), stocks and bonds traditionally involves developing an investor profile. Investment advisers do this at the onset of a relationship and on an ongoing basis. A DIY investor may not consider the appropriateness of every investment for their portfolio in such a formal way, but investing commonly involves three major considerations: investment objectives, risk tolerance and time horizon.
The challenge occurs when trying to preserve capital on any sort of relative basis to the change in the cost of goods and services. That is, on an-adjusted basis. If your goal was to preserve $100,000 of savings on a “real” basis, and inflation was seven per cent over the past year, as it has been, you would need $107,000 after one year to keep up with inflation.Article content
But the better rate means the investor is unable to liquidate or withdraw from the GIC during its term. There is no risk to capital on an absolute basis, but there are pitfalls in guaranteed products when reviewing this strategy relative to inflation.Article content
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