is doing a good job?

Research indicates that only about one third of U.S. mutual fund managers outperform the benchmark portfolio after factoring in expenses and risk. This same research also concludes that mutual fund performance is inconsistent, which means that a top performing fund in one year isn't necessarily the top performer in the following year. Studies indicate that although professional money managers can outperform the index, the costs to find these opportunities can most often be greater than the additional returns.