Do you wish to receive a steady stream of passive income that rolls into your account every month, without taking on too much risk? Financial products and innovations in Canada today can help you make passive income investments that securely build wealth while you sleep, even if you are starting with limited funds.
You don’t need a six-figure investment to start generating passive income every month. With a strategic approach and the right tools, you can build a robust portfolio that produces regular returns, even with a starting balance of just $7,000. Even better, the two low-risk income investment options I’m going to discuss are eligible for your registered accounts for potentially improved tax efficiency.
GICs: Low-risk investments for building passive income in Canada
Record interest rate hikes of 2022 brought interest-bearing low-risk investments back on the menu for Canadians who wish to generate respectable passive income streams while preserving capital. Risk is a given in any investment, and to build a bulletproof monthly passive income stream, you may wish to assume as little risk as possible to earn reliable income every month.
GICs (Guaranteed Investment Certificates) are a thriving income source today. They can earn you interest income without you worrying about potential capital losses. Your interest and capital are guaranteed, and market volatility may not dictate your returns. The cash flows seem bulletproof.
Offers with yields above 3% on a one-year cashable GIC are plenty. Canadian chartered banks the likes of Royal Bank of Canada (RBC) may promise yields of 4.75% on a one-year non-redeemable GIC today while Saven Financial’s First Home Savings Account GICs offer up to 5.4% interest per year.
Although GICs may pay interest every month, you will get better yields on deals that pay interest annually. To make passive income monthly, you will stagger or ladder your GIC investments so that they mature every month in 2025. Your first $7,000 could buy seven one-year $1,000 principal GICs, one each month over the next seven months, with maturities starting in 2025.
However, once staggering and GIC laddering strategies come into play, GICs may no longer be as much a passive way of generating income as investors wish them to be. You may have to actively stagger or ladder your investments and reinvestments to generate the income stream you desire.
With that, bond exchange-traded funds (ETFs) and similar options could offer a better passive income profile
Make passive income the easy way: Buy the CI High-Interest Savings ETF
Investors could build a bullet-proof monthly passive income portfolio around high-interest savings accounts and bond funds, and the CI High Interest Savings ETF (TSX:CSAV) is an attractive investment for individuals looking for low-risk income payouts every month-end.
Managed by professionals at CI Global Asset Management (a subsidiary of CI Financial Corp), the CI High Interest Savings ETF has created a $7.5 billion portfolio of predominantly high-interest deposit accounts since its inception in 2019. It seeks to maximize monthly income for investors while preserving capital and liquidity. Its investments carry little capital risk, and its regular cash flows from chartered banks and short-term government bills should make you sleep well at night during periods of elevated market volatility.
The ETF’s most recent monthly payout of $0.2149 per unit in April should yield 5.2% annually. However, monthly payouts may slightly vary month-to-month but grow as interest rates remain elevated in Canada. Monthly payouts averaged $0.2067 per unit over the past 12 months to yield 4.96% annually.
A management expense ratio (MER) of 0.16 implies investors pay $1.60 on every $1,000 invested annually. Costs are on the low side.
Most noteworthy, the ETF delivered positive investment returns during the stock market volatility spikes of 2020 and 2022 – offering valuable “bulletproof” shelter for investors’ capital.
If you have $7000 to invest today, you could buy CSAV units, preserve your capital, and receive monthly cash flows as shown below.
| Investment Asset | Recent Price | Investment Amount | Number of Shares | Dividend | Total Payout | Frequency | Annual Dividend |
| CI High Interest Savings ETF (TSX:CSAV) | $50.04 | $7,000 | 139 | $0.2149 | $29.87 | Monthly | $358.45 |
Investor takeaway
Low-risk bulletproof passive income investments usually give up capital growth potential for capital preservation and cash flow security. Consider adding some equity investments whenever your risk tolerance levels allow. Some dividend stocks may boost a portfolio’s capital growth potential while still meeting passive income needs.
