Q&A: Looking for U.S. Investment

A reader is tired of low interest rate but doesn’t want stock market exposure. Here, Gordon Pape on a conservative U.S. investment.


Q – I was wondering if you could recommend a conservative U.S. dollar investment. I have about $50,000 just sitting in a brokerage account making nothing. I am retired and really do not want to take on more equity risk. The broker’s saving account rate for U.S. dollars is a dismal 0.25% (as opposed to 1.25% for Canadian funds). I have been looking at the iShares Conservative Allocation ETF (NYSE: AOK). Would appreciate any advice. – Darrell C.


A – The iShares ETF to which you refer does not eliminate equity risk. It’s a balanced fund of other iShares ETFs (so a fund of funds) that is allocated approximately two-thirds to bonds and one-third to stocks. A small percentage of the stock holdings are higher risk – mid-cap, small-cap, and emerging markets funds.

You won’t get a great return from this fund but it will certainly be better than the 0.25% your money is earning now. As of the end of November, the fund was showing a year-to-date gain of 6.1%. It has never posted a calendar year loss however it was launched in November 2008 so did not experience the brunt of the credit crunch meltdown. The MER is 0.29%.

Overall, I like the look of this ETF for your purposes – but remember, it does have some stock market exposure. – G.P.

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