Are you looking for investments that carry little risk? There are some choices available for you. 

If you believe that in the stock market might not be for you, then you may be interested in considering some lower risk investments, such as a guaranteed investment certificate or GIC. A GIC is an investment that is purchased for a fixed amount and that accrues interest over time.

The interest rates paid on GICs will vary depending on the financial institution that issues them, the amount of invested as well as the term that the GIC is held for. While many people believe that GICs carry absolutely no risk, there is one small risk involved with them. Your principal is guaranteed not to decrease in value, so there isn’t any risk of losing your capital. Therefore, with a GIC there is no way of ending up with less than you started with when it comes to maturity. The return is also guaranteed, so if you purchase a GIC that has a 2% interest rate, you will get this return when the investment matures. One of the issues with GICs is that they offer a relatively low rate of return. This means that the return that you get is not guaranteed to beat inflation. Therefore, if the inflation rate is 3% and the interest rate on your GIC is 2%, your actual return adjusted for inflation would be -1%. For this reason, many financial experts recommend that those interested in purchasing GICs make the effort to find one that offers the best possible return.

For those looking for an investment that has a shorter term than a GIC, money market funds could be worth looking at. These funds are invested in short term debt securities, such as treasury bills, bankers acceptances, certificates of deposit, as well as commercial paper. The funds that you invest in a money market fund will be used to provide some short term financing for Canadian government bodies and companies.

It should be known that money market funds are not guaranteed and therefore do carry a small amount of risk. If protecting your invested capital from risk is your top priority, you can consider money market funds which use federal treasury bills, as these are backed by the Government of Canada. Even with money market funds that use corporate debentures and provincial treasury bills, the risk is small, but nonetheless higher than with federal T-Bills.

As money market funds have a maximum maturity of 364 days, they’re considered to be a place where investors can “park” their money while they wait for other investment opportunities to arise that will have higher yields. They may also be a good choice for people that want a short term investment that will pay a few percentage points more than savings accounts issued by Canadian financial institutions.

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