If rising interest rates aren’t enough to rekindle your interest in GICs, then how about some new research about the stability they can bring to a portfolio?
Unless you put risk avoidance at the top of your list of attributes when selecting investments, you’ve probably not bothered to take a look at guaranteed investment certificates in recent years.
With interest rates as low as they were, GICs offered returns that were almost laughably low. Today, though, you can get as much as 3.6 per cent for a one-year GIC and 4.45 per cent on a five-year term. Still not interested? Then consider some research that Bank of Montreal commissioned recently.
The study tries to put a mathematical spin on something you already know in your gut – that GICs can add reliability and safety to a portfolio.
A couple of other conclusions are worth looking at, one is that short-term GICs can provide higher returns than other cash-like investments.
Another is that long-term GICs have a low or negative correlation to stocks and bonds, which is a fancy way of saying that GICs are a good diversifier because they offer returns that don’t rise and fall with other asset classes.
Over the last 20 years, returns from five-year GICs had returns were almost completely independent of the S&P/TSX composite index and had only a minimal similarity to the S&P 500 stock index (in Canadian dollars) and the Scotia Capital Universe Bond Index.
Aside from their recent low returns, the main drawback with GICs is that rates vary widely between financial institutions.
You may not be able to get the most competitive rates unless you buy through an adviser or broker with access to the products of various banks, trust companies and credit unions.
Even if you deal with a big bank and get bonus of an extra half a percentage point, you still could be making less than what small trusts and credit unions are offering.
If you deal with an adviser or broker (full-service or discount) and you’re interested in GICs, ask to see the most competitive rates available. Then, use a source like Cannex.com (look under term deposits) to see how competitive those rates are.
Making 3.5 per cent in a one-year GIC doesn’t sound like much in the context of what stocks and bonds have delivered in recent years. But if you’re worried about what rising rates will do to bonds and how the stock market can possibly produce yet another great year of returns, then putting a little money in something guaranteed to make 3.5 per cent might sound good.
This article first appeared on GlobeinvestorGOLD.com. If you'd like to profit from the insight of more than 30 financial experts and columnists, including Rob Carrick — sign up for a free trial to GlobeinvestorGOLD.com.
Friday, December 23, 2005
Wednesday, December 21, 2005
Large-Cap Stocks
While there were many consistencies in investment choices for all Baby Boomer executives, the report found some differences in investment strategies or asset class choices based on age.
The report looked at the executives in three different age categories: those born 1946-1951, those born 1952-1958 and the youngest of the Boomers born between 1959 and 1964.
Large-cap stocks were the most popular of assets measured. According to the report, the number two and three most popular asset classes varied by age group, but fixed income, small caps and money markets were the favorites with Baby Boomers.
According to Ted Disabato, Chief Investment Officer of Clark Consulting's Investment Group, "Baby Boomer executives certainly have more investment choices than their parents did.
They have benefited greatly from the strong US economy over the last 60 years and are very comfortable with equities as a major portion of their retirement account."
Late Boomers (born ’46 – ’51)
Large-cap stocks were the most popular of assets measured, with the oldest group placing nearly 40% of their assets in that class (39.5%).
The second and third most popular asset classes were fixed income (14.1%) and small-caps (10.7%).
For Middle Boomers (1952-1958), small caps were also third most popular, with 12.9% of assets measured. However, second-place money markets barely edged small caps (13.4%) by fewer than 60 basis points.
Middle Boomers (born ‘52 – ’58)
Middle Boomers allocated 35.9% of their assets to large-cap stocks, and the youngest group had 35.0% of their assets allocated to large-caps.
Young Boomers (born ’59 - ’64)
The youngest of the Boomers--those born between 1959 and 1964--differed from their elders; small-caps were not in their top three measured assets. Instead, they selected money markets (17.3%) and fixed income (11.2%).
"Counter intuitively, the youngest group of Boomer executives allocated almost twice as much of their accounts to the 'safer' investment of money market funds than did the eldest group with 17.3% and 9.6% respectively," Wamberg continued, "even though it might be wise for them to take more risk.
While we tend to presume that the closer one is to retirement age, the more conservative their investments will be, our report indicated otherwise."
The report looked at the executives in three different age categories: those born 1946-1951, those born 1952-1958 and the youngest of the Boomers born between 1959 and 1964.
Large-cap stocks were the most popular of assets measured. According to the report, the number two and three most popular asset classes varied by age group, but fixed income, small caps and money markets were the favorites with Baby Boomers.
According to Ted Disabato, Chief Investment Officer of Clark Consulting's Investment Group, "Baby Boomer executives certainly have more investment choices than their parents did.
