The Asset-Class Menu

⏱ ~25 min📚 Foundations🍔 Menu walkthrough

"Investing" is not one thing. It's a menu. Each item has a different flavor of risk, return, liquidity, and tax treatment. Before you allocate money, you need to know what you're choosing between.

Think of it like a food court. Stocks are the spicy entrée — high risk, high reward. Bonds are the rice — boring, steady, fills you up. ETFs are the buffet plate — a little of everything in one trip. GICs are the bottled water — completely safe, totally bland.
STEP 1

The Six Things You'll Encounter

AssetWhat it isRiskTypical Return*
Stocks (Equities)Ownership in 1 companyHigh~7–10%/yr long-run, but bumpy
ETFsA basket of stocks (or bonds) in one tickerLow–Med~7–9%/yr (broad equity ETF)
Mutual FundsSame idea as ETF, older format, higher feesLow–Med~5–7%/yr (after fees)
BondsYou loan money to gov/corp, they pay interestLow~3–5%/yr
GICsLocked-in savings at a bank, fixed rate~Zero~3–5% currently
REITsBuy fractional real estate via sharesMed~6–8%/yr + rent dividends

*Long-run averages. In any given year a "stock" return could be +30% or –40%. The averages only show up over decades.

STEP 2

Stocks vs ETFs — The Most Important Distinction for You

An ETF (Exchange-Traded Fund) is a single ticker that holds dozens-to-thousands of stocks inside it. You buy it like a stock; you get diversification automatically.

Example: VFV (Vanguard S&P 500 Index ETF for Canadians) holds the 500 largest US companies. One purchase = exposure to Apple, Microsoft, Coca-Cola, Pfizer, etc. all at once.

🎯 Single Stock

  • You pick one company
  • If it doubles, you double. If it goes to zero, you lose everything.
  • Requires research, attention, conviction
  • Fun but stressful

Concentrated risk

🧺 ETF

  • You own hundreds of companies in one trade
  • One company going to zero barely dents you
  • Set-and-forget compatible
  • MER (annual fee) — typically 0.05–0.30% for index ETFs

Diversified by default

🍁 Canada-relevant ETFs you'll meet VEQT, XEQT — 100% global stocks, "all-in-one" portfolios.
VFV, XUS — S&P 500 (US large-cap).
VCN, XIC — Canadian stock market.
ZAG, VAB — Canadian bond market.
We'll cover these properly in Module 3.
STEP 3

Bonds — The Boring Best Friend

A bond is an IOU. You lend $1,000 to the Canadian government for 5 years; they pay you, say, 3.5% interest each year and return your $1,000 at the end.

Bonds are boring on purpose. They smooth your portfolio when stocks crash. In 2008, Canadian stocks dropped 33%. Government bonds gained 6%. That counter-movement is what bonds are for — not for big returns, but for keeping you sane (and your money intact) when the stock market is having a bad week/month/year.

For a 25-year-old with a 40-year horizon, bonds usually make up a small slice (we'll set it via slider in Module 3). For a 60-year-old, they're a big slice.

STEP 4

Cap Sizes — Small / Mid / Large

Stocks are also classified by market capitalization (how much the whole company is worth = share price × number of shares).

CapRoughly worthBehavior
Large-cap$10B+Stable, slower growth (RBC, Apple, Enbridge)
Mid-cap$2B–$10BSweet spot — growth + some stability
Small-cap$250M–$2BHigh volatility, high growth potential, also higher failure rate
Micro/Penny< $250MSpeculative. Often illiquid. (e.g. ASTI sits here)
⚠️ Reality check Penny stocks (sub-$5/share, micro-cap) feel cheap and exciting. They're not "cheap" — they're priced low because the company is small and risky. The lottery-ticket vibe is real and most lottery tickets lose. If you trade these (your "active bucket"), keep position sizes tiny — we'll do the math in the Position Sizer tool.
STEP 5

Where Each Asset Lives in a Real Portfolio

Sneak peek of what we'll build in Module 3 — a typical 25-year-old retirement portfolio looks like:

🧠 Quick Check

You buy XEQT for $1,000. What did you actually buy?
A loan to the company XEQT
A tiny share of ~9,000 stocks across the world, all in one trade
A guarantee from the bank for 4% interest
A penny stock with high upside

📝 Your Notes

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