Yikes! I have been investing the maximum allowable amount into my TFSA for the past 2 yrs and was advised to invest this $10,000 in GIC's. They are locked in for 5 yrs @ 3% (Whoo Hoo!!) Wish I'd seen Kerry's advice sooner. I just don't know where to put my money anymore???? It's all so confusing and to ask for advise, we are literally putting our money into the hands of the advisor. Scary stuff! Look at how many people have already been scammed out of their entire savings! Maybe my husbands father had it right all along. He put his money in plastic peanut butter jars and buried them. He didn't gain any interest, but he never lost anything either!!

Currently GIC's still wont loose your capital. I had just started in a mutual fund in feb 2006. I eventually bailed in 2008 and only lost 4,500$ of my 10,000$. In that time I had changed half of the investment into just the one fund (started in 3). The cost to do this was pricey but i did manage to salvage an extra $1000. It left me wondering what the fund managers do, when times get bad... apparently they dont do anything, but let the markets take you. My investment of 10 thou became 5,600$ after Fees. In 2 years the mutual fund investment cost me approx 1000 in fees. The people taking care of the fund did nothing to protect the fund. True I missed the rebound, but even at that I would still be in the low 8 thou range. It may be true that GICs wont keep up with inflation at todays rates. However they wont cost me my capital, and times are coming where inflation will kick in, and the GIC rates will go up, soon. I plan on making some TFSA moves soon, but it will be into stock that I pick, not a mutual fund... not ever again. I was a new investor that got sold a bill of goods. Since then I have learned, any fool can be an investment advisor during good times ... during the bad times, there were a few mutual funds which broke even or have actually made marginal advances. These are run by the few elite advisors who actually know what they are doing. So my advice is to get into one of these mutuals, and let the crummy funds your bank trys to sell you, pass. If I had not interfered with my fund and had sat tight, It would have cost me less in fees, but I would have lost more than that by staying in. Moving when I did allowed me to get into a GIC that pays 3.5%. It aint a lot, but its building capital now, instead of losing. And no more fees to people who dont deserve them.

Daughter thinks GIC's are IT, me with careful planning and investigation I invested in Mutual funds and doubled my money in 5 years, should have taken profits and put into GIC's, but didn't, they were up far enough that they still are over my initial investment, even though I have taken out over 40% of my original investment. Convinced daughter to change open money to RRSP in mutual funds and from feb 09 to dec 09 went from $2900 to $4700. There are money makers out there, I didn't listen to financial planners as they said invest in health care because of baby boomers coming, lost money, did own research and averaged 14% over 6 years. Watch quartile standings of your funds to see where they stand in the group they are in, I picked 1's, financial planner picked 3's and 4's. Some of my best funds did not have a fee.

Investing does not make any sense at all. In a anti market economy without clear rules failure will be inevitable. The only thing that can only sustain your money is real estate.Even when real estate is down you can rent it use it and still have purpose for it.all other financial instruments are meant to destroy your wealth.

Very Smart,
mutual funds return is calculated after the management fees, if you want to give advice i tink you should advice people to look for management and managers rather than the fees. because waht matters the most is the bottom line, than they can decide what they want a mercedes or Hyundai.

The advise is very sound. However, it does not go far enough. Investing in mutual funds is not a very good idea. Unless you are prepared to "take" profits and sell at the right time, you are exposed to mediocrity for ever. Investment advisors do not like you to tell them when to buy and sell, in their language it's called "timing" the market. How else are you supposed to make a profit. Just look at the performance of mutual funds over the last 15 years and you will know what I am talking about. The best solution; a self directed RRSP where you buy and sell only the most profitable companies with very good dividends. GIC's will not loose your capital, enough said!!!

and remember you can not be successful in a environment where there are constantly changing circumstances. Todays decision may be wrong tomorrow.

The inflation rate is huge this year. The government post unrealistically low inflation rate, last year we had 25% inflation. So everybody locking their money for 5 years with 3% consider yourself dead.In 5 years you can not buy anything with this investments.Inflation is the ultimate tool for enslavement. I remember in post soviet era we had no inflation for 15 years.

You guys sound like you work at the BANKS, gic.
Get insufficent funds,

Whether MF fees are paid before the return calculation or after is really a moot point. The Standard & Poors SPIVA reports show that over the longer term, over 85% of MFs cannot beat the market. To make matters worse, not a single fund can claim to beat the market every year so how do you know who will get lucky next year. The only way to consistently make money on MFs is to buy shares in the MF companies or get a job selling MFs.As to what a person should buy, well that depends on how much risk/return they need to take to make ends meet. Rather than suggest one option is the "right" option I think it best to say what works best is whatever allows you to attain your goals with the least risk and fees.

Some of the best returns have been those seen by investments held with AGF - those guys are amazing! The key word is "held" - you have to realize that when it comes to making money, time is your friend.

