{"id":7560,"date":"2009-08-15T01:55:27","date_gmt":"2009-08-15T05:55:27","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=7560"},"modified":"2009-08-15T01:55:27","modified_gmt":"2009-08-15T05:55:27","slug":"research-preferred-shares-gics","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=7560","title":{"rendered":"Research: Preferred Shares & GICs"},"content":{"rendered":"

Many fixed income investors do themselves a disservice by holding GIC Ladders. In this essay I attempt to highlight the weaknesses in the strategy and show how these weaknesses may be addressed by the addition of Preferred Shares or other longer-dated fixed income instruments.<\/p>\n

Look for the research link!<\/p>\n

<\/a><\/div>\n

Update, 2009-8-29<\/b> This essay was picked up in a Globe & Mail Round-up<\/a>:<\/p>\n

The 411 on GICs <\/b>
\nThe manual for conservative investing starts with the concept of the bond or GIC ladder, where you divide your money evenly into terms of one through five years. It’s a strategy that gives you new money to invest every year at potentially higher rates, while limiting the damage if rates fall. Now, read about the down side of laddering GICs<\/a> from James Hymas, one of Canada’s foremost experts in preferred shares. <\/p>\n

\nMr. Hymas’ comments have been posted on the website of an independent education website called Independent Investor<\/a>, which itself has some comments on GICs (called certificates of deposit here) and preferred shares. <\/p>\n<\/blockquote>\n

The linked website provides its own perspective on the question, but I take issue with one aspect of the commentary:<\/p>\n

He recently published a text (or a PDF version doc.1399) which criticizes the technique of building a ladder of fixed income investments using certificates of deposit, and proposes instead investing in preferred shares a significant portion (but less than 50%) of the fixed income portion of the securities portfolio of most (but not for all since , for example, he excludes 70 + years of age investors) investors. <\/p><\/blockquote>\n

I didn’t exclude investors of 70+ years of age, but I did state:<\/p>\n

The \u2018one size fits all\u2019 nature of the fixed income strategy allows advisors to brush aside considerations such as:<\/p>\n