There are many types of investment options available in Canada: stocks, bonds, GIC’s, term deposits, mutual funds, segregated funds, annuities, art, classic cars, etc. At Onelife Wealth Management (North Bay) Inc. we most often recommend GIC’s, annuities, mutual funds and segregated funds to our clients.
The principal in a GIC is guaranteed to be returned at the end of the term and the interest rate is guaranteed as well. Typical terms are 1-5 years, but some institutions offer terms up to 30 years. All the interest earned on your GIC is treated as taxable income (unless it is held in your RRSP/RRIF/TFSA) and is taxed at your marginal tax rate.
An annuity allows you to give a lump sum of money to an insurance company in return for a guaranteed income for a specified time period or, most often, for the rest of your life – regardless of how long you live. Non registered annuities offer the additional advantage of declaring minimal taxable income to the holder since most of the income is considered a return of capital. Annuities come with a variety of convenient and flexible options.
These investment funds are not guaranteed – the value of your investment in a mutual fund will vary depending on the value of the investments held in the fund. There are over 4,000 mutual funds available in Canada. They invest in a wide variety of stocks, bonds and real estate both in Canada and around the world. Although mutual funds can earn you very strong returns, there is always the risk of losing money as well.
Segregated funds are very similar to mutual funds, however they are only offered through insurance companies. They carry one distinct advantage: your original capital can be 100% guaranteed at maturity or death, regardless of how the fund performs. So, if you pass away when the investment values are less than your original investment, the insurance company will guarantee that original amount to your named beneficiaries within 10 days of providing proof of your death. One other advantage: at death the funds could by-pass the entire estate process without any probate, legal or executor fees. So, not only will your affairs be more confidential, but your estate could save money too.