How to Flow Through Shares and Bankers’ Acceptances Popular with Canadian Investors

Currently, there is a wide range of financial options available to investors in Canada, including equities, bonds, flow through shares, and bankers’ acceptances. This article will review these different investment options briefly to educate readers on these various options.

The RRSP is a tax incentive for registered retirement savings plans. This tax incentive allows investors to reduce the amount of tax payable while they are saving for retirement. Regular contributions can be deducted from the investors income, which will reduce the amount of taxes payable. The contributions are 100% tax deductible, however, any sums which are taken out of the plan will become taxable and will be added to the investors income. There is also an RRSP limit of 18% of your income or about $22,000 whichever is more (2011 limit was $22,450).

In recent years Flow Through Shares and Bankers acceptances have both become increasingly popular. Flow-through shares are becoming an especially popular choice for individuals that are interested in investing in the Canadian commodities market, especially in regards to Oil Gas Stocks. One reason behind the popularity of oil & gas stocks is that investors with flow through shares can (potentially) obtain tax credits. Many oil exploration companies choose to trade in flow through shares, which allows them to pass on tax breaks to investors. These tax breaks work best for those investors who are lucky enough to find themselves in the highest income tax bracket, although (in theory) flow through shares can be financially profitable for almost any investor.

Bankers’ acceptances options have been growing rapidly in popularity throughout 2010, especially among traders that are looking to trade on an international level. Bankers’ acceptances are negotiable and often fairly flexible; this makes them an attractive option to investors. Essentially, a banker’s acceptance is a written agreement between a bank and the client, which acts as a guarantee that the bank will pay the agreed-upon sum of money to the person named on the document. Bankers’ agreements are usually only very short-term agreements, and in this arrangement the bank is responsible for all liability once the agreement has been signed and accepted by both parties. Investors are increasingly utilizing bankers’ acceptances because they allow the investor to obtain a loan through the bank, while at the same time backing the loan against the bank’s credit rating (rather than the investor risking his or her own personal credit rating).

There is, of course, still risk involved, since bankers’ acceptances are heavily reliant on the bank in question possessing a good reputation/standing within the financial community. Independent reports show that this year’s increase in bankers’ acceptances is the biggest rise in recent years, and while growth in the financial sector has generally slowed down, demand in Canada for bankers’ acceptances remains high. This has resulted in a close examination of the policies relating to bankers’ acceptances, and some banks appear to be shaping up to push for much stricter regulations. Some requirements/regulations will be enforced by national financial regulations and agencies, and others will be imposed and self-enforced by the banks themselves. But, as a rule-of-thumb, most all banks will have minimum requirements/criteria that must be met in order to qualify for bankers’ acceptance. The criteria banks require usually include a creditor being trustworthy, financially secure, and able to present a good reason for the bankers’ acceptance being issued.

Tags: ,

Related posts

This entry was posted on Tuesday, July 19th, 2011 at 1:30 pm and is filed under Banking/Finance, General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.