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“I don’t want to take risks — I prefer guaranteed investments.”

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“‘Me, I don’t take risks. I want guarantees.’ Here’s how to respond to that cautious stance.”

Guaranteed Investments: Security… but at What Cost to Your Future?

Many people avoid stock market investments because of their volatility, preferring so-called “guaranteed” investments. Products like guaranteed investment certificates (GICs) or savings bonds seem reassuring they protect your capital. However, while this strategy may be appropriate in the short term or later in life, it can compromise long-term wealth growth. Here’s why.

1. The Myth of Absolute Security

Guaranteed investments indeed carry no risk of losing the nominal value of your capital. However, they are not immune to the loss of real value caused by inflation. A GIC earning 3% per year in a 4% inflation environment actually results in a loss of purchasing power. What you protect in monetary value, you lose in real economic value. This can undermine your savings’ ability to keep up with future needs especially during retirement.

2. Returns That Are Often Insufficient in the Long Term

Market history shows that over the long term, investments such as stocks generate higher returns than guaranteed products. For example, between 1993 and 2023, the average annualized return of Canadian equities was over 7%, compared to less than 2% for GICs. Completely avoiding financial markets out of fear of risk also means accepting minimal growth of your wealth — which in turn requires saving much more to reach the same goals.

3. The Risk of Not Reaching Your Goals

The real risk isn’t that the market fluctuates it’s that your money doesn’t grow enough to meet your future needs. Whether it’s buying a home, funding a child’s education, or enjoying a comfortable retirement, your financial goals depend on your savings’ ability to grow. By choosing only guaranteed investments, you’re taking a different kind of risk the risk of having to scale back your goals or work longer.

4. There Are Hybrid Solutions

It’s not necessary to choose between all or nothing. You can build a portfolio that offers a certain level of security while still aiming for moderate growth. For example, a balanced investment approach might include 40% bonds and 60% stocks, with adjustments based on your age and risk tolerance. Products such as monthly income funds, dividend ETFs, or diversified portfolios managed according to your profile allow you to benefit from market growth while keeping risks under control.

5. The Real Remedy: Education and Guidance

Fear of risk often stems from a lack of information or from negative anecdotal experiences. An advisor can help you understand the different types of risk — market risk, inflation risk, and longevity risk — and manage them wisely. Taking risks doesn’t mean gambling. It means accepting a certain level of volatility within a structured, thoughtful framework tailored to your goals.

In conclusion

Guaranteed investments have their place in a balanced financial strategy, especially for short-term needs or to secure a portion of your assets. However, limiting yourself to them out of fear of risk can lead to a greater danger — running out of money later. The key is not to eliminate risk, but to understand it, measure it, and manage it wisely.

Sources :

  • Bank of Canada. “Policy Interest Rate and Inflation”
    https://www.banqueducanada.ca
  • Autorité des marchés financiers (AMF). “Understanding Guaranteed Investments” https://lautorite.qc.ca
  • Éducaloi. “Guaranteed Investment Certificates”
    https://educaloi.qc.ca/capsules/certificats-de-placement-garanti-cpg/
  • Québec Institute of Financial Planning (IQPF). “Risk in Investments” [https://www.iqpf.org](https://www.iqpf.org)
  • Morningstar Canada. “Historical Returns” https://www.morningstar.ca