Q&A: Low risk, high return
Question: How can we get the best return with the most tax effective investment at a low (or no) risk, other than GICs or money market funds? – Michael V.
Gordon Pape answers: There is no such thing as a risk-free investment. The whole concept is based on the false premise that anything that preserves capital is riskless. It’s not. Inflation erodes the purchasing power of money over time so unless you earn a return that at least keeps pace with the cost of living, you’ll steadily lose ground. As of August, Canada’s annualized inflation rate was 3.1%.
There aren’t many low-risk investments available these days that come close to matching that. Some small financial institutions offer five-year GICs that yield 3.5%. That’s about as good as it gets on a risk/return basis.