Weekend Reading – Is the party over for GICs?

Weekend Reading – Is the party over for GICs?

Hey Friends!

Welcome to a new Weekend Reading edition, questionning whether the investing party might be over for GICs.

First up, some recent reads on my site:

A week ago, I highlighted the incredible life, wisdom and wit of Charlie Munger.

Earlier this week, I posted this latest dividend income update as we progress closer to financial independence in the coming year…

November 2023 Dividend Income Update

Weekend Reading – Is the party over for GICs?

To answer the question, probably. 

Weekend Reading - Is the party over for GICs

Image source, Pexels, cottonbro studio

I’ve been thinking the same thing since readers have asked me about GICs (Guaranteed Investment Certificates) and GIC rates over the last few months. 

That’s why Ian McGugan’s post in The Globe and Mail caught my eye (subscribers).

From the article and key takeaways:

“To attract investors, stocks typically have to generate substantially more in earnings than bonds are producing in yield. Right now, there isn’t much of a gap, at least in the U.S. market.”

And…

“If interest rates do fall over the next year, the supersized yields on these stocks are going to be outrageously tempting. That should drive their share prices higher.

The bottom line is that GICs still hold considerable appeal for cautious investors. However, GICs have historically not been a great investment. Over the past 20 years, they have barely kept pace with inflation.

Right now, other assets seem poised to produce superior returns.”

My thinking on GICs has been and will continue to be this:

  • GICs are not the answer for all investing needs – although they do offer a secure way to invest up to the CDIC-limit. 
  • GICs might have a place in your portfolio inside your registered accounts (RRSPs, RRIFs, LIFs, TFSAs) IF you are a more conservative investor and seek that modest income security. 
  • GICs could be a strong choice to offer meaningful financial and psychological buffer from stock market volatility if your saving or investing timeline to this GIC money remains short (within 1-3 years).

Otherwise, learn to live with stocks along with some cash or cash ETFs IMO.

Own stocks to outperform bonds and further still, own stocks to outperform GICs long-term but you’ll need to stomach lots of investing drama along the way.

While you’re at it, be careful with bonds as well although some different reasoning applies:

Why would anyone own bonds now?

More Weekend Reading…now that the party over for GICs…

Morningstar highlighted that Berkshire (BRK.B) stock will continue to shine for years to come…

“As long as nothing is done to tamper with what has been a very efficient and effective operating structure, Berkshire should be able to survive the departure of Buffett and Munger in the long run. With all the company’s operating businesses managed on a decentralized basis, pushing responsibility for each business down to the subsidiary level and eliminating the need for layers of management control, the next set of managers should be able to focus on stewardship of the firm’s portfolio and capital-allocation decisions.”

Great stuff from Of Dollars and Data:

Personal finance is personal - Of Dollars and Data

Here is my analogy, something I’ve seen other investors mention as well…

“Life is like driving on the freeway. Lots of cars. Different cars going to different places. Focus on your drive and enjoy your journey to your desired destination.” – My TED Talk. 🙂

With the 2023 investing year almost over, always interesting to see what some 2023 predictions were by various analysts. Who knew Tom Lee might have nailed it – just a few weeks to go?

Tom Lee S&P 500

Congrats to my friend GenY Money on growing her investing and income snowball:

“There were a number of dividend increases last month, especially with the Canadian banks.

  • Added 50 shares of TD Bank (TD.TO)
  • Added more Vanguard ex-Canada ETF (VXC.TO)
  • National Bank  NA.TO) increased their quarterly dividend from 1.02 to 1.06, which is about a 3.9% increase
  • Sunlife (SLF.TO) increased their quarterly dividend from 0.75 yo 0.78 which is about a 4% increase
  • Bank of Montreal (BMO.TO) increased their quarterly dividend by 2.3% from 1.47 to 1.51 per quarter
  • TD Bank (TD.TO) increased their quarterly dividend from 0.96 to 1.02 which is a 6.3% increase
  • Suncor (SU.TO) increased 2.08 to 2.18 which is a 4.8% increase”

Dale Roberts mentioned November was an investing month to remember.

Save, Invest, Prosper!

As the holidays approach, be sure to check out my Deals page – partnerships and discounts I maintain to help you make the most out of your money – some of them you can’t find anywhere else!

Even better 🙂 – you can also consider reaching out here for some low-cost financial projections services – anytime.

Cashflows & Portfolios

With my partner on that site, we use professional financial software to deliver customized, personal reports to you whenever you want. 

In fact, there are now two (2) low-cost services to choose from:

  • Done-For-You – we do the work and data entry, and provide your reports OR 
  • DIY – whereby you do all the work, you do your own data entries, and you get your own results in the software – we essentially open up some professional financial software for you to use to be your own retirement income planner!

I launched this service with my DIY investor good friend – a service founded by DIY investors for DIY investors without the conflict of any advice.

Have a great weekend! 

Mark

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

4 Responses to "Weekend Reading – Is the party over for GICs?"

  1. Why the concern for CDIC coverage? I have never let that coverage affect how I want to invest. If our banking system was ever to collapse this would be the least of our concerns. In 2007 the government had to backstop financial institutions and will again in future problems. If the government can’t or won’t backstop the system then our problems are bigger than CDIC coverage. Just my thoughts

    Reply
    1. Don, that’s a great point. I know some readers/investors want that coverage but to me, you also get that coverage with savings accounts too.

      I appreciate that angle.
      Mark

      Reply
  2. Lloyd (63, retired at 55) · Edit

    GICs are but one tool in the financial tool box. It behooves the individual to recognize what they are attempting to accomplish and use an appropriate tool for that endeavor. It is also good to keep in mind that sometimes, knowing *how* to use a tool doesn’t mean one should *attempt* to use that tool. 🙂

    Reply

Post Comment