Q&A: Wants to earn 8.5 to 9.5 per cent

Zoomer | May 24th, 2006

Question: Could you suggest areas where one can invest money to get a return
of 8.5 to 9.5 per cent? – Sid E.

Gordon Pape answers: There are lots of places where you could
potentially obtain that kind of return or more – but none that are guaranteed.
So it really comes down to how much risk you are prepared to accept.

Interest rates have been on the rise, but they are still relatively low. As
of mid-March, five-year GICs at the major banks are paying only 3.25 per cent.
That’s less than half what you are aiming for.

It is possible to put together a low-risk portfolio that would have a projected
return of 5 per cent-6 per cent. It would consist of a mix of government and
corporate bonds, preferred shares, and some conservatively-managed mutual funds.
As you move higher up the return ladder, you have no choice but to add more
risk to the mix. So if you want to hold to your target, you would need to use
some combination of stocks, equity mutual funds, income trusts, monthly income
funds, and the like to achieve it. A financial advisor could give you specific
recommendations.

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