The Money Management Newsletter: GICs and Fixed Income
Fixed-income investments have a lot to offer

By David J. Newman
Director, Financial Information Services
Money Management Newsletter - May 2010

If you're looking for a place to invest your money, but don't want a great deal of risk, GICs and CSBs aren't your only options - and not necessarily the best ones, either. While the principal and interest of GICs are insured up to a point, these investments may not provide you with the return you want for your hard/earned cash.

Fixed-income mutual funds are an excellent investment option for cautious investors. The term fixed-income encompasses such investments as government, provincial and corporate bonds, mortgage backed securities, T-Bills and commercial paper. While the principal and return of fixed -income funds aren't guaranteed, fixed-income funds do provide the opportunity for higher returns.

Investors with a long-term outlook shouldn't be overly concerned about short-term fluctuations in return. They know the benefits of mutual funds over GICs and CSBs - such as historically more attractive rates of return, flexible redemption's and the ability to purchase virtually any amount - outweigh temporary price fluctuations.

A variety of fixed-income funds are available - each exposing you to varying degrees of risk and reward and designed for different investment horizons. Some funds are composed of high-quality government securities, while others invest in lower-rated corporate bonds. Some focus on the short term and are ideal for "parking" your money while deciding where to invest for the long term. Others are suitable for long-term objectives. Some may be volatile, while with others, investors face little risk of capital loss. Most fixed-income funds have moderate to high short-term risk, moderate to high income potential, and moderate long-term growth potential.

Fixed-income funds may be managed by an individual professional money manager, or by a team. These fund managers research, analyze and make investments in a number of companies, industries and countries on your behalf. And fixed-income fund managers may work closely with equity fund managers to share information and apply their knowledge to corporate bonds. They ensure the fund works towards its objectives, while the fund company ensures your account is accurate and up to date, and that you're kept aware of how your investment is performing.

So if you think GICs and CSBs are the best means to securing your financial future, think again. You may be forgoing the opportunity for more growth.

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