Some Safer Investment Options

With the current economic climate getting a lot of individual and corporate investors

worried about the future of the economy, there has been a renewed interest among many investors to seek out lower risk investment vehicles, even if these would mean lower rates of return for the amounts invested.

In the Canadian market, there are certain options available to investors. One of the most widely known would be the Guaranteed Investment Certificate, also known as a GIC. This type of investment is also known as a term deposit.

GICs have a certain time span in which the money has to be held in them. This time span can vary depending on the instrument purchased by the investor and range from 6 months to 10 years. When they mature, these investments can either be cashed or renewed again. One reason that they are so popular among investors is that the minimum amount thats required to deposit is low. In fact, it is possible to purchase a GIC in Canada for as little as $500.

The interest rates paid on a guaranteed investment certificate will vary depending on a few factors, such as: the amount of time the GIC is invested for (longer terms carry higher interest rates), the amount of money invested (naturally, someone who invests $500 000 will get a better rate than someone who only buys a $500 GIC) and the institution that youre buying the GIC from. Rates can vary from around 1% to 10% per year.

GICs are viewed as a safe investment due to the fact that your capital is safe from loss. Thus unlike stocks or mutual funds, you cannot lose all or part of your investment when you buy a GIC.

Another kind of investment that is generally viewed as a safe option by experts are money market funds. When compared to GICs these are investments that mature a lot more quickly and are designed for those with short term investment goals. Many investors use these to "park" their money when they seek out an investment vehicle that is more profitable but market conditions at the time arent very good. Money market funds make investments in federal and provincial treasury bills, as well as debentures which are issued by large corporations. They pay a slightly higher interest rate than a savings account.

Even though according to many experts in the field of finance money market funds are very low risk, this doesnt mean that the risk is non-existent. Theres always a chance that your investment will lose value, as it is not guaranteed. However, compared to other instruments, the risk is very small.

by: JenniferNobles

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