Page 226 - A Canuck's Guide to Financial Literacy 2020

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the price of a specific commodity will rise or fall. Be aware that trading
commodities is high risk and not for a novice investor.
▪ Flow Through Shares

Flow through shares provide a tax incentive to investors who acquire them.
Companies in the mining, oil and gas and renewable energy are allowed to
issue flow through shares to help finance their projects. These companies
typically struggle to raise capital to finance their exploration and development
activities which is why flow-through-shares are attractive.

Benefits of Alternative Investments

1. Adding alternative investments to your portfolio can enhance the diversification of
your portfolio.
2. Alternative investments may provide you with higher level of return as you’re taking on
more risk.
3. Alternative investments may be negatively correlated to the overall market thus
providing with you with a lower volatility.

Drawbacks of Alternative Investments

1. Liquidity might be an issue. Alternative investments may have a holding period of
days, months or even years.
2. Portfolio managers utilize complicated investment strategies that an average investor
would not understand.
3. The more complicated the investment strategies are, the higher the fees. Alternative
investments have a higher transaction cost and high management fees.

4. Alternative investments may be exempt from prospectus disclosure requirements. The
lack of transparency may be an issue for some investors.