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Hi,

I'm thinking I might want to buy a house within the next 5 years. Just to stay on the safe side and not lose half of it in a market crash, I'd like to buy bond with the money I have for the mortgage.

There are quite a few options though. Do you have any suggestions? should I go with just gov bond, or maybe ETF bonds? or something else? Any good suggestions?

Lastly, can someone confirm that I will be allowed to cash those bonds whenever I chose. I'm not exactly sure when I'll be ready to make the move so I don,t want to lock that money away.

Thank you
 

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Yields on high quality bonds are very low right now and lowest of all on government 'risk free rates" You can cash out of an investment in a bond or bond fund but you're not guaranteed necessarily get 100% of your capital back. It's not a GIC, but the funds are not locked in either.
 

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Lastly, can someone confirm that I will be allowed to cash those bonds whenever I chose. I'm not exactly sure when I'll be ready to make the move so I don,t want to lock that money away.
Five years is a short enough time horizon that you may be best off just holding the amount in a high interest savings (cash) account.
 

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Just stay away from bond etfs. They are essentially exchange traded equity products subject to retail sentiment as well as varying interest rates. Buy something that guarantees to return your capital. GIC probably the most simple choice.
 

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The best options would be HISAs and cashable GICs. Your principal is protected and you can access the money easily. Make sure you stay below the CDIC limit.

You could also invest in Government of Canada bonds that mature in 5 years. You can sell it at any time, but if you sell it soon, you could potentially have a loss.

In theory, a bond ETF or mutual fund would be an option provided that the duration of the fund is less than 5 years. However, assuming you are investing in a non-registered account, you need to take tax considerations into account too.
 

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Yeah in this time frame, I can't see how a bond ETF makes sense. The OP would cash in this investment in maybe 2-5 years. Even a short term bond ETF such as XSH can fluctuate quite a bit in that time frame.

If someone said 5 to 10 years, then I would say XSH as it's nearly certain that XSH would perform better than cash in 5 years.

If someone said 10-30 years, then it's XBB, which again is nearly certain to outperform cash.
 

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For such a short timeframe, maybe get a 5 year CIG (or a 2-3 year if you think you might need the money sooner) or use a HISA?
 

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ZST is a possible bond ETF option. It has a short enough average maturity, and duration, that it would be appropriate for the time frame the OP wants. However I still don't think it's worth it under current conditions. The yield to maturity of ZST is only 1.20% which is also before fees, not to mention the additional tax-related work in a non-registered account. In the past, there were times when ZST offered significantly better interest than cash deposits.

You can get better interest rates with cash deposits in many places:
 

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Only problem as I see it with ZST is that it is mostly corporate. If there is a credit crunch in corporate credit, there could be problems.

The OP should consider CLF. Its a 1-5 yr ladder with ONLY Govt bonds - pretty secure and doesnt move much in price. I think the yield is 2.25-2.3% right now. So, just a bit higher than a HISA. Its also very liquid which the OP was after, if anything it is too liquid (hence my next comment).

During the market drop this spring it did take a beating, but that is only cause of margin calls and opportunity buys, it recovered very fast.

I find this fund is a 'free to trade' at a lot of brokers that have a list of free ETFs... that means that there is a lot of activity in this fund just due to all the free, non-strategic trades that are going on here....

I do use it for my cash component in my portfolio...

Your last option, would be HSAV. I think its probably like a 1.85% ROI but it is capital gains at the time of the sale and NO interest income along the way, this provides a tax efficiency and a real return that is higher than 1.85%.
 

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The OP should consider CLF. Its a 1-5 yr ladder with ONLY Govt bonds - pretty secure and doesnt move much in price. I think the yield is 2.25-2.3% right now. So, just a bit higher than a HISA. Its also very liquid which the OP was after, if anything it is too liquid (hence my next comment).
Given where the current yield of goverment bonds are, it is hard to see how a fund made up of such bonds could have a yield of 2.25-2.3% going forward.
Just as well to read and fully understand the fund (I have not!) This might help: Under Portfolio Characteristics

My view is that OP should avoid funds - Use GICs and/or HISAs. (I don't believe major bank HISAs don't offer yields anywhere near 2.25%, so be careful where you buy those too!)
 

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I am wondering when people can start stocks investment. Maybe should never buy stocks after 40 years old.
People will definitely want to buy house in the next few years after graduating from college. So put all the savings in GIC for the down payment. After buying the house, paying down the mortgage in my opinion is the first priority, risk free investment.
My son started his career in 2016 and is too busy or lazy to manage his savings. So I help him a little bit. He definitely will buy a house or condominium in the next few years. I often ask myself should he put his savings in GIC? Sometimes, I talked to myself "There is much money (less than 100k). It is not big deal even losing half of it. There is chance to earn a better return than GIC". I am still struggling.
 

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I am wondering when people can start stocks investment. Maybe should never buy stocks after 40 years old.
. . .
My son started his career in 2016 and is too busy or lazy to manage his savings. So I help him a little bit. He definitely will buy a house or condominium in the next few years. I often ask myself should he put his savings in GIC? Sometimes, I talked to myself "There is much money (less than 100k). It is not big deal even losing half of it. There is chance to earn a better return than GIC". I am still struggling.
I think the best answer to this is to find the right % stock % bond mix, so that the portfolio is stable enough (in case you need to withdraw it) but also provides a good return. This is what I do personally.

The stock/bond ratios are like a knob you can turn, to your desired level of risk. In normal markets, even something like 20/80 or 30/70 ... meaning minimal equities! ... still actually gives you a pretty good return that beats inflation. Historically, it has returned more than GICs.

I think an ETF like Vanguard's VCIP is worth a look. It contains minimal equity risk, but look at the 1 year return ... it's still up 6%.

There's a US equivalent that I've suggested to friends for some time, called AOK. It has minimal risk with only 30% stocks, but the long term return over a decade has been 5.6% which handily beats GICs. I point this out to show that it doesn't take a particularly large weight in stocks to produce a good return.
 
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