FISCAL AGENTS: Financial Services Group

Open the QuickNav window
Site Map

The Knowledge Bank

The Money Centre

The Learning Centre

Financial Tools

The Money Management Newsletter
General Interest
GICs / Fixed Income
RIF Planning
RSP Planning
Managing Money
Choosing Fin.Services
Insurance Products
RESP Savings
Taxes / Estate Matters
Home Ownership
Companion Advisor
Product Reviews
E-Newsletter Archive
Front Page Archive
Subscription Services

Products and Services

About Us

Glossary of
Financial Terms
Find out more
Click above to find out how Fiscal Agents can assist you on investing in GICs.
Now Quick-Nav enabled!
Use this link to connect you directly to additional useful information related to GICs.


The Money Management Newsletter: GICs and Fixed Income
What is the best fixed term to invest for with rates so low?

This is a simple question for which there is no easy answer. Very few people other than The Great Zambini or your fairy godmother can accurately predict how long interest rates will remain at a particular level or the future direction of such rates. Unless you have access to infallible data, the best course of action in almost all cases is to stagger the maturities of your investments over several years.

The concept of staggered maturities is simple and recommended by most investment professionals, however applying it is another matter for a lot of people. The main stumbling block in applying this concept is peoples emotions and their willingness to gamble on interest rate changes.

For example, in the fall of 1990, long term rates were in the 11.25% range while shorter term rates averaged around 11.75%. Many of our clients with deposits maturing at that time, renewed them for one year or less, anticipating that rates would continue to increase. Similarly when interest rates began falling rapidly in early 1991 many clients again renewed for short terms hoping that rates would soon return to previous levels. We all know that rates have continued to fall so the people noted above had those particular investments renew at even lower rates.

Now that rates are much lower than they were in 1990 and 1991 many clients are again renewing for shorter terms feeling that rates have to improve. This may or may not happen and time will be the only judge of current decisions.

You will note however the pattern illustrated above. Individuals were renewing for short terms during periods of high rates, falling rates and again when rates are low. Emotions may have been a factor in these decisions which in retrospect have produced lower returns.

A consistent approach of staggering investment terms will eliminate emotional decisions that can often create negative results. This disciplined approach should improve the overall return of your portfolio and produce a more consistent investment cash flow. A consistent cash flow is especially important if you rely heavily on your investment income to meet monthly expenses, as wide fluctuations in your earnings can make budgeting difficult.

* * *
Use this link to load a printer-friendly
version of this document.

Do you want to share this page with someone else?
Send this page to
Your email address

Have a question regarding this article? Use our feedback form to send us a note.

© , Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700


Fiscal Agents Home

Knowledge Bank Money Centre
Learning Centre Financial Tools
Newsletter Products & Services
About Us    

Legal | Site Map | Home | Search

Copyright © 1984 - Fiscal Agents Financial Services Group

Questions? Comments?
Use our Feedback page to contact us.

GICs And
Fixed Income

2002 Ontario Savings Bonds Information

GICs: A new take on a tried and true investment

New twist to convertible GICs - Buy Mutual Funds; write cheques

Do your homework before buying index linked GICs

Fixed-income investments have a lot to offer

Look into Government Bonds

Strip Bonds - Are they really the investment for you?

Introducing a GIC for life

The lifetime Term Deposit

What is the best fixed term to invest for with rates so low?

How do GICs compare with NHA Mortgage Backed Securities?

The Companion Advisor:
Fixed Income