Thursday, June 25, 2020

Predictable Interest

If you want to securely earn interest use GICs not any bond ETF. Bond are not paying interest or much interest. There is a risk in bonds and that is because interest rates and bond values go in opposite directions. If you are a novice or not an investor and do not understand investing do not go into bonds to make capital gains. This is what you do if you buy bond ETFs at this point in our history. Capital gains are not easy to make and they certainly are not easy to make on a consistent basis.

A friend of mine, who is not sophisticated in investing went to her bank to get some GICs. Her “advisor” got her to buy GICs connect to mortgages. The banks can only win with this. They put the risk of their mortgages onto their customers. The “advisors” get paid to sell these things. My friend knows that her GICs are somehow related to mortgages, but had no idea how or what the terms were. Other bonds are linked to some stock market index. Do not buy these either

Generally, with linked GICs the worst thing to happen is that you will get no interest paid at all. Usually, the face amount of the GIC is payable, so you do not lose your capital. But these things are generally non-redeemable. This means that you cannot redeem them before the end of the term.

So, the bottom line is, if you want safety and predictability the only place to be is in one to five years GICs at this point in time. There is no other place. And, I am talking about absolutely plain vanilla GICs that are not connected to anything. This site of Rate Hub seems to have some good basic Infor on GICs.

Remember the first rule of investing. It is do not buy what you do not understand.

On my other blog I wrote yesterday about Computer Modelling Group Ltd (TSX-CMG, OTC-CMDXF) ... learn more. Next, I will write about Parkland Fuel Corp (TSX-PKI, OTC-PKIUF) ... learn more on Friday, June 26, 2020 around 5 pm.

This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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