They have benefited greatly from the strong US economy over the last 60 years and are very comfortable with equities as a major portion of their retirement account."
Late Boomers (born ’46 – ’51)
Large-cap stocks were the most popular of assets measured, with the oldest group placing nearly 40% of their assets in that class (39.5%).
The second and third most popular asset classes were fixed income (14.1%) and small-caps (10.7%).
For Middle Boomers (1952-1958), small caps were also third most popular, with 12.9% of assets measured. However, second-place money markets barely edged small caps (13.4%) by fewer than 60 basis points.
Middle Boomers (born ‘52 – ’58)
Middle Boomers allocated 35.9% of their assets to large-cap stocks, and the youngest group had 35.0% of their assets allocated to large-caps.
Young Boomers (born ’59 - ’64)
The youngest of the Boomers--those born between 1959 and 1964--differed from their elders; small-caps were not in their top three measured assets. Instead, they selected money markets (17.3%) and fixed income (11.2%).
"Counter intuitively, the youngest group of Boomer executives allocated almost twice as much of their accounts to the 'safer' investment of money market funds than did the eldest group with 17.3% and 9.6% respectively," Wamberg continued, "even though it might be wise for them to take more risk.
While we tend to presume that the closer one is to retirement age, the more conservative their investments will be, our report indicated otherwise."
Baby Boomer Investing
The leading edge of the 76 million Baby Boomers, who are about to reach 60 and be eligible for some retirement benefits, have invested their money in large-cap stocks.
They have nearly 40 percent of their assets in these blue chip stocks, which are most often favored by conservative investors.
They are a little more conservative than younger Boomers, according to a survey of how Boomer executives are investing their money.
To get a snapshot of how Baby Boomers who are executives are investing for retirement, Clark Consulting issued its Executive Retirement Report - The Baby Boomer Edition.
According to Clark's Executive Retirement Report, Baby Boomers overwhelmingly favor large-cap stocks, with these funds comprising 36.9% of all assets measured.
Money markets were a distant second at 13.2%, while fixed income was a close third with 12.7% of total assets measured.
As part of the largest demographic group in our country, the investment choices of Boomer executives may be an economic bellwether," said Tom Wamberg, CEO of Clark Consulting, himself a Baby Boomer.
My peers and I comprise nearly 26% of the U.S. population.
We have impacted American society since the 1960's youth culture and spawned the consumer-based yuppie culture of the 1980's that still exists.
Baby Boomers have become accustomed to a high standard of living, and where and how we invest for retirement will definitely have an impact.
They have nearly 40 percent of their assets in these blue chip stocks, which are most often favored by conservative investors.
They are a little more conservative than younger Boomers, according to a survey of how Boomer executives are investing their money.
To get a snapshot of how Baby Boomers who are executives are investing for retirement, Clark Consulting issued its Executive Retirement Report - The Baby Boomer Edition.
According to Clark's Executive Retirement Report, Baby Boomers overwhelmingly favor large-cap stocks, with these funds comprising 36.9% of all assets measured.
Money markets were a distant second at 13.2%, while fixed income was a close third with 12.7% of total assets measured.
As part of the largest demographic group in our country, the investment choices of Boomer executives may be an economic bellwether," said Tom Wamberg, CEO of Clark Consulting, himself a Baby Boomer.
My peers and I comprise nearly 26% of the U.S. population.
We have impacted American society since the 1960's youth culture and spawned the consumer-based yuppie culture of the 1980's that still exists.
Baby Boomers have become accustomed to a high standard of living, and where and how we invest for retirement will definitely have an impact.
Tuesday, December 20, 2005
Mutual Fund
Mutual Funds what are they?
By Canadian Securities Administrators
A mutual fund is a pool of money that is managed on behalf of investors by a professional money manager.
The manager uses the money to buy stocks, bonds or other securities according to specific investment objectives that have been established for the fund.
In return for putting money into the fund, you'll receive either units or shares that represent your proportional share of the pool of fund assets.
In return for administering the fund and managing its investment portfolio, the fund manager charges fees based on the value of the fund's assets.
Mutual funds are 'open-ended' investment funds, meaning that new investors can contribute money to the fund at any time, and existing investors can return their units or shares to the fund for redemption at any time.
When you redeem your units or shares of a mutual fund you will receive a cheque based on the current market value of the fund's portfolio.
