There are many Canadians these days who are trying to simply keep their cash safe. And I get it. You may be saving cash and setting it aside, waiting for the right opportunity, and it’s just not presenting itself. In fact, I wouldn’t blame you if you were quite jaded by the market today.
So, if you have $1,000 and are looking for a place to put it, look no further. Here are three options I would consider to continue growing that $1,000 you’ve saved so diligently.
GICs
One of the best places that you can store cash for a long period of time is through a Guaranteed Investment Certificate (GIC). These are some of the best options on the market right now! While you won’t get returns like you would through stocks, you get fixed income instead.
That fixed income depends on where you’re investing and for how long. But to give you an idea, a five-year GIC at major banking institutions is around 5% right now. That’s 5% on your $1,000 investment each and every year!
Here’s what that could look like over the next five years.
| Year | Starting Amount | Increase | Total |
| 1 | $1,000 | $50 | $1,050 |
| 2 | $1,050 | $52.50 | $1,102.50 |
| 3 | $1,102.50 | $55.13 | $1,157.63 |
| 4 | $1,157.63 | $57.88 | $1,215.51 |
| 5 | $1,215.51 | $60.78 | $1,276.29 |
As you can see, by the time you take out your cash after five years, you’ll have made $276.29 from that original investment!
ETF
Exchange-traded funds (ETFs) are another strong option. That’s because you have a whole team of portfolio managers doing the work for you. If you want to get into renewable energy, you can pick a renewable energy ETF. If you’d rather stick to banks, find an ETF for that as well.
Yet if you want safety, there are many conservative ETFs out there as well, along with ETFs offering dividends for those focusing on cash flow. One that I like is Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC).
This fund focuses on providing global exposure for Canadian investors as well as a broad range of market capitalizations. The ETF has done quite well, with shares up 7.25% year to date and a dividend yield at 1.76% as of writing. So, it’s certainly a great way to keep cash safe and see conservative long-term growth.
Banks
It’s a different situation for investing in banks compared to the United States. Down south, there is just so much competition, creating volatile situations for investors. However, in Canada, we have an oligopoly of banks that has created a mass amount of cash reserves for these institutions.
This is why Canadian banks have plenty of provisions for loan losses and have been using them to keep afloat. Plus, during high interest rate environments, banking institutions can actually do quite well — charging more for loans and seeing an increase in GIC investments as well.
Yet among them all, perhaps Royal Bank of Canada (TSX:RY) is the safest for your $1,000. That’s because it’s the largest of the Big Six banks, with stable cash flowing in from its wealth and commercial management sectors. Furthermore, it hasn’t dropped as much as the other banks. Royal Bank stock now trades at 10.66 times earnings and holds a 4.98% dividend yield, with shares down 14% in the last year.
