Monday, October 12, 2009

Canada Savings Bonds: My favourite low risk investment

To anyone who has a small child who will be off to University in a decade and a half, or to anyone with a large number of dependents; my advice is to play safe. I would still advise you to have some of your investment savings in the stock market because that is still pound for pound the best risk/return asset class, but my favourite low risk investment is the Canada Savings Bond. Buy a bunch of those and stick them in a safe deposit box. You will also want to keep a proportion of your holdings in cash money, preferably Canadian dollars. I know, I know, what would Peter Mansbridge say of my encouraging investors to buy Canadian? The only risk in the Canadian dollar is that the fed may attempt to deliberately deflate it in a vain attempt to save the manufacturing sector. That is a policy decision that cannot be reliably predicted.

Precious metals are considered the best hedge against market downturns and currency collapses, however with alarmists like Glenn Beck ringing the alarm bells of an imminent collapse of the dollar for years, a large proportion of investors have been buying up gold for years. That means if you are going to buy gold today, you will have to pay a premium to do so. For more on gold, read Would King Midas Hold American Dollars?

Anyone investing anything anywhere at anytime, always remember "if it sounds too good to be true, it often is!"

4 comments:

  1. I have lived (and died) by this very advice! Nowadays, in this economic climate, I have adhered to Conservative (coincidently) mutual funds, from which the more tax-favorable income elements of dividends and capital gains may be derived. The $5,000 tax-free savings account is another good play, along with your child's Registered Education Savings Plan, containing whatever ingredients you prefer, including some exposure to such items as those Canada Savings Bonds. Such options are another reason to be THANKFUL in our great nation of Canada.

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  2. Terrible idea. Those bonds earn less than inflation so you'll actually lose money-there's nothing safe about that!

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  3. I thought everybody was afraid about pending deflation? Haven't we been in a deflationary cycle Mr Anonymous? Inflation devalues many assets, including wages. What would you then suggest as a safe investment Mr Anonymous, because I am positive that I can find risk in anything you would like to suggest. Well?

    And let me quess, you sell mutual funds for a living?

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  4. Speaking of inflation, a lot of experts feel that the Canadian dollar is well positioned to gain ground against other world currencies in the near future. Our abundance of natural resources provide a boost to our currency while the American dollar spirals to critical failure. We are also less debt-leveraged than many of our major counterparts. Let's wait and see what damage Obama and Pelosi can do to the greenback before we start deciding the safe play. With uncertainty on the horizon, I like Canadian Savings Bonds.

    If our money is worth more and theirs is worth less, this means that Canadian dollars can buy MORE goods abroad, which is a downward force on inflation. This is somewhat offset by a decreased demand from the American consumer market, but still represents a wealth transfer over the border.

    Again, I don't know what Mr Anonymous would hold as a safe investment in turbulent financial waters. He did not elaborate. I smell Primerica.

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