# Starving for Fixed Income ideas



## Albert (Jan 19, 2012)

Can not find anything that is safe and yields at least inflation rate, any suggestions?


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## OptsyEagle (Nov 29, 2009)

Albert said:


> Can not find anything that is safe and yields at least inflation rate, any suggestions?


What do you want, the world? I hear Switzerland will hold your money if you pay them. lol.

Sorry for the jokes above. You should let us know what your plan is for this money and its investable time frame, also if we are talking registered money or non-registered.


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## gardner (Feb 13, 2014)

Albert said:


> safe and yields


If you find something, I'll take 25,000.

HISAs still yield 1%, maybe a bit more
You can get 2.8% in a 5yr GIC, maybe a shade more


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## leeder (Jan 28, 2012)

Strictly based on the OP's post, the OP wants a product that is safe and yields at inflation rate. The inflation rate is currently sitting at about 1.0% (previously at 1.5%). There are still certain GICs that yield at such a rate. I believe Equitable Bank is offering a 1-year GIC at 1.51%. Oaken is offering 1-year GIC at 1.8%. Sure, it isn't as high as early January, but certainly choices are there for those who look.


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## Sasquatch (Jan 28, 2012)

I have 2 HISAs with CDF in Edmonton and they still pay 1.9 % pa. Good enough for me


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## Albert (Jan 19, 2012)

Non registered account, need the money to live, I am 70 years old, hope I have another 30 years.


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## gardner (Feb 13, 2014)

Have you checked into life annuities?


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## Numbersman61 (Jan 26, 2015)

gardner said:


> Have you checked into life annuities?


I would not be recommending life annuities in this low interest rate environment.
You might be interested in EIT.UN, a large closed end investment unit trust which trades at a significant discount to NAV which was $14.47 yesterday. Currently trading at $12.42; pays monthly distribution of 10 cents per unit (9.6% yield).


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## CPA Candidate (Dec 15, 2013)

You didn't say risk-free, so I'd look at buying some REITs. I can't imagine anyone living off 1-2% interest unless you have millions.


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## Albert (Jan 19, 2012)

With a 9.6% yield, how safe can it be?


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## OnlyMyOpinion (Sep 1, 2013)

You've identified the HUGE challenge we face in retirement these days. You can only answer this in the context of your overall income sources, investments and comfort with volatility/risk.
When you say to 'need money to live on', is there enough capital available that a high interest savings acc or GIC's will provide enough and last long enough, or will you fall short? That is, do you just want the best true fixed income alternative or do you need to consider alternatives such as a monthly income etf or an annuity?

My recent example of 'context' is my folks who are mid-80's. They just locked into 1-5 year laddered GIC's with the intent of rolling over half into 6-10yrs. The rates suck but the maturing value of this cash wedge over the next 10yrs will cover the balance of their expenses (after CPP & OAS). They are 'depletng' their estate but that is what they were comfortable doing with their money. They have max'd out TSFA's if emergencies arise. Beyond that though, they have a fair-sized mutual fund that will continue to DRIP and in 10 yrs should have grown. In ~8 yrs and we will look at how to best use it for income.


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## Numbersman61 (Jan 26, 2015)

Albert said:


> With a 9.6% yield, how safe can it be?


You clearly haven't looked at the unit trust. They have paid 10 cents a month for at least the past five years. The NAV is $2.05 in in excess of the market price.


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## Pluto (Sep 12, 2013)

eit.un is an interesting one. Thanks for bringing this to our attention. Here is a description I found:

"Canoe EIT Income Fund (the Trust), formerly EnerVest Diversified Income Trust is a closed-end investment trust. The investment objective of the Trust is to maximize monthly distributions relative to risk and maximize net asset value, while maintaining and expanding a diversified investment portfolio. , the Fund employs an investment strategy that strives to maximize return while controlling the risk profile of the Fund. The net asset value of the Fund is maximized through active management of portfolio assets, purchasing securities considered to be undervalued and selling securities considered to be fully valued. The Fund seeks to maximize monthly distributions primarily through investing in income-generating securities. The Fund invests in a diversified portfolio of income-generating and capital growth-oriented securities listed primarily on the TSX. "

the strategy makes sense to me but I have to do more research to see if this security is managed effectively. It isn't clear to me why it was about 15 /share some years ago, and is 12+ now. (I have a distaste for strategies that don't care about asset value, and only income - they end up wasting some hard earned money on over priced dividend payers.)


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## fatcat (Nov 11, 2009)

you can get a cashable 1-year gic (after 90 days) that pays 1.75
that puts you nicely ahead of inflation 
assuming inflation is 1% and the problem with this number is that some things are deflating and others are inflating at very different rates


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## Eder (Feb 16, 2011)

I'm 58 and hold some corporate bonds that are rated BBB but yield over 5%...(they are in my RRSP so the tax hit on interest income wont make them useless). I hold a huge chunk of BCE yielding around 5% but the income is tax advantaged...it's not fixed income but it provides a big part of my income stream.

