My answer: accept a bit more risk, open a self-directed portfolio account and invest with care. All the big North American markets are at all time highs. A correction is likely. At the very least, a pullback from the recent highs is likely.
My answer, buy enough good, dividend-paying investments to get you by and keep the balance of your money in a money market account paying .25% daily interest. This is the same rate as paid by a 1 year term GIC!
I'm tracking a demo portfolio to show a friend exactly what I mean. They can show this post to the bank at their next meeting.
Total amount of money to invest: $60,000.
- Invest $25,000 immediately. Do not try to time the market. I have the following in my demo account:
- 46 shares of Canadian Imperial Bank of Commerce (a bank)
- 192 shares of Emera Inc. (a utility)
- 88 shares of Enbridge Inc. (a pipeline)
- 252 units of iShares Core Growth ETF Portfolio
- The balance, $35,000, is in the money market account TDB8150 paying daily interest of .25%
- This portfolio delivers 2.09% annual dividend income calculated on the original $60,000 investment.
- This dividend income amounts to $1255.96 annually.
Even in a severe bear market, I expect this self-directed account to retain more than 85% of its value. And in a bear market is the best time to get into the market, one can immediately invest the balance. The cash is not tied up, out of reach, in a GIC. (In reality, I'd invest half the balance and then invest the other half when I felt confident that I knew where the market was heading: rebounding or testing new lows. I'd be hoping for another drop. I like stocks that are not only on sale but ones that carry Further Reduced red tags.)
When the market rebounds out of correction territory, I'd sell a little, converting a minimum of 5% into cash which I would put in a money market account.
And how is my demo account doing? I'm in the black and I'm collecting dividends. If this demo was the real deal, I'd be happy.
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