Ever wondered about the fine line between low-risk investments and higher-risk ones? Many Canadians grapple with this distinction. If you foresee needing your funds within the next five years, could low-risk investments guaranteed by the Canadian Deposit Insurance Corporation (CDIC) be the way to go?

Think high-interest savings accounts or GICs. And if you’re on the lookout for top low-risk investment options in Canada for 2024, we’ve got you covered. Check out our compiled list, perfect for those saving for a down payment, vehicle purchase, or dream vacation.

Top 5 Safe Investments of 2024

1. Treasury Bills

Treasury bills, commonly referred to as T-bills, are short-term debt securities issued by the government through the Bank of Canada on behalf of the federal government. These are considered one of the safest investments because the Canadian government backs them. T-Bills are issued at a discount to their face value and mature at par. Although they do not accrue interest during the investment period, investors are guaranteed a return upon redemption.

Investors often use T-Bills as a component of their investment portfolio, seeking safety and liquidity for short-term cash management. They are commonly utilized by individuals, institutional investors, and corporations as a means of preserving capital while earning a modest return.

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2. Money Market Mutual Funds

Money market mutual funds represent a highly liquid and secure option frequently chosen for short-term cash management requirements. These funds invest in short-term debt securities characterized by high credit quality, including Treasury bills, commercial paper, and certificates of deposit (CDs).

Offering minimal expenses and exceptional liquidity, money market mutual funds are favored for their safety, though they typically yield lower returns than other mutual fund categories. Like any mutual fund, money market funds cannot guarantee returns or preserve principal.

3. Guaranteed Investment Certificates (GICs)

Guaranteed Investment Certificates (GICs) provide secure investment opportunities where investors lend funds to the issuer for a predetermined period. Upon maturity, investors are assured of receiving their full principal amount back and regular interest payments throughout the investment duration.

GIC interest rates are available in either fixed or variable forms. Fixed-rate GICs offer stability as the interest rates remain constant, whereas variable rates fluctuate based on the Prime interest rate. Opting for fixed-rate GICs is generally considered safer, especially in the current economic climate, where interest rate fluctuations pose risks.

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4. High-interest Savings Accounts (HISAs)

For Canadians seeking a secure location to stash their short-term savings, high-interest savings accounts (HISAs) prove to be an ideal choice. Typically, online banks are best for providing the most competitive high-interest savings accounts, benefiting from reduced operational expenses and thus offering higher interest rates.

However, it’s worth noting that a lot of Canadian financial institutions, including credit unions and major banks, also provide HISAs. Before you choose a high-interest savings account, it’s important to verify that it includes CDIC insurance coverage.

5. Bonds

Investing in bonds involves lending money to the seller for a predetermined period and receiving regular interest payments in return. Similar to GICs, bonds lack CDIC insurance. Firstly, bonds include a wide variety of options, ranging from those issued by local entities to bonds from large corporations. However, for most Canadians, focusing on bonds from highly secure entities, such as provincial or federal governments or exceptionally stable companies like Bell, is typically sufficient. Secondly, purchasing individual bonds has become uncommon due to the complexity involved. Even once-popular options like Canada Savings Bonds are now less accessible. Instead, many investors opt for bond ETFs (Exchange-Traded Funds).

6. Annuities

Annuities are not similar to most low-risk investments. They function as insurance contracts where you contribute a fixed sum in exchange for regular future payouts. These payments can be made either as a lump sum or through set monthly premiums over an accumulation period.

Suitable for retirement-age investors, annuities may not suit everyone’s investment strategy. During the accumulation phase, the funds you invest become illiquid, meaning they cannot be withdrawn without facing financial penalties. However, once the payout period commences, your income is assured, either for a specified duration or for your entire life, depending on your chosen annuity structure.

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Every investment carries some level of risk. To make the best decision for your situation, consider your risk tolerance and liquidity needs carefully.

If stability is your top priority, any of the options above offer a path to invest with a high likelihood of ending up with at least a modest increase in your initial investment.