Yes, there's risk with both ideas, but you have no choice in your situation...2% doesn't cut it.


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## OnlyMyOpinion (Sep 1, 2013)

Pluto, re/ eit.un consider also: 10yr performance 6.4%, MER 1.74%


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## Numbersman61 (Jan 26, 2015)

OnlyMyOpinion said:


> Pluto, re/ eit.un consider also: 10yr performance 6.4%, MER 1.74%


I started investing in EIT.UN about two years ago. My average cost is around $12. On Feb 26/13 the NAV was $13.70 and market price $12.47. Today NAV is $14.48 and market is $12.40. In the two year period, the fund has paid $2.40 in distributions. The investment portfolio is primarily blue chip - Wells Fargo, TD, Microsoft, Proctor & Gamble, Fortis etc.


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## lonewolf (Jun 12, 2012)

Numbersman61 said:


> I would not be recommending life annuities in this low interest rate environment.
> You might be interested in EIT.UN, a large closed end investment unit trust which trades at a significant discount to NAV which was $14.47 yesterday. Currently trading at $12.42; pays monthly distribution of 10 cents per unit (9.6% yield).


 Could interest average into annuities interest rates could stay low for a long time, @ 70 death credits would add up fast regardless of interest rates. deferred death credit would add really fast. Swiss annuity companies (google The Swiss advantage) well respected wealth preservation experts say are financially stronger then Canadian insurance companies.


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## P_I (Dec 2, 2011)

Albert said:


> Can not find anything that is safe and yields at least inflation rate, any suggestions?


By definition, don't Government of Canada real return bonds address this need. They are a bit more complex to understand and purchase. I'm aware of them but have no personal experience buying them.


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## Daryl (Feb 14, 2015)

Numbersman61 said:


> I started investing in EIT.UN about two years ago. My average cost is around $12. On Feb 26/13 the NAV was $13.70 and market price $12.47. Today NAV is $14.48 and market is $12.40. In the two year period, the fund has paid $2.40 in distributions. The investment portfolio is primarily blue chip - Wells Fargo, TD, Microsoft, Proctor & Gamble, Fortis etc.


I have had Eit.un for years and bought more recently when it got caught in the financial meltdown and went on sale. It was originally recommended by my TDWaterhouse financial advisor. I am retired but not dependant on the distributions. Good fund and seems well managed.


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## Daryl (Feb 14, 2015)

I wanted to recommend for yields look into preferreds which are discounted due to lower interest rates. Nobody should have all their eggs in one basket so I also have HR.un, Ishares corporate bond fund XCB, HAB.


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## OnlyMyOpinion (Sep 1, 2013)

Daryl said:


> I have had Eit.un for years and bought more recently when it got caught in the financial meltdown and went on sale. It was originally recommended by my TDWaterhouse financial advisor. I am retired but not dependant on the distributions. Good fund and seems well managed.


To each their own, that's what makes life interesting. To me the MER seemed high for a fund returning a lot of your own money (roc) and their swing to be 1/3 invested in oil & gas last June seemed poorly timed. Don't see the value-add over owning a CCP-type etf portfolio.


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## Numbersman61 (Jan 26, 2015)

OnlyMyOpinion said:


> To each their own, that's what makes life interesting. To me the MER seemed high for a fund returning a lot of your own money (roc) and their swing to be 1/3 invested in oil & gas last June seemed poorly timed. Don't see the value-add over owning a CCP-type etf portfolio.


One of the explanations for ROC in prior years was unrealized gains on investments. Regulatory filings for first six months of 2014 indicate that almost all of the distributions were allocated to dividend income and realized gains. With regards to energy holdings, the fund profile at Nov 30 indicated that only 16.5% of the holdings were in energy.


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## Causalien (Apr 4, 2009)

i am curious about the annuity comment. Why is it a bad idea to get an annuity in a low rate environment?


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## Numbersman61 (Jan 26, 2015)

Causalien said:


> i am curious about the annuity comment. Why is it a bad idea to get an annuity in a low rate environment?


The financial institutions calculates the annuity payments based on the interest rate environment at the time the annuity is purchased. If interest rates are low, the annuity payment will also be low. Conversely when interest rates are high, the annuity payments are higher.


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## pwm (Jan 19, 2012)

I always think that people should not equate volatility with risk. Volatility is simply a measure of the swing in prices that other people are trading your stock at. Risk is the possibility of losing your money. Not the same thing. I'm 65, been retired for 10 years, and hold a 100% equity portfolio of common and preferred shares, REITS and various funds that hold the same. No bonds or GICs, although I do keep $10,000 in an HISA for emergencies. I consider my portfolio to be low risk. Why? Because I hold for the long term, and don't care if the pricing on my holdings goes down, since the dividends keep coming in as they did in 2008-2009. I don't intend to change my allocation in any way as I get older.


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## My Own Advisor (Sep 24, 2012)

Hey pwm,

65, 100% equity, good on you! 

How many holdings do you have? Canadian and U.S. and international? Are you holding a blend of individual securities and ETFs?

