Investment Risk Disclosure
The following is a summary of the risks of investing. Please note that this list is not exhaustive, and has been provided as an indication of the factors that can affect the value of your investments.
Equity Risk: Investors in equity securities may be exposed to a high level of risk because the prices of equity securities can rise and fall significantly in a short period of time. This could arise due to the fortunes of the companies that issue them or with general stock market or economic conditions.
Short Selling Risk: Short selling strategies can provide an investor with an opportunity to manage volatility and enhance performance in declining or volatile markets. Short selling securities involves risk because there is no assurance that securities will sufficiently decline in value during the period of the short sale to offset the interest paid by the investor and make a profit for the investor. Securities sold short may instead increase in value. The investor may also experience difficulties repurchasing and returning the borrowed securities. The borrowing agent from whom the investor has borrowed securities may go bankrupt and the investor may lose the collateral it has deposited with the borrowing agent.
Credit Risk: A fixed income security, like a bond, is essentially a promise to pay interest and repay a specified amount at a later time. The probability that the issuer of the fixed income security will fail to honour that promise is called credit risk. Credit rating agencies give investors an idea of how much of a credit risk an issuer represents. If a company or government has a high credit rating, the credit risk tends to be low. A lower credit rating means more credit risk.
Interest Rate Risk: A change in general interest rates is one of the biggest factors affecting fixed-income securities. A bond for example, pays interest based on the level of interest rates prevailing when the bond is issued. Generally, if interest rates fall, the values of the bond rises. This is because the interest rate on the existing bond will be higher than the rate on newer bonds. On the other hand, when general interest rates rise, the price of existing bonds is expected to drop because they pay less than newer bonds.
Inflation Risk: is the risk of decline in the purchasing power of your savings due to a general rise in prices.
Foreign Currency Risk: Investing in securities that are priced in foreign currencies involves foreign currency risk. Securities that are priced in foreign currencies can lose value when the Canadian dollar rises against the foreign currency. As well, foreign governments may impose currency exchange restrictions, which could limit the ability to buy and sell certain foreign investments and could reduce the value of the foreign securities that are held by investors.
Foreign Market Risk: Foreign investments involve additional risks because financial markets outside of Canada and the U.S. may be less liquid and companies may be less regulated and have lower standards of accounting and financial reporting. In some countries, an established stock market and legal system that adequately protects the rights of investors may be lacking. Foreign investments can also be affected by social, political, or economic instability. Foreign governments may impose investment restrictions.
Liquidity Risk: Liquidity refers to the speed and ease with which an asset can be sold and converted into cash. Most securities can be sold easily and at a fair price. In highly volatile markets, certain securities may become less liquid, which means they cannot be sold as quickly or easily. Some securities may be illiquid because of legal restrictions, the nature of the investment, or certain other features such as guarantees or a lack of buyers interested in the particular security or market. Difficulty in selling securities may result in a loss or reduced return for a Client.
Borrowing Risk: The use of leverage may not be suitable for all investors. Using borrowed money to finance the purchase of securities involves greater risk than using cash resources only. If an investor borrows money to purchase securities, the investor's responsibility to repay the loan and pay interest as required by the terms of the loan remains the same even if the value of the securities purchased declines.
Derivatives Risk: A derivative is a type of investment whose value is derived from the performance of other investments or from the movement of interest rates, exchange rates or market indices. The Advisor will only recommend derivatives as permitted by securities regulations. The Advisor may recommend derivatives to help offset losses that other investments held by a portfolio might suffer because of changes in stock prices, commodity prices or interest or exchange rates. This is referred to as hedging.
Some common risks of hedging with or investing in derivatives are:
Exchange Traded Fund Risk: Exchange-traded funds (“ETFs”) are securities that closely resemble index funds, but can be bought and sold like common stocks:
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Past performance is no guarantee of future results. Any historical returns or expected returns may not reflect actual future performance. All securities involve risk and may result in loss. Read our Investment Risk Disclosure.
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