Investing is a powerful tool for growing your wealth, but with so many options available, it can be difficult to determine which investment vehicle best suits your goals. Capstone Asset Management breaks down four common investment vehicles—individual stocks & bonds, mutual funds, pooled funds, and exchange-traded funds (ETFs). Here’s what you need to know.

1. Stocks & Bonds: Direct Ownership, Direct Control

When you invest in stocks, you’re buying a piece of a company, and when you invest in bonds, you’re essentially lending money to a company or government in exchange for interest payments. These investments can be purchased through a brokerage account, either directly or with the help of an advisor.

Key Benefits:

• Full control over investment choices

• Potential for dividend income and capital appreciation

• Tax advantages for Canadian stocks, including lower tax rates on eligible dividends

However, direct ownership also means you bear full responsibility for any gains or losses, and there may be trading fees involved. It’s also worth noting that capital losses can be used strategically to offset capital gains for tax purposes.

2. Mutual Funds: Diversification in a Single Package

Mutual funds pool investors' money to buy a diversified portfolio of stocks, bonds, or other securities. Managed by large investment firms, mutual funds offer a range of options, from Canadian equity funds to global growth funds.

Key Benefits:

• Instant diversification

• Professionally managed portfolios

• Accessible through most brokerage platforms

However, mutual funds often come with management expense ratios (MERs), which can vary in cost. Investors should also be aware that distributions—whether from dividends, capital gains, or interest—are taxable and reported on a T5 slip for Canadian tax purposes.

3. Pooled Funds: A Tax-Efficient Investment Option

Pooled funds, also known as mutual fund trusts, function similarly to mutual funds but come with a slightly different tax structure. Instead of a T5 slip, investors receive a T3 slip, reflecting income from a trust.

At Capstone, most of our funds are structured as mutual fund trusts, offering investors exposure to a range of investment strategies, including traditional equity and non-traditional investments like mortgage funds. Pooled funds can be an attractive option for tax-conscious investors looking for diversified, professionally managed portfolios.

Additionally, Limited Partnership (LP) Funds—while not one of the four main vehicles covered—are another option. LP Funds are structured differently and are not eligible for registered accounts, with tax reporting done through a T5013 slip.

4. Exchange-Traded Funds (ETFs): Low-Cost, Market Exposure

ETFs have surged in popularity due to their low fees and passive management style. These funds track market indices and trade on stock exchanges like individual stocks.

Key Benefits:

• Typically lower fees than mutual funds

• Easy access to a broad range of markets

• Liquidity—can be bought or sold throughout the trading day

ETFs offer a balance between individual stock ownership and mutual funds, making them a flexible option for investors.

While ETFs provide access to various markets, one gap still exists—there is currently no Biblically informed ETF in Canada that aligns investment decisions with Biblical principles. Capstone Asset Management is changing that. Stay tuned for more details on this exciting new investment opportunity!

Understanding different investment vehicles can help you build a portfolio that aligns with your financial goals and values. Whether you prefer the control of individual stocks, the diversification of mutual funds, the tax benefits of pooled funds, or the efficiency of ETFs, each investment option has unique advantages.  

A new era in investing is here. Let’s make the most of it together! Start exploring your opportunities with Capstone Asset Management by scheduling a free consultation call.