In life, there really aren’t very many guarantees. After all, so much can happen, and that’s especially true in the stock market. But there is one guaranteed way of creating passive income for 2024, and quite a lot of it. This is why today we’re going to cover that, and furthermore, how to make perhaps even more cash in 2024.
The smartest move you can make
If you’re like me and in the millennial age range, you likely grew up with parents who were obsessed with one type of investment. That’s the Guaranteed Investment Certificate (GIC). GICs provide Canadians with guaranteed passive income on your investment. And in the 1980s, that was enormous! I mean, one year, they were at something like 11.3%! It’s no wonder our parents were on board.
But in the last decade, GICs haven’t made much sense. Interest rates were unreal, with a mortgage hitting around 2%. And with the TSX today trading up during that time, investing in a GIC just didn’t add up.
Today, that just isn’t the case. The stock market might be improving, but there could still be falls. In fact, the TSX today is up 12.6% at the time of writing from lows hit Oct. 27, 2023. That could continue, but if inflation and interest rates remain sticky, then we could see a drop in the market once more.
Get in on GICs
That’s why for 2024 at least, I would absolutely continue to bring in these strong rates from GICs. Right now, the average GIC is somewhere around 5%. And that’s per year. Here’s how that could add up if you were to put, say, $10,000 in a 5% GIC for the next decade.
| Year | Investment Amount | Rate | Increase |
| 1 | $10,000 | 5% | $500 |
| 2 | $10,500 | 5% | $525 |
| 3 | $11,025 | 5% | $551.25 |
| 4 | $11,576.25 | 5% | $578.81 |
| 5 | $12,155.06 | 5% | $607.753 |
| 6 | $12,762.81 | 5% | $638.14 |
| 7 | $13,400.95 | 5% | $670.05 |
| 8 | $14,071 | 5% | $703.55 |
| 9 | $14,774.55 | 5% | $738.73 |
| 10 | $15,513.28 | 5% | $775.66 |
You’ve now increased your original investment by over 50% to a total of $16,288.94 in a decade! That’s total returns of $6,288.94, by the way. And that’s again all guaranteed, but not going to be guaranteed for long.
Now what?
So, let’s say you decide to go ahead and put a large chunk safely away in a GIC. That’s amazing, and you can feel safe about the future of your portfolio and goals. Furthermore, in that case, you’re taking advantage of interest rates that simply will not be around forever when the Fed decides to cut rates.
Add to that, you might need to take out some cash now and again! So, that’s why making smart investments with some extra cash should be another part of your strategy. For this, I would look at safe blue-chip stocks that offer dividends. And there are some great deals out there.
For example, consider a safe Canadian bank such as Canadian Imperial Bank of Commerce (TSX:CM). Again, you’re getting a great deal as the stock is coming back, but it isn’t back quite yet. It’s had a rough time with its exposure to the Canadian housing market, but that will eventually recover.
When it does, you’ll have brought in high returns and a dividend yield currently at 5.86% as of writing! So, again, that’s another 5% or more on top of the 5% you’re earning. Only this is these are not 100% guaranteed. But you could also be making even more than 5% when factoring in earnings.
Altogether, make sure you’re making investments that are diversified, meet your needs, and are planned out with your advisor to meet your goals as well. Do that, and you could make serious passive income for the future.