I think I'm headed down the same road as you, at least I believe I am: 100% equities, no bonds, and $5-$10k in HISA for emergencies. Otherwise everything is 100% invested for cash flow: dividends, distributions from ETFs, etc.

I don't intend to change my ways either but I'm always curious to learn from folks who are older than me, who have "been there and done that" and been very successful.


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## pwm (Jan 19, 2012)

I counted my holdings in Quicken. There are 23 different securities. It's a blend of ETFs, eSeries funds, common shares, and I still have 2 mutual funds with low MER that I like. Mostly Canadian, with about 15% US and International. 

I learned long ago to invest in dividend paying large caps and hold for the long term, and not be intimidated by market swings.


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## lonewolf (Jun 12, 2012)

Causalien said:


> i am curious about the annuity comment. Why is it a bad idea to get an annuity in a low rate environment?


 There are more then one type of annuity i.e., can get annuities that are indexed to stock market or an annuity that holds physical gold & gold shares.


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## Numbersman61 (Jan 26, 2015)

pwm said:


> I always think that people should not equate volatility with risk. Volatility is simply a measure of the swing in prices that other people are trading your stock at. Risk is the possibility of losing your money. Not the same thing. I'm 65, been retired for 10 years, and hold a 100% equity portfolio of common and preferred shares, REITS and various funds that hold the same. No bonds or GICs, although I do keep $10,000 in an HISA for emergencies. I consider my portfolio to be low risk. Why? Because I hold for the long term, and don't care if the pricing on my holdings goes down, since the dividends keep coming in as they did in 2008-2009. I don't intend to change my allocation in any way as I get
> older.


I'm a little older (73, retired 5 years ago) and also invested only in dividend paying entities (except for $100,000 in HISA) I have no company pension so have to rely on investment income to fund our retirement. I'm a CA who spent the last 35 years in the energy sector in executive and corporate director positions. I own a fair amount of rate reset preferreds but am not worried about recent fall in price since they were purchased for yield and are issued primarily by blue chip companies. My expectation is that when rate reset time occurs, long term rates will have recovered.


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## Albert (Jan 19, 2012)

Thanks for all the replies, information and suggestions. Wish I had the guts to be 100% equities, I am a very conservative investor and at the stage in my life I need to protect my capital. What I did was purchase a one year GIC at 1.8% and ZPR for the higher yield and the portions of capital that I will not need for a long time. I have more monies maturing soon and will have to make further decisions. Great site to get down to earth information.


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## Eclectic12 (Oct 20, 2010)

pwm said:


> ... I learned long ago to invest in dividend paying large caps and hold for the long term, and not be intimidated by market swings.


One of the benefits of starting early is that IMO, volatility becomes less of an issue. Where one bought a short while ago, a 30% drop is likely to make people nervous ... if on the other hand, the ACB is peanuts - a 30% swing on today's price is a blip.


Cheers


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## My Own Advisor (Sep 24, 2012)

pwm said:


> I counted my holdings in Quicken. There are 23 different securities. It's a blend of ETFs, eSeries funds, common shares, and I still have 2 mutual funds with low MER that I like. Mostly Canadian, with about 15% US and International.
> 
> I learned long ago to invest in dividend paying large caps and hold for the long term, and not be intimidated by market swings.


Great to know pwm, I've likely asked you something similar before...so thanks again for sharing. I currently own 20+ CDN stocks, a few REITs, 10 U.S. stocks and a couple of indexed ETFs. I hope to have about a 50/50 Canadian/U.S. + International stock split eventually, 100% equities.

I have also learned that dividend paying stocks are good for many reasons, steady income, growing income and also some capital appreciation. 

I continue to train my investing brain to celebrate stock market declines and buy accordingly.


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## jamesbe (May 8, 2010)

Does EIT still pay a dividend? Looks like it stopped in Nov last year

Looks like they resumed for Feb


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## OptsyEagle (Nov 29, 2009)

jamesbe said:


> Does EIT still pay a dividend? Looks like it stopped in Nov last year
> 
> Looks like they resumed for Feb


EIT has not missed any dividends. Not sure what you are looking at. 

Now, before anyone jumps on this, you need to be aware that EIT does not earn their dividend. If you beat to death their latest financial statement or any other statement, you will find that they will come up short, in that the income they receive from their portfolio does not cover what they need to pay dividends, after their management fees and other expenses.

I wouldn't worry about it, since it is a closed end fund and therefore it is not like other corporations where its payout ratio is material to its financial health. It can simply sell stocks and continue the dividend until the cows come home. The only reason I mention it, is that since it does not earn its dividend, you should understand that the part of the dividend it pays that it does not earn, will lower its Net Asset Value (NAV). So in a time when the stocks it owns are not rising in value, you need to expect the NAV and therefore the share price to decline. They are basically selling your investments for you and giving you the money. Read into that what you may.


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## CharlesF.Donahue (Jan 7, 2015)

Have you check any official site for that? If not then first check the site and make a decision.


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