Oh shucks, not another one of those green peace articles!
Nope not even close, it is however advisable though because you're wasting fuel
and that will cost you over time. Anyway I digressed, this is a
financial advisory blog not an environmental one so let's stick to finances.
Today we are going to talk about being greedy and maximizing your return because "greed is good", I mean
let's be honest financial incentive is a powerful force that leads us.
In times of market uncertainty, many of us like to wait it
out and there's nothing wrong with that... sort of. You see there are many low
to medium risk investments that you can park your money in, not your savings
account. Why earn an abysmal 1% when you can take on a little more risk and get
a bond, or even a balanced growth mutual fund? Actually to be honest I don't
even think my savings account gives me 1% while the April 2013 Canada Savings
Bond (CSB) is in fact exactly 1%. If you want absolute security, get the
government ones because they will never default. However if you're not looking
to spend your idling cash in the next 4 months or so, I would actually suggest
a balanced growth or income mutual fund and for two reasons: 1) unit prices
(aka. NAV) are low now due to Cypress and a recent market correction, if you
buy-in now you may get a gain shortly in the next few months, and 2) monthly
distributions would exceed what your savings account gives you. The mutual fund
doesn’t guarantee that it won't go down in value, but a balanced growth one is
not likely going to have any major downswings.
The next few months will be rough, hang in there and don't
panic! Get too emotional and you will end up selling at the dips and buying
when it's high. Though this is more applicable to riskier investments like
shares, it applies to mutual funds too. This month is earnings season, so far
there have been both positive and negative earnings surprises, you will likely
see more volatility but it should be going back up slowly after June as investors
start seeing into 2014 to base their decisions.
At this point you may be wondering, wait a minute, where are
the GICs in this picture??? They certainly are very safe, but the rates for
cashable ones are so terrible that if you're looking for something safe, get a
bond or a mutual fund. GICs in general give you a really small return relative
to the other options out there because they are GUARANTEED. In most cases
however, take on a little bit more risk and you can easily double what a GIC
can give you. In fact, the relationship between me and GICs has deteriorated so
much that as Taylor Swift puts it, "we are never ever ever getting back
together".
Lastly I just want to leave with this note, always reserve a
safety net! Don't put all your money into investments, no matter how safe. Not
because a government bond or a mutual fund will go bankrupt, but for the reason
of liquidity (aka. Ability to take out cash when you need it immediately).
Stay tuned for the next article folks, hopefully within the
next two days depending on how busy I get.
-TT
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