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 Your
Money Matters
October 2007 Issue
How to find the right balance between safety and growth for your
hard-earned dollars
Deciding
how to invest your money is not always easy. Let’s say you have
$10,000. to invest over the next 10 years. Consider these three
options:
- money market,
high interest savings or savings bonds
- guaranteed investment certificate (GIC)
- Canadian equity growth mutual fund
Compare
the return and see which choice feels right to you to balance safety
and growth. How would you invest $10,000.?
Money market, high
interest savings or savings bonds: earning 3.00% a year grows to
$13,439. after 10 years. Offers safety for a lower return, you do
not worry about losing money, rates fluctuate, if rates stay low,
you will get a lower return, return is 100% taxable income. Shopping
around can pay off. Some high interest savings accounts can offer up
to .50% more than a savings bond or money market instrument.
A five-year GIC at
4.5% renewed at the same interest rate for an additional 5 years
grows to $15,455. Offers safety, return guaranteed, better return
because you’re committing your money for a number of years, return
is 100% taxable income.
An average
Canadian equity growth mutual fund (based on S&P/TSX Composite Index
average return of 10.7% per year) grows to $27,611., possible higher
average return but no guarantee, prices go up and down, you could
even lose money if you have to sell when the market is down,
preferential tax treatment on dividends and capital gains.
There
are always tradeoffs when you invest. No investment provides high
returns with low risk. When you guarantee what you’ll make, or limit
your losses, you give up some return for that safety. The challenge
is to balance safety and growth in a way that’s right for you.
For
more information on the types of investments available and all of
their features, please don’t hesitate to call. We will help you find
the investment that best suits your needs and risk tolerance.
Theresa Wever and the Money
Concepts Team. |
