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iShares Core Canadian Universe Bond Index ETF (XBB)
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iShares Convertible Bond Index ETF (CVD)
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iShares Core Canadian Long Term Bond Index ETF (XLB)
I'm looking for your sage opinion on how to deploy cash at this point in time. I have enough cash for 5 years of expenses and I'm in my 2nd year of retirement. The rest of my nest egg is in equities, real estate and bullion.
I have been thinking of just putting this cash into a five year GIC ladder and call it a day. But.... rates are already falling on GICs as we speak, likely in anticipation of further Bank of Canada and soon US Fed cuts.
Have you other options for me to consider for how to deploy this cash to 1) ensure a high probability of being able to meet expenses without selling equities in the event of a market downturn, while 2) ensuring a reasonably decent return from this cash over such a long period.
Specifically, does it make sense to accept around 4% as a guaranteed average rate or is there a solid case to make for dividend payers instead of GICs. Open to other and all suggestions.
Thanks for your invaluable service.
Michael
We could always make a case for equities, but since equities can and do decline, it is harder to make them a case as an 'equivalent' to cash. We can't direct answers personally, but we would consider five years of pure cash 'a lot'. But of course much depends on timeframe, other income, expenses, taxes and risk profile. Based on the parameters in the question, a solution we see is a mix of GICs and bonds. A laddered GIC strategy will eliminate guesses on interest rates and allow for guarantees and steady cash flow. Bonds, or bond ETFs such as XBB and XLB will not be 'guaranteed' but if rates do fall then higher net returns could be achieved. CVD could be an option here as a convertible bond ETF, allowing for some more gains if equities go on a run. There are some 'buffer' ETFs which may be of interest in such a case. An ETF such as IVVB is hedged and provides some downside protection in a market decline. This hedge though 'caps' returns at 6.95%. It's not perfect, but can solve some worries about a giant market decline, but still allow some equity participation (up to a point) if markets rally.