Your mutual fund management fee arguement is flawed. What matters is your net return. I have owned mutual funds with 1.5% MER's (low MER) that have underperformed on average as much as 5% less per year than one with a 2.5% MER (What you call high). They publish the net returns in places like Morningstar.ca, Globefund.ca, etc. Try comparing CI Harbour Fund to Chou RRSP Fund and see how your arguement above does not make any sense. How come my high MER fund (CI Harbour) has beaten the low MER fund (Chou RRSP)by over 5% per year over three and five year periods? The answer is better management...well worth the cost in my books if you do a little research and carefully pick your mutual fund investments.

I suppose all the people on this board also search out the cheapest Dr, Lawyer, Dentist, Vet, etc. or they get it for free.

Knowing the price of everything and the value of nothing relegates said person to the poor house fast.

One poster above should recover his money in about 20 years, I hope he doesn't need it. Unfortunately, (s)he put money in as market was heading to top in 2006, pulled it in 2008 when the market crapped out, and blamed everyone else. Classic car wreck story. The real estate story - check out the prices in Vancouver, Toronto, and Calgary when they hit their top in 2006/7 and then tanked. Did everyone on this board put the for sale sign in the front lawn when your house valus dropped 30% in late 2008 early 2009?

It all comes down to balance (have an asset mix in place that you'll stay with thick and thin). Use whatever vehicle will get you to your end goal be it GICs, Gov bonds, Funds, ETFs, Real Estate, the list goes on. Invest don't speculate!

Having the right people, with repeatable process, at the right price will bring you performance. Stop putting performance first because you'll always lose! Once it feels safe and your target investment has appreciated 30 or 40% your too late! I think a fella named Warren Buffett (a pro) invested billions last year when the amateurs ran for the hills and locked in their losses. He is up roughly 75% over the low of last year. The amateurs are up what 2 or 3% in that safe GIC?

Have fun at the next market peak everyone.

In these ecomonic times, where inflation and growth are an uncertainty, GIC's can make sense for a portion of a portfolio by using the "ladder" system. Take a chunk of cash, divide into 5 equal parts and buy 1, 2, 3, 4, & 5 year term GIC's. As the GIC's mature, reinvest for a 5 year term. In this manner, each year you will have a GIC maturing for reinvestment at the current 5 year rate so that does take into account any changes in interest rates.

Shop around for the best rates. Big banks currently offer about 2% for a 5 year term but I was able to find 3.5% 5 year and 1.6% 1 year just last month with a CDIC financial institution.

Guess enough comments that returns are more impt. than MER's. If you are low income then interest rate, ie GIC, provides a better return than dividends with lower risk, so, GIC's can be a proper investment. The older you are the more fixed income you should have. As far as diversification goes, to have the broadest, most diversified portfolio you can have will probably give you a lower return than a GIC. You need to be diversified but you can be way over diversified as well. Non-registered index linked GIC's can be really bad because all the income is paid in the final year and so taxed higher. And for the comment of the index outperforming managed fudns, in a volatile market, managed funds will do better.

I can't believe that anyone would consider a GIC at a time when the interest rate is at an all-time low and the threat of inflation looms so large over the horizon. That's ridiculous. Now is the time to capture growth in the marketplace. In the investment business, as I am, the saying is this: GIC's carry 3 guarantees - (1) You will get all your principle back (2) You will get a small amount of interest, and (3) You've lost money due to inflation by the time you get your money back. People tend to focus on risk of loss (Has anyone ever actually USED the CDIC insurance?!) and they forget about other risks such as re-investment risk, inflation risk, etc.

GIC's are a simple way for banks to use your money so they can lend it back to you at 4 times the rate.
Great if you're a sheep. Not so good if you want to retire one day.
-gb

Too bad it's so hard to invest ethically...everyone wants to make sure they have an income from their investments but fail to realize that often the ones posting the highest returns are from raping the earth and exploiting people.

Sadly,it seems only one poster above,(steve) gets it...inflation!
With the printing presses rolling 24/7 in North America, printing paper money, be prepared for the worst, hyper-inflation. Your monies won't buy you a coffee soon.
The education we receive as to how to invest is for the benefit of the financial institutions only. You need to learn the corruptness in the financial system thoroughly. We seem to think that these financial planners etc., are the only ones capable of investing our hard earned monies. They are all from the same school and not about to honestly say they are working for you only. The sooner you get it, the better off you will be.
The whole investment world is a scam..."he who holds the gold makes the rules." A sad state of affairs I am sorry to say.
My advice is for everyone to buy precious metals,don't vote for corruption (any party) and withold your income tax, it is not a legal requirement, but one of coercion. This should be done on a world-wide basis, ot just here in Canada. Maybe then we will be listened too seriously.
This is the only way out of this financial mess, once and forever.

Beware of the mutualfund company or bank that is on
a huge advertising splurge!!
In my experience they are the ones in desperate need
of new clients to cover their losses!
Also do not trust the investment advisor that the
bank assigns to your account. He or she may have
had lots of "training" but many of them are lacking
in simple common sense. I learned this through
costly experience.

Deb, your father-in-law was so right!
Once upon a time, a company I was working for hired
a former bank manager to be its general manager.
This guy made so many blunders that we in our
engineering department jokingly suggested at that
time, we should just stuff our money under the mattress
rather than put it in a bank.