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I think I'll buy another 5 year GIC in a few days.
Risky move James. Think about that. It's kind of a bold move ;)

By the way, I suggested to my wife that maybe we should sell our whole portfolio and buy GICs. May not quite cover inflation, but we could draw them down for the next 20 years and still have some money left over. Of course I was joking! But it would work. Something she could do one day.
 

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I know it is riskier but I put into low risk utilities like Fortis or preferred shares which I believe are in the right spot given the current macro situation. Floating rate preferreds and certain resets .
I have quite a bit in preferreds, but right now everything has been bid way up. Most issues are trading at a premium and well over par. I have some cash to invest, but still looking.

On another subject, I bought a couple of balanced funds more as a learning exercise than anything. Not too impressed. XBAL for example. This has about 63% equity 37% fixed income. At current price it has a distribution yield of 1.4%. That seem kind of pitiful. We could do double that with a handful of bank stocks and some GICs. Sure unit price has increased, but the gain has had a downward trajectory for past 3 years. 5.5% TR since inception. Like overall markets, looks like it is ready for a correction.

Nothing looks too attractive these days :(
 

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Risky move James. Think about that. It's kind of a bold move ;)
Ironically, having a solid fixed income component (enough to handle any market drawdown) allows me to comfortably take risk elsewhere in my portfolio.

Having some super safe stuff allows more confident risk-taking, helping me stick with my portfolio over the long term without disruptions or capitulation.

I've had many friends and coworkers over the years who thought (like you) that bonds and GICs were dumb. They ended up taking way too much risk in their portfolios, and many have since given up or disrupted their portfolios. One of my best friends sold ALL his equities during the 2020 crash.
 

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Super happy that everyone seems to be buying products from Equitable Bank... Because I'm a shareholder of EQB.TO
 

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Ironically, having a solid fixed income component (enough to handle any market drawdown) allows me to comfortably take risk elsewhere in my portfolio.

Having some super safe stuff allows more confident risk-taking, helping me stick with my portfolio over the long term without disruptions or capitulation.

I've had many friends and coworkers over the years who thought (like you) that bonds and GICs were dumb. They ended up taking way too much risk in their portfolios, and many have since given up or disrupted their portfolios. One of my best friends sold ALL his equities during the 2020 crash.
Holding diverse assets that reduce portfolio volatility (risk) is the name of the game. Obviously we would want all the assets to individually produce great returns. But that's not reality. What matters is how the combo works together.
 

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Inflation is running at 4% plus and the interest on the GIC is fully taxable. When bonds and GICs mature I reinvest in the fixed income sector. I know it is riskier but I put into low risk utilities like Fortis or preferred shares which I believe are in the right spot given the current macro situation. Floating rate preferreds and certain resets .
You're changing your asset allocation then. Certainly Fortis isn't fixed income..

ltr
 

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I've had many friends and coworkers over the years who thought (like you) that bonds and GICs were dumb.
James, I only think they are dumb when they have yields lower than the target inflation rate. IOW, guaranteed to have a negative total return.

I actually have something like $70k in GICs maturing in '22, '23, '24 & '25. Some were short term bought during initial covid crash just as a holding position. Yields are from 2.3% to 3.29% which considering BMOIL do not have attractive GIC rates, did not seem too bad for the purpose.

I loved GICs back in early 1980's when one we had yielded 16% and beat the CPI by almost 4%!

I know you understand these things in principle, but anyone buying GICs n recent times should be aware of the effect of inflation and taxes on real returns. Chart below from Mackenzie article shows just how long a periods GICs had negative Real Returns.

Rectangle Slope Plot Line Font
 

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Holding diverse assets that reduce portfolio volatility (risk) is the name of the game. Obviously we would want all the assets to individually produce great returns. But that's not reality. What matters is how the combo works together.
Yes, exactly. And what matters in the end is the whole portfolio (the combo) and how that is behaving.

In a diversified portfolio, almost by definition, you won't always be holding every optimal asset. If you really could predict which assets were optimal from the outset, you would be the most skilled active manager on the planet.

In the real world, that kind of active management is rarely successful. Look at Ray Dalio for instance. For two years now, he's been talking about how bonds should be avoided. In the mean time his flagship actively managed fund (Pure Alpha) is doing terribly. So people like Dalio talk a big game about being smart enough to pick & choose assets, and pretends he can trade in and out of bonds, but his actual results... suck.
 

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Actually, what matters in the end is coming out on top.

If you're investing in bonds or GICs, it's actually more intelligent to spend the money on material things you want or experiences with the ones you love.
 

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I think folks need to accept investors hold GICs for a multiple of reasons, all of which have been discussed numerous times. They are intelligent enough to know they are often under water post-inflation, post-tax. It gets weary hearing people denigrating those that choose to do so. Le it be.

I no longer buy GICs myself but I have a healthy cash reserve in HISAs earning 1.15-1.25% (half that of a GIC ladder). I won't take a back seat to anyone for choosing to do so.

P.S. I am running about 85/15
 

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If there is a large bill due in the not to distant future it’s quite prudent to put the cash in a GIC. Maturity matched to the bill date and cash equal to present value of GIC. With that out of the way get back to making money on the portfolio and not worrying about it.
 

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If there is a large bill due in the not to distant future it’s quite prudent to put the cash in a GIC. Maturity matched to the bill date and cash equal to present value of GIC. With that out of the way get back to making money on the portfolio and not worrying about it.
That makes sense if you have upcoming expenses with knows timing.

We shouldn't mix up cash for living expenses and investments.
Cash in wallet, bank accounts, HISAs, short term money funds or GICs all good for cash. But they are not investments.
 

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You're changing your asset allocation then. Certainly Fortis isn't fixed income..

ltr
I should mention I have put some money into US dollars and purchased Vanguard Inflation Protected Short Term Securities . If we get 5% inflation I should have that covered. I believe there are Canadian securities that provide some inflation protection.
 

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That makes sense if you have upcoming expenses with knows timing.

We shouldn't mix up cash for living expenses and investments.
Cash in wallet, bank accounts, HISAs, short term money funds or GICs all good for cash. But they are not investments.
Most cash should count as part of one's investments albeit a revolving chequing account for monthly cash flow spend is one that I also exclude. Those who calculate a portfolio return without their HISA (and other) short term accounts included are overstating their CAGR performance. As an example, much of my 15% fixed income (cash reserve) allocation is in HISA accounts and I would be remiss not including them in my annual CAGR performance (it obviously depresses CAGR performance). I accept that as a drag because it brings certainty, just like insurance. I could do the alternative, i.e. keep all such funds invested in higher return vehicles, and take the risk of higher volatility when I need to access the funds.
 
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