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If you want stability, look no further than bonds

Aug 15, 2024

If you want stability, look no further than bonds

Bonds may not be offering the highest returns on your investments right now, but they are a solid choice for adding stability to your portfolio. Sure, they’re not as sexy as high-risk investments like GameStop stocks, but stability can be music to your ears, especially if you were stressing over your TFSA or RRSP dropping in value last week. Investing in bonds means you can likely count on getting back what you put in, plus a little extra. When you buy a regular bond, you’re basically loaning money to the issuing government or company. In return, you’ll get regular interest payments and 100% of your original investment back when the bond matures, usually over a set period of time. While bonds are generally safer than stocks, they typically offer lower returns. But stocks are also riskier. For example, if the market takes a dive — like it did last week when the S&P 500 dropped 3% in a single day — you could lose value pretty quickly. This month, 10-year government bonds are yielding around 3%. While this is lower than what we saw before the recent interest rate cuts, it’s still on the higher end compared to the last three years. In fact, now might be a great time to invest, since historically, long-term yields tend to peak a few months before the Bank of Canada wraps up its rate hikes, which is expected to happen in the near future.

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