What’s New: A Few Points of Interest - Alternatives to traditional bonds

Recently Mark Carney, the Governor of the Bank of Canada, stated that due to unsettled economic conditions around the world, Canadian interest rates are unlikely to start rising until around the middle of 2014.

In addition, the economic forecast for Canada is not as rosy as predicted last October, when the Central Bank (of Canada) was anticipating an upturn in 2013. As a result, the revised forecast for our economy is for it to expand at a rate of 2 percent, down significantly from the 2.3 percent predicted a few months ago.

What does this mean for investments? For those who require an income from their portfolio, the decline in interest rates and bond yields has made it challenging to replace the levels that we enjoyed only a few years ago.

As higher coupon bonds come to maturity, given the low interest rate environment, high net worth investors have begun to look at alternative avenues to generate reliable income. At Northland Wealth we have identified viable solutions to address our clients’ requirements.

Some examples of alternatives that we are utilizing in our clients’ portfolios (where appropriate) are:

• Actively managed bonds funds

• Dividend paying common stocks

• Preferred stocks

• Convertible bonds and debentures

• REIT’s – Real Estate Investment Trusts

In general these alternatives are likely to generate higher yields in the current low interest rate environment. We are diligent in ensuring a balance of quality versus the increased yield. When we next meet with you, we will be pleased to elaborate further on this area.