When it comes to investing, there is no single option that works for everyone. Each type of investment offers different benefits, risks, and opportunities. The key is often not choosing one investment over another, rather understanding how different investments can work together to help you reach your financial goals.
Just as a healthy diet includes a variety of foods, a healthy investment strategy often includes a mix of savings, guaranteed investments, market-based investments, and tangible assets. The right balance depends on your goals, timeline, risk tolerance, and financial circumstances.
Let's explore some common investment types and what to consider when deciding how they may fit into your financial plan.
Savings Accounts
A savings account is one of the simplest and most accessible ways to set money aside.
Pros
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Easy access to funds
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Low risk
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Suitable for emergency savings and short-term goals
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Deposits are typically protected by deposit insurance, subject to applicable limits and conditions
Cons
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Lower potential returns than most other investment options
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Interest earned may not keep pace with inflation over time
Best For
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Emergency funds
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Upcoming expenses within the next few years
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Investors who prioritize security and liquidity
Considerations
A savings account is often the foundation of a financial strategy. Before investing for longer-term goals, it can be helpful to have cash available for unexpected expenses.
Guaranteed Investment Certificates (GICs)
GICs provide a guaranteed rate of return for a set period.
Pros
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Principal is protected
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Predictable returns
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No market volatility
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Available in a variety of terms
Cons
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Limited access to funds until maturity (depending on the product)
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Potential returns may be lower than long-term market investments
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Inflation may reduce purchasing power over time
Best For
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Short- to medium-term goals
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Conservative investors
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Preserving capital
Considerations
GICs can provide stability within an investment portfolio. They may be particularly appealing when interest rates are relatively high or when funds will be needed on a known future date.
Market-Linked GICs
Market-linked GICs combine principal protection with returns that are tied to the performance of a market index.
Pros
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Principal protection at maturity
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Opportunity for higher returns than traditional GICs
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Reduced downside risk compared to direct market investing
Cons
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Returns may be capped or subject to participation rates
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Growth potential may be lower than direct market investments
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Terms and return calculations can be complex
Best For
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Investors seeking some market exposure with principal protection
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Those who are cautious about market volatility
Considerations
It's important to understand how returns are calculated and whether there are limits on potential growth before investing.
Conservative Market Investments*
Conservative market investments may include bond funds*, balanced funds*, dividend-focused portfolios*, or other investments designed to provide modest growth with lower volatility.
Pros
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Potential for higher returns than savings accounts or GICs
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Income opportunities through interest or dividends
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Lower volatility than more aggressive investments
Cons
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Market fluctuations can still occur
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Returns are not guaranteed
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May not generate enough growth for long-term goals on their own
Best For
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Medium- to long-term goals
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Investors seeking a balance between growth and stability
Considerations
Conservative market investments can help smooth out some market volatility while still offering growth potential.
Aggressive Market Investments*
Aggressive market investments typically focus on long-term growth while carrying more risk, and may include equity mutual funds*, exchange-traded funds (ETFs)*, or individual stocks*.
Pros
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Highest long-term growth potential
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Opportunity to outpace inflation over time
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Suitable for building wealth over longer periods
Cons
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Greater market volatility
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Potential for significant short-term losses
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Requires patience and a long-term perspective
Best For
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Long-term goals such as retirement
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Investors with higher risk tolerance
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Individuals with time to recover from market downturns
Considerations
While market declines can be uncomfortable, long-term investors often benefit from remaining invested through market cycles rather than trying to predict short-term movements.
Gold and Precious Metals
Gold has long been viewed as a store of value and a potential hedge during periods of uncertainty.
Pros
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May provide diversification
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Often behaves differently than stocks and bonds
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Can serve as a store of value during certain economic conditions
Cons
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Does not generate income like dividends or interest
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Prices can be volatile
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Long-term growth may lag productive assets such as businesses
Best For
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Diversification within a broader portfolio
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Investors seeking exposure to alternative assets
Considerations
Gold is often used as a complement to other investments rather than as the foundation of an investment strategy.
Hard Assets: Real Estate and Other Tangible Investments
Hard assets include investments such as residential or commercial real estate, farmland, and certain physical assets.
Pros
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Potential for income generation
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Opportunity for long-term appreciation
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Tangible asset ownership
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May help diversify a portfolio
Cons
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Requires significant capital
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Less liquid than many financial investments
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Ongoing maintenance, management, and ownership costs
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Property values can fluctuate
Best For
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Long-term investors
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Individuals seeking diversification and potential income
Considerations
Real estate can play an important role in wealth building, but it is important to consider financing costs, maintenance expenses, and the time commitment involved.
How Do You Find the Right Balance?
A balanced investment strategy often reflects three key factors:
Your Goals
What are you saving for? An emergency fund, a home purchase, education costs, retirement, or leaving a legacy may all require different approaches. As well, you may want to consider socially-responsible investments if that is important to you.
Your Timeline
Money needed in the near future is often better suited to lower-risk options. Longer timelines may allow for greater exposure to growth-oriented investments.
Your Comfort with Risk
Every investor responds differently to market fluctuations. A portfolio should help you stay invested through changing market conditions rather than causing unnecessary stress.
Your Tax Strategy
Investors should consider tax implications and consider registered plans that come with some tax savings if needed.
Bringing It All Together
Many investors benefit from a mix of investment types rather than relying on a single option. Savings accounts can provide liquidity, GICs can offer stability, market investments can support long-term growth, and assets such as real estate or gold can provide diversification.
The right mix will be unique to each person. By understanding the strengths and limitations of different investment types, you can make informed decisions that support your goals today while preparing for tomorrow.
Before making investment decisions, consider meeting with a member of our Wealth and Investment Team in partnership with Aviso Welath who can help align your investment strategy with your personal circumstances and long-term objectives.
*Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.