Fixed income alternatives

By Stephane Ruah

Canada is a safe place to invest relative to other regions in the world. Unfortunately, the resulting flow of investment money into Canada only makes things more difficult for domestic, income-oriented investors who are also looking for safety.

Hence there is a strong need for income-oriented investors to start looking at alternatives.

Cash and cash equivalent products, government bonds and GICs are relatively well-known alternatives. Newer cash equivalent options include “investment savings accounts” offered by retail investment advisors. These are purchased in the same way you buy a mutual fund. Interest is calculated daily, paid
monthly or at sale, and the interest can be reinvested.

For the right investors though, I prefer corporate bonds. Corporations usually set out to make money – not always the case in government – and a lot of times corporate bonds are just as safe as government issues.

There are different ways to access and buy fixed income alternatives, but there are barriers to this way of investing as well.

Unlike stocks, research on bonds and preferred shares is extremely difficult to obtain if you’re not aligned with the right firm. Fixed income is not as lucrative, and firms tend to push people towards activity-driven products, instead of these buy-and-hold offerings.

Product inventory or availability, along with much higher costs at certain institutions, are other challenges. Most investors won’t even know when a new bond comes to market.

Psychologically too, the bond market is misunderstood and underappreciated, in part because people don’t believe that bonds provide favorable returns. People want to hit a homerun, but there is no real homerun, so to speak, when it comes to bond investing. You will have a better chance to win the game
90% of the time, however, if you keep hitting singles.

Things to consider

Your own risk tolerance is a big factor to consider. Although corporate bonds are good assets to hold investors will still need to be able to tolerate some fluctuations. Your unique tax needs, and your individual time horizons should also be taken into account.

To help you make sense of it all, I invite you to subscribe to our free bi-weekly newsletter and visit our website: www.thermgroup.ca.

Stephane Ruah is Director, Wealth Management and Investment Advisor at Richardson GMP Limited, Canada’s largest independent wealth management firm. He provides exclusive and innovative investment services to successful families and entrepreneurs and can be reached at 514.288.4018 or
Stephane.Ruah@RichardsonGMP.com.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates.

Richardson GMP Limited, Member Canadian Investor Protection Fund.
Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P.
Both used under license by Richardson GMP Limited.

Stephane Ruah

Stephane Ruah Director, Wealth Management Investment Advisor Stephane has been in the investment industry for nearly 10 years, most recently as a member of one of Canada’s top producing team where he was overseeing in excess of 2.7 billion in assets. Stephane holds a bachelor’s degree from the Université de Montréal, and also holds his Options Trading license. At an early age he displayed a true passion for the financial world and by the age of 13 he was investing in the stock market. Today, he is a frequent speaker at conferences and shares his expertise by writing regular publications.