Q&A
Robert Bradburn Wealth management specialist
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CWB WEALTH MANAGEMENT
Years in the industry 9 Fast fact Guaranteed investment certificates are most commonly purchased for retirement plans, as they provide a low-risk fixed rate of return. The principal is at risk only if the bank defaults
Why are GICs a good investment at the moment? GICs are a good investment at any time for the right person. It really comes down to what a client is trying to achieve. We might select GICs for a client who has a definite timeline and doesn’t want to take on any market risk. Someone who is saving for a down payment for a house, for example – someone who has a future liability that they absolutely have to meet. Another place we use GICs would be with someone who has a retirement portfolio. They might have 75% of that portfolio with market risk – stocks, bonds, mutual funds. That other 25% would be something that is guaranteed, where it doesn’t matter what the markets are doing.
Who are the providers? All the major banks and the credit unions in Canada offer GICs.
What yields can you expect on a GIC? On a GIC, for anything up to about 15 months, you would get 1% to 1.5%. Anything up to five years, you would be hard pressed to do shopping and get anything better than 2%. That’s just the nature of
:_`e\j\ _\[^\ ]le[ realizes 2,100% ^ifnk_ Chinese commodity futures trader Wang Bang reported that his Guli Trend Aggressive Strategy Fund has climbed about 750% this year, marking a growth of around 2,100% since its March 2015 inception. Wang, whose fund has seen the highest gains this year among the Chinese funds tracked by Shenzhen PaiPaiWang Investment and Management, credits the gains to supply and demand analysis. “There are always more opportunities to make big profits, or big losses if you are wrong, amid wide price swings,” he told Bloomberg.
the guaranteed marketplace right now.
What are the most common length terms? In any Canadian institution, you will find anything up to five years, but you won’t find anything past that. Most institutions, you will be able to find short-term GICs running from 90 days up to a year. You don’t see a lot of benefit from holding a GIC until you have one that’s a year or more, though.
How much is guaranteed by the government? CIDC insurance guarantees up to $100,000, but really it depends on what registration you’re holding and what name is on the account. There are certain ways you can structure your investment so you have a lot more than $100,000 insured. You would see an investor that has more than $100,000 in an RSP, and that coverage will be limited per institution, per registration, per individual name. They might have another $100,000 in a TFSA. CIDC insurance is something that a lot of Canadians like to see is there. It gives them comfort that their assets are going to be backed up. But really, CIDC is a nice security blanket, but you would be hard-pressed to find scenarios where it actually needs to be used.
9iffbÔ\c[ :<F X[m`j\j _Xi[ Xjj\kj Xd`[ e\^Xk`m\ iXk\j According to Bruce Flatt, the head of Brookfield Asset Management, institutional investors are looking to real assets to combat the trend of negativeyielding government bonds. Over the past 18 months, Brookfield has raised $27 billion from nearly 250 clients who are interested in hard assets like real estate. That marks the largest amount of capital closed for a series of funds at Brookfield. However, Flatt told shareholders that Brookfield believes there will still be a strong bid for US Treasuries for a long time.
>fc[ i`j\j Xd`[ [fneY\Xk LJ afYj Ô^li\j Gold futures have again gained ground on the heels of lower-thanexpected US employment data in August. According to the Labour Department’s monthly report, payrolls climbed by just 151,000 in August following a 275,000 gain in July. So far in 2016, gold is up 25% amid uncertainty in the US, fuelled in part by speculation of a Brexit-driven slowdown in Europe. That uncertainty also led the Federal Reserve to reconsider raising interest rates this year, a move that has further bolstered the appeal of gold.
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