People have been asking…

…and immediately we thought…

…but it’s a good question, with lots to unpack:

Stock returns are based on a premium over safer investments. Investors require an additive return to take on additional risk. When interest rates increase, so do expected returns on stocks.

From 1980 to 1985, GIC rates were between 10-15%. Yet over those six years, stocks beat GIC returns. If you factor in that stock returns compound and attract less tax, stocks CRUSHED GIC returns.

^{Data adapted from Furtado, A.}

These types of narratives boil down to “this time it’s different” arguments.

Those words are often described as the most dangerous words in investing.

It pays to be an optimist. The chart below shows that bad headlines don’t stop the market from going higher.

GICs are taxed as interest income - the highest rate!

Returns from dividends and capital gains attract a much lower tax treatment. Additionally, long-term investors don’t have to sell their stock returns; this defers tax and allows for additional dollars to compound.

Yes, GICs pay 5%. Inflation is at 7%.

When you invest in GICs, you lock in a loss of purchasing power.

The chart below categorizes each year of stock market performance from 1926-2021. The take aways:

• Markets go up 75% of the time
• When markets go up, they usually go up by much more than 5% (orange box)

Camber provides unbiased and independent investment recommendations. You pay us to worry about finding the best investment solutions, so you don't have to. If we found that GICs were a suitable option for you, we would let you know.

As always, please reach out to any of our team members if you have questions or concerns - we're here to help.

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