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If you're looking for a secure long-term investment that will generate interest income, take a look at fixed income investments. We can help you choose from a wide range of options to build a well-balanced investment plan and, if held to maturity, a guaranteed return.
Canadian investors in the know understand
that fixed income investments are an integral part of every well-balanced
portfolio. They provide safety of principal, regular interest
income, and the potential to generate capital gains whenever interest
rates move lower.
Fixed income investments also help to
reduce the overall risk of your investment portfolio. Depending on the issuer, they can provide
a guaranteed fixed return when held to maturity and are a source of
stable cash flow. If you are an active investor who currently
owns stocks or equity mutual funds, fixed income investments can
add stability to the value of your portfolio because of the potential
return they provide.
There is a wide variety of fixed income
investments including Government of Canada and
Provincial Bonds, Federal Crown Corporation Bonds,
corporate bonds, stripped bonds ("strips") and
mortgage-backed securities. All are fully
marketable and can be sold at market value at any time, should
you need access to your funds. Fixed income investments can be purchased
from your local TD Canada Trust Branch, through TD Waterhouse, or from TD Evergreen Investment Services.
Term Deposits and Guaranteed Investment Certificates (GICs) are another form of fixed
term investment. They offer a specific rate for a pre-determined period of time.
Government-Issued Fixed Income Investments
Government-Issued Fixed Income Investments are fully guaranteed by the issuer for both principal and interest--no matter how much you invest. They are essentially risk-free if held to
maturity and also provide the flexibility of being marketable,
so that you can sell your investment before maturity if you need
to. You have a wide choice of investment terms, ranging from
one year to 30 years.
Each of Canada's ten provinces issues their own bonds. While provincial
bonds carry a greater credit risk than Government of
Canada and Federal Crown Corporation Bonds,
they represent some of the safest investments available.
Provincial bonds also provide the flexibility
of being marketable securities, which can be
sold prior to maturity at prevailing market prices.
Many government bonds can be purchased in
either U.S. or Canadian denominations, and are considered Canadian
content in your RSP or RRIF.
- The yields on these issues are typically expressed as a spread over Government of Canada benchmark bond yields.
More about Government of Canada Bonds
More about Federal Crown Corporation Bonds
More about Provincial Bonds
More about Term Deposits and Guaranteed Investment Certificates
Stripped Bonds ("Strips")
Stripped Bonds are ideally suited for RSPs, RESPs and saving for other long-term
goals because they eliminate reinvestment risk over the term of
your investment. Strips are created when the interest payment
coupons are separated from the principal portion of a bond.
Both are then sold as individual investments. They are
always sold at a discount and mature at face value; the difference
is your interest income. The longer the term to maturity, the
deeper the discount. Like all bonds, you know exactly how much
your investment will be worth at maturity and how much income
you will earn. But with strips, you also reap the benefits of
true interest compounding, so a relatively small investment goes
a long way.
More About Stripped Bonds
Mortgage-Backed Securities
Mortgage-Backed Securities are fixed-rate investments that are ideal for investors who want a very safe
investment that provides monthly income. They represent an ownership
interest in a pool of many mortgages. The monthly payments they
provide are a share of the interest and principal payments associated
with these mortgages. Mortgage-backed securities have terms from
1 to 10 years and are fully guaranteed by the Canadian Mortgage
and Housing Corporation (CMHC).
More About Mortgage-Backed Securities ("MBS")
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