My asset allocation model calls for 65% equities, 35% fixed income. So, needless to say, it is important for me to get the best fixed income instruments that I can buy.
I had 2 GICs that just came due at my bank. Just like I did for my mother (see article “GIC Rates: Don’t Settle for Posted Rates”), I told my bank that I could earn 4.85% over 5 years at Achieva Financial. My bank came back and told me that the best that they could offer was 4.30% over 5 years and that I should check and see what kind of guarantees are offered by Achieva.
Obviously, they want to scare me into staying with the bank. Banks are covered by Canada Deposit Insurance Corporation (CDIC).
The Canada Deposit Insurance Corporation (CDIC) is a federal Crown Corporation. It was created in 1967 to provide deposit insurance and contribute to the stability of Canada’s financial system. CDIC insures eligible deposits at member institutions (up to $100,000 per depositor) and reimburses depositors for the amount of their insured deposits when a member institution fails.
Achieva Financial is covered by Credit Union Deposit Guarantee Corporation (CUDGC).
Manitoba provincial law requires the Corporation to guarantee credit union deposits. The exact wording under Section 143 of The Credit Unions and Caisses Populaires Act is:
“Purposes of a deposit guarantee corporation:
The purposes of a guarantee corporation are to guarantee the deposits of members of credit unions and to ensure and promote the development of sound financial procedures and controls to protect credit unions against financial losses and, without limiting the generality of the foregoing, a guarantee corporation shall do such things as are necessary to enable a credit union assigned to it to satisfy the claims of the members of the credit union for withdrawals of deposits.”
Achieva says that all deposits are 100% guaranteed - no limit. Unlike CDIC which guarantees up to $100,000.
I have downloaded the enrollment forms for Achieva Financial and will be sending them in later this week. Banking is a commodity for me. I will go with the best interest rate possible.
At the moment, all my fixed income is in GICs. I would like to learn more about purchasing bonds (not bond funds - I hate MERs!) in the future. Once I get a feel for those, I will then see if I can incorporate them into my portfolio. For now, I will stick with what I know.
6 users commented in " Getting the Best Rate for my Fixed Income "
Follow-up comment rss or Leave a TrackbackMy advisor buys individual bonds for his clients with lots of money (lowest cost that way). I’m using TD Canada Trust Bond fund right now. Once I have more money to make it worthwhile I’ll probably switch over to iUnits XBB ETF. Or XSB maybe.
Don’t hate MERs only. I mean if you hate MERs, you should hate commissions, fee-based advising, the whole works too. MER is just one cost structure. For me, my portfolio is small so in many cases buying a mutual fund with an MER is cheaper than getting an ETF with a commission.
I tend to use the word MER quite loosely (especially when talking about mutual funds). Really I mean the cost of investing. Like Warren Buffett said, all these frictional costs like MERs, commissions, stock trading costs, etc… are all eating into OUR returns until there is nothing left for the investor (who takes all the risk).
That is why I own DRiPs (and currently don’t have a brokerage account). I prefer to send my money directly to the company.
That is why I index. So that I can get the diversification with the lowest cost possible.
That is why I want to read up on bonds, so I can build my own bond ladders. It might turn out that GICs are the best way to go for me. I don’t know yet.
And that is why I am a DIYer. To keep as much of my hard earned money working for me instead of funding somebody else’s retirement.
Quick question about your asset allocation: how did you end up with the 65-35 split? You are very young and you work for the federal government which has a very good pension plan (which can be thought of as a bond component). IMHO, your equity component should be much higher (unless you are investing the bond portion for the short-term).
That is a good question. And I wish I had a great answer.
I am fairly new to DIY investing having started getting serious about it approximately one year ago (during my last meeting with my financial advisor just before RRSP season). Doing some reading, I had read that pension funds tend to run at a 70/30 or 60/40 equity/fixed income ratio. So I thought “If it is good enough for them, then it is probably a great starting point for me.” So for the last year, I have maintained this asset allocation.
However, this is my RRSP asset allocation. In fact, I do own more equity outside my RRSP. I have DRiPs as well as TD e-Funds in a taxable account. So my overall equity ratio is higher.
One thing I intend to do in the next short while is roll my whole portfolio together (taxable and non-taxable) into a single spreadsheet. Then I can see what my ‘true’ asset allocation currently is and then I will adjust as needed.
And I also hope to own an income producing property in the future. So that will hopefully give me government pension, my pension, my RRSP, rental income from property and dividend income from my DRiPs for retirement.
Oh. I forgot to mention. Earlier in my investing career, I used to have my RRSP invested in an “Aggressive Growth” managed fund at CIBC. This was basically an all equity managed fund. And it performed very poorly. I would have done better investing only in GICs.
That experience turned me off the ‘all equity’ approach.
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