While interest rates on the floor may be good for first time home buyers and those who renew their mortgages, they are certainly a hit with retirees looking for safe investments.
For the last 10 years, the yields on certificates of deposit and bonds have plummeted considerably
For example, a couple of annuitants who relied on the income of an asset totaling 250,000 to 6%, could hope to withdraw $ 15,000 annually without capital loss.
Today, this same couple can only get $ 5,000. Since everything costs more and more, if they do not change their strategy, they will have no choice but to tap into capital and become poorer.
Recently, TD Investment Management made available to the public an investment strategy that was reserved for institutional clients such as pension funds. As you know, pension fund managers are required to manage with caution and diversification because there are more and more benefits to be paid and they face the same reality of low rates.
The stock market has this ability to offer attractive returns, but it also has the unfortunate habit of stunting us and from time to time slipping underfoot. When a retiree is in the disbursement phase and the stock market enters a downward period, it can do serious damage. As a result, TD has established “risk reduction funds” that eliminate almost all of the declines in its exposure to the index of the largest North American companies in the S & P 500.
How to limit stock market losses?
Fund managers Bank Credit and Lender manage to limit volatility through a strategy of risk hedging throughput and call options. This collar method creates downward and upward limits on a stock or index. The average yield will oscillate in a secure corridor. We understand that it will not sparks because it also eliminates dizzying climbs, but it does not sting the nose either. This is an advantage! For example, reconstituted historical data from the Conservative Retirement Portfolio show average earnings over 5% annually over the past 14 years.
But the most formidable feat, in my opinion, is that this return has been achieved without a negative calendar year. No joke, even in 2008 when the S & P 500 slipped by -37%, the portfolio realized a gain of 4%! No wonder since the launch in September 2013, the sum of deposits in these accounts exceeds one billion dollars.
The “Conservative and Balanced Retirement Portfolios” are within everyone’s reach as the minimum investment is $ 500. They are eligible for RRSPs, TFSAs, RRIFs, LIFs, etc. Finally, note that these investments are not offered in a bank branch but only through advisors or planners.