Several parties are involved in the organization and operation of a mutual fund, including:
» Mutual Fund Manager:
Establishes one or more mutual funds, markets them and oversees their general administration
» Portfolio Adviser:
The professional money manager appointed by the Mutual Fund Manager to direct the fund's investments. The Mutual Fund Manager also often acts as the Portfolio Adviser
» Principal Distributor:
Coordinates the sale of the fund to investors, either directly or through a network of registered dealers
» Custodian:
The bank or trust company appointed by the Mutual Fund Manager to hold all of the securities owned by the fund
» Transfer Agent and Registrar:
The group responsible for maintaining a list of all investors in the fund
» Auditor:
The independent accountants retained by the Mutual Fund Manager to audit each year, and report on the financial statements of the fund
» Trustee:
The entity that has title to the securities owned by the fund on behalf of the unit holders
By Canadian Securities Administrators
A mutual fund is a pool of money that is managed on behalf of investors by a professional money manager.
The manager uses the money to buy stocks, bonds or other securities according to specific investment objectives that have been established for the fund.
In return for putting money into the fund, you'll receive either units or shares that represent your proportional share of the pool of fund assets.
In return for administering the fund and managing its investment portfolio, the fund manager charges fees based on the value of the fund's assets.
Mutual funds are 'open-ended' investment funds, meaning that new investors can contribute money to the fund at any time, and existing investors can return their units or shares to the fund for redemption at any time.
When you redeem your units or shares of a mutual fund you will receive a cheque based on the current market value of the fund's portfolio.
Several parties are involved in the organization and operation of a mutual fund, including:
» Mutual Fund Manager:
Establishes one or more mutual funds, markets them and oversees their general administration
» Portfolio Adviser:
The professional money manager appointed by the Mutual Fund Manager to direct the fund's investments. The Mutual Fund Manager also often acts as the Portfolio Adviser
» Principal Distributor:
Coordinates the sale of the fund to investors, either directly or through a network of registered dealers
» Custodian:
The bank or trust company appointed by the Mutual Fund Manager to hold all of the securities owned by the fund
» Transfer Agent and Registrar:
The group responsible for maintaining a list of all investors in the fund
» Auditor:
The independent accountants retained by the Mutual Fund Manager to audit each year, and report on the financial statements of the fund
» Trustee:
The entity that has title to the securities owned by the fund on behalf of the unit holders
Sunday, December 18, 2005
How to Invest in Retirement
Spend smart and invest for a long retirement.
Regardless of the market's inevitable misbehaviors, the long-term nature of investing in retirement still means that a healthy investment in stocks is the key to preserving financial security for the rest of your life.
In the past, conventional wisdom suggested that retirees follow two basic precepts:
Switch your investments from stocks to safe, income-producing securities, such as bonds and CDs, and never spend your principal.
Today, for many retirees, especially younger ones, following either dictum could lead to financial calamity.
The new reality is that retirement is getting longer, perhaps 30 or 40 years or more, as more people retire earlier and lifespans steadily increase.
Over such a long period, running from the possibility of stock-market risk by investing in fixed-income securities guarantees that you'll run straight into the risk of inflation.
"Inflation is your enemy, even if it's not hyperinflation," warns financial planner Deena Katz of Coral Gables, Fla. If, for example, prices rose at a rate of 3% a year, the cost of living would double in 24 years; at 5%, it would take only 14 years.
Regardless of the market's inevitable misbehaviors, the long-term nature of investing in retirement still means that a healthy investment in stocks is the key to preserving financial security for the rest of your life.
In the past, conventional wisdom suggested that retirees follow two basic precepts:
Switch your investments from stocks to safe, income-producing securities, such as bonds and CDs, and never spend your principal.
Today, for many retirees, especially younger ones, following either dictum could lead to financial calamity.
The new reality is that retirement is getting longer, perhaps 30 or 40 years or more, as more people retire earlier and lifespans steadily increase.
Over such a long period, running from the possibility of stock-market risk by investing in fixed-income securities guarantees that you'll run straight into the risk of inflation.
"Inflation is your enemy, even if it's not hyperinflation," warns financial planner Deena Katz of Coral Gables, Fla. If, for example, prices rose at a rate of 3% a year, the cost of living would double in 24 years; at 5%, it would take only 14 years.
Saturday, December 10, 2005
Get and stay fit at any age
you can improve your fitness level at any age.
We all know we should exercise. We're reminded every time we turn on the news, pick up a fitness magazine or see our doctor for a physical.
Medical studies are continually telling us the amazing things exercise can do, including reducing risk of heart disease, high blood pressure, obesity, late onset diabetes, osteoporosis, stroke and colon cancer.
If that's not enough to get us on our feet, perhaps the fact that being physically active as we age makes all the difference when it comes to being happy-and-healthy old, or sad-and-sick old.
