A community bond is an original way to support a community organization and conserve your capital. You help a social group while receiving interest on your capital, which won’t be touched.
Québec’s Autorité des Marchés Financiers (ATM, or financial markets authority in English) allows community groups to float community bonds without issuing a prospectus and without going through a broker. That way, no broker has to be paid for the issuance of these bonds, which means more money makes it to the community group, and there’s less cost to the investor.
Three groups have already issued community bonds:
- Le Grand Costumier de Radio-Canada
- Le Cinéma du Parc
- Les Ateliers 7 à nous
After 25 years of helping marginalized youth, to consolidate all of its social activities the Journal de la Rue is preparing a bond issue. These bonds, in multiples of $1,000, will pay interest rates anywhere from 1% to 6.5% annually, according to the amount and the term of each bond.
- These bonds aren’t guaranteed. So any investor has to be prepared to lose their money without putting their personal finances in peril.
- If you have any debt on your credit cards, start by paying that off. A credit card can cost you up to 29% interest annually. No community investment can offer you interest equivalent to your unpaid debts.
- There exists a basic investment that any citizen should consider before putting money into a community group. It’s called an RRSP, because it’s tax deductible and it’s a guaranteed investment. It should be prioritized above any community investment.
- Purchasing a house should also come before any community investment.
- Banks and caisse populaires offer guaranteed deposit certificates up to $100,000. That entire amount is guaranteed by the Canada Deposit Insurance Corporation (CDIC).
- Make sure you’ve paid off not only your credit cards, but your car and other payments.
- You own your own home and your mortgage is a drop in the bucket in terms of your budget.
- You’ve contributed a maximum amount to your RRSP.
- Your deposit certificates, along with those of your spouse, have hit the $100,000 mark guaranteed by the CDIC.
- You could easily afford a nice vacation even if you lost your community bond investment.
If you meet all these restrictive criteria, then we could foresee accepting you as an investor in the Journal de la Rue.
For anyone else who does not meet this strict criteria, take care of your own financial health first. You can’t buy happiness, but you can avoid tearing your own hair out if you pay all your bills. And everyone deserves to spend their retirement in the peace and quiet that they’ve earned.
Money is a tool that should work for you.