Investors who crave safety can find little more growth

By Bruce Sellery on May 31, 2019
Estimated reading time: 2 minutes

How can Dave get better returns than the laddered GICs he currently holds? Our expert says ETFs are an option.

A. Dave, I have a thousand questions about your question: How old are you? What is your family composition? Do you have a pension? What other assets do you have and how are they invested? What is your risk tolerance? When do you need access to that $300,000? And, of course, what is your favourite movie of all time?

Unfortunately, this isn’t the format for a two-way dialogue. So I’ll focus very specifically on the question of how to do better than the crummy returns offered by GICs. Perhaps consider another Exchange Traded Fund. I asked Terry Shaunessy to weigh in. He’s is the president and portfolio manager at Shaunessy Investment Counsel. He says: “My answer is pretty simple. Forget GICs. The loss of after-tax purchasing power is too steep a price. It is worth enduring the periodic volatility and looking at other asset classes.”

Shaunessy says that since you’re already familiar with Vanguard’s multi-asset ETFs, you should “use VGRO as the default investment allocation for any funds with a time horizon greater than one year. It is very difficult to beat the combination of good returns and managed volatility that a balanced portfolio provides.”

In other words, you’ll enjoy steady income, and the opportunity for bigger gains through your investment’s appreciation in value. “VGRO yields approximately 2%—competitive with a GIC—and that dividend should grow over time. Vanguard does all the re-balancing so there are no worries in that respect and all for about 0.25%,” Shaunessy says.

Vanguard isn’t the only firm offering a product like this. Blackrock’s iShares brand offers similar all-in-one ETFs under the ticker symbols XBAL and XGRO.

I understand why GICs are your go-to. And that may be where you end up, even after consideration of Shaunessy’s advice. But $300,000 is a lot of money. I’d encourage you to consider your whole financial picture to see how you can minimize your risk and maximize your return.