Robert Goode, professor of exercise physiology at the University of Toronto and the lead researcher on many government handbooks on the importance of exercise, says, "Exercise alone won't provide you with a huge quantity of years (the keys to longevity are avoiding tobacco and alcohol), but it will most definitely provide you with quality years.
Start with the basics
As long as you have your doctor's okay, you can start to reap the rewards of regular exercise at any age. To ensure overall good health and well-rounded fitness, your workout should consist of cardiovascular, strength training, flexibility, and posture and balance exercises.
Nothing will give you a better shot at aging well. Here's a great workout suggested by Susan Lee, program manager of the University of Toronto Athletics Department and executive director of the Canadian Personal Trainers Network.
Cardiovascular
How long: 30 minutes. Try shooting for six minutes to start, working up to 30 minutes. It should take a few months to reach your goal. You can break this up throughout the day, walking for 10 minutes, riding a bike for another 10 minutes.
How often: Health Canada's Physical Activity Guide to Healthy Active Living for Older Adults recommends you do cardio most days of the week, but three days a week is the minimum needed for results.
What to do:
Although it's the most important way to improve your overall health and endurance, cardiovascular exercise sounds so intimidating. Images of sweaty bodies bouncing through 60 minutes of aerobics classes spring to mind. But it doesn't have to be all pain and Lycra. The best ways to get your heart pumping after the age of 50 include walking, riding a bike, using an elliptical trainer, swimming, a aquafit classes, or low-impact aerobics classes.
Don't forget to breathe
According to Goode, you don't need to bother with calculations to figure out whether you're really doing your body any good.
Simply listening to your breathing will tell you if you're getting the full benefit of your workout by working at or near your ventilatory threshold.
Start your workout, whether it's walking or an aerobics class, and listen to your breathing. If you can't hear yourself breathing, increase your speed or effort until you hit your ventilatory threshold. "When you hear it, you're there explains Goode. Continue at this pace. To ensure you aren't pushing yourself too hard, take the talk test. You should be able to talk while you exercise -- if you can't, slow down.
thanks to Jennifer Walker
We all know we should exercise. We're reminded every time we turn on the news, pick up a fitness magazine or see our doctor for a physical.
Medical studies are continually telling us the amazing things exercise can do, including reducing risk of heart disease, high blood pressure, obesity, late onset diabetes, osteoporosis, stroke and colon cancer.
If that's not enough to get us on our feet, perhaps the fact that being physically active as we age makes all the difference when it comes to being happy-and-healthy old, or sad-and-sick old.
Robert Goode, professor of exercise physiology at the University of Toronto and the lead researcher on many government handbooks on the importance of exercise, says, "Exercise alone won't provide you with a huge quantity of years (the keys to longevity are avoiding tobacco and alcohol), but it will most definitely provide you with quality years.
Start with the basics
As long as you have your doctor's okay, you can start to reap the rewards of regular exercise at any age. To ensure overall good health and well-rounded fitness, your workout should consist of cardiovascular, strength training, flexibility, and posture and balance exercises.
Nothing will give you a better shot at aging well. Here's a great workout suggested by Susan Lee, program manager of the University of Toronto Athletics Department and executive director of the Canadian Personal Trainers Network.
Cardiovascular
How long: 30 minutes. Try shooting for six minutes to start, working up to 30 minutes. It should take a few months to reach your goal. You can break this up throughout the day, walking for 10 minutes, riding a bike for another 10 minutes.
How often: Health Canada's Physical Activity Guide to Healthy Active Living for Older Adults recommends you do cardio most days of the week, but three days a week is the minimum needed for results.
What to do:
Although it's the most important way to improve your overall health and endurance, cardiovascular exercise sounds so intimidating. Images of sweaty bodies bouncing through 60 minutes of aerobics classes spring to mind. But it doesn't have to be all pain and Lycra. The best ways to get your heart pumping after the age of 50 include walking, riding a bike, using an elliptical trainer, swimming, a aquafit classes, or low-impact aerobics classes.
Don't forget to breathe
According to Goode, you don't need to bother with calculations to figure out whether you're really doing your body any good.
Simply listening to your breathing will tell you if you're getting the full benefit of your workout by working at or near your ventilatory threshold.
Start your workout, whether it's walking or an aerobics class, and listen to your breathing. If you can't hear yourself breathing, increase your speed or effort until you hit your ventilatory threshold. "When you hear it, you're there explains Goode. Continue at this pace. To ensure you aren't pushing yourself too hard, take the talk test. You should be able to talk while you exercise -- if you can't, slow down.
thanks to Jennifer Walker
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