Figuring out ways to stash your cash isn’t an easy task these days. Record low-interest rates make some of the regular investment opportunities less attractive. So, where are the opportunities to grow your money?
Finding the best investments starts by identifying your goals – generally, whether those goals are short-term (1-5 years) or long-term (5 years or more). The time horizons of your goals will have an impact on where you put your money.
According to Sunrise Credit Union’s Lead Wealth Management Advisor, Stacey Vanhove, achieving short-term goals requires sticking with less risky investments like Guaranteed Investment Certificates (GICs) or High Interest Savings accounts.
“For those that are risk-averse, a hybrid product where the principal is guaranteed is a great option, such as Market-Linked GICs - where the return is linked to a basket of curated stocks,” said Vanhove, “These provide guaranteed protection for your principal with the potential to maximize market gain over a pre-determined period, typically one to five years.”
You’re not as likely to lose money with most low-risk investments, but lower risk reflects lower return. Other low-risk investments include Treasury Bills and money market funds.
Higher-risk investments have the potential for higher returns over the long-term and historically perform in that way. Any person with longer than ten years until retirement is encouraged to have some percentage of their investment portfolio (i.e. RSP, TFSA) outside of a guaranteed investment. A guaranteed investment at today’s rates is not likely to ensure your portfolio keeps up with inflation. If you have a long-term time frame, Vanhove says the mutual fund market may provide options which help your investments grow.
A mutual fund is a collection of stocks and/or bonds. An advantage is that your money is pooled with the funds of other investors invested into the market. Mutual funds provide you with professional money management as well as instant diversification.
“Industry leaders are predicting that 2021 will be a volatile year in the stock markets, but balanced mutual funds historically outperform GICs, and this is especially true today,” said Vanhove. “Your advisor can help you find a level of risk within the investment industry that suits your situation and your financial goals in keeping with your risk tolerances.”
Another option to consider in the current climate that could allow you to increase your investment opportunities is taking advantage of the low-interest rates on borrowing.
Refinancing your mortgage, consolidating your debt including paying off high-interest credit card balances may provide an opportunity to have more available cash to put into investments for your financial future. The gain of reducing the credit interest rate automatically improves your financial situation and is a great first step in making your money work for you.
Bruce Luebke, Communications Coordinator, Sunrise Credit Union