Your clients are wondering if they should rethink their investment approach and if this is the right time to do so? Here are 3 options to consider in the current climate.
High interest savings account (HISA)
The HISA may be a good option for your clients who prefer not to take risks with their savings. Here's why:
- It has a potential for higher returns than a chequing account. In addition, the latest interest rate hikes have had a positive impact on its returns.
- It offers greater security than assets invested in the markets since earnings are guaranteed and cannot be affected by stock market fluctuations.
- It improves the diversification of your clients’ portfolios.
- No minimum investment is required to open a HISA and the funds can be withdrawn at any time and at no cost. These advantages make the HISA an ideal emergency fund for dealing with the unexpected.
| For these reasons, it is an excellent option for your clients who wish to put money aside while waiting for the right time to invest in the markets. |
Guaranteed interest funds (GIF)
With their guaranteed returns, GIFs offer the same type of security as HISAs. However, they are a more interesting option for clients who would like to invest for a fixed term.
Here are some advantages that you can highlight:
- Having also benefitted from rising interest rates, GIFs currently offer attractive rates for terms ranging from one month to ten years.
- Their competitive returns make them a good alternative to bonds.
- Unlike HISAs, whose rates may vary over time, GIF returns are fixed and guaranteed for the life of the contract.
- Rates may prove to be more advantageous than those of a HISA depending on the amount and term of the chosen investment.
- GIFs can be redeemed at any time. Unlike HISAs, however, a withdrawal made prior to the maturity of the contract may result in a fee.
In addition, our GIFs and HISAs come with all the benefits of segregated funds, such as possible creditor protection and quick settlement in the event of death.
Dollar cost averaging (DCA) or systematic savings
For your clients who wish to participate in the financial markets while mitigating risk, one of the best strategies is still dollar cost averaging, or systematic savings. By regularly investing smaller amounts, they can:
- Spread their risks over a longer period and therefore reduce the potential impact of market downturns on their total assets.
- Capitalize on rather than endure market fluctuations since market downturns will allow them to buy when prices are lower.
- Accumulate at a steady pace to take advantage of market opportunities as they arise.
Whatever strategy your clients decide to adopt, remember to remind them of the importance of diversifying their portfolio to take advantage of the potential of each asset type.
As you can see in this chart from J.P. Morgan’s Guide to the Markets, it’s difficult to predict which assets will perform best year over year.
Performance by asset class
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