If you own a Canadian bond, you may be taking a significant risk – and not be aware of it.

Canadian interest rates are low and any increase in interest rates will have a significant and negative effect on existing Canadian bonds, driving their price down. If you own individual bonds or a mutual fund with Canadian bonds in it (which is common), you are at risk – and at risk with an investment that you are probably expecting to be safe. Because Canadian bonds are providing VERY low returns, often less than 2% currently, and with Canadian core inflation around 2.2% - you may not really be making ANY money. And that’s before considering taxes that you may have to pay on your bond interest returns. This is not good.

It is essential that the bond component of your portfolio generate a positive return. This can be done – and done while lowering your risk – but not with the Canadian bonds or mutual funds that you own right now.

Luckily, there are investments that purchase bonds from countries other than Canada – where interest rates and returns are higher. Some of these available investments are categorized LOW RISK. So, you could possibly make more money, while taking less risk. This is good.

Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, [name], and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection