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 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.
INVESTMENT
TYPE |
SHORT-TERM
RISK |
INCOME
POTENTIAL |
LONG-TERM
GROWTH POTENTIAL |
| GICs |
None
|
Moderate
|
Low
|
| CSBs |
None
|
Moderate
|
Low
|
Fixed-Income
Funds |
Moderate
to High
|
Moderate
to High
|
Moderate
|
* * *
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