Diversified sustainable retirement income

Have you ever seen an old friend recently and been shocked to see how much they had changed over the years?

Have you ever seen an old friend recently and been shocked to see how much they had changed over the years? After a quick conversation, you may have felt a little introspective about your own life and how much things had changed for you. You may be facing some of the same feelings if your focus has changed from saving to generating income for retirement.

Not long ago, you could rely on the stability of government bonds and Guaranteed Investment Certificates (GICs) to protect your savings while providing you with an attractive rate of return. But as interest rates change, so too does the amount of interest income that a GIC portfolio produces. Many investors today are taking advantage of diversified income mutual funds that focus on investing in a variety of income-oriented securities.

Here is an overview of the various types of asset classes that diversified income mutual funds invest in making an effort to produce a more reliable income stream.

Corporate bonds – Bonds issued by stable corporations that need working capital to invest in their business.

Because these bonds are issued by corporations, they are considered higher risk than government bonds,

since a government can always pay its debt by printing more money. To compensate investors for this

additional risk, the amount of interest that corporate bonds pay is almost always higher than government

bonds and GICs.

High-yield bonds — Bonds issued by less stable corporations. Because they are considered higher risk than government or investment-grade corporate bonds, the rate of interest they pay to compensate investors for this risk is almost always higher.

Emerging market bonds – Bonds issued by countries with developing economies and corporations that reside within these countries. Emerging market bonds have become more popular with investors in recent years largely because many of these economies have become stronger, which has led to higher credit ratings.

Preferred shares — Called “preferred” because these shareholders receive their dividends before common shareholders. Furthermore, in the event the company experiences financial hardship, preferred shareholders have the potential to be paid before common shareholders.

Dividend paying equities – Common shares that pay regular dividends to shareholders. While these cash payments are never guaranteed, companies that pay dividends tend to be large, financially secure corporations in mature industries. If you are looking for a tax-efficient source of income, dividend payments receive preferential tax treatment in Canada when compared to interest income from bonds and GICs.



Stuart Kirk is a Wealth Advisor with Precision Wealth Management Ltd and an Investment Funds Advisor with Manulife Securities Investment Services Inc. The opinions are those of the author and may not necessarily reflect those of Precision Wealth Management Ltd or Manulife Securities Investment Services Inc. Stuart can be reached at stuart@precisionwealth.ca.



Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Kyle Patrick McGuire was give a nine-month non-custodial sentencing to be followed by two years of probation on Wednesday, March 3, at the Nanaimo Law Courts. (PQB News file photo)
Bowser man sentenced to house arrest after guilty plea to child pornography offence

Nine-month non-custodial sentence to be followed by two years probation

The Regional District of Nanaimo faces challenges with garbage bin replacement requests. (Michael Briones photo)
Regional District of Nanaimo faces challenges to meet requests for garbage bin replacements

Waste manager says RDN will have a surplus of 100-litre carts

Members of the Freshwater Fisheries Society of B.C. set up the tube where rainbow trout were released into Spider Lake on Thursday, March 4, 2021. (Michael Briones photo)
Fishing time: 1,800 rainbow trout released into Spider Lake

Society records spike in fishing licences during pandemic

A map showing where the new developments for affordable housing will be located on Moilliet Street in Parksville. (submitted photo)
Parksville city council approves development permit for 87 housing units

Development to include four-storey apartment and eight townhouses

Provincial health officer Dr. Bonnie Henry updates B.C. on the COVID-19 situation. (B.C. government)
Dr. Bonnie Henry predicts a ‘post-pandemic world’ for B.C. this summer

‘Extending this second dose provides very high real-world protection to more people, sooner’

Malawian police guard AstraZeneca COVID-19 vaccines after the shipment arrived in Lilongwe, Malawi, Friday March 5, 2021. Canada is expecting its first shipments of AstraZeneca vaccine next week. (Associated Press/Thoko Chikondi)
B.C.’s daily COVID-19 cases climb to 634 Friday, four more deaths

Currently 255 people in hospital, 66 in intensive care

A crashed helicopter is seen near Mt. Gardner on Bowen Island on Friday March 5, 2021. Two people were taken to hospital in serious but stable condition after the crash. (Irene Paulus/contributed)
2 people in serious condition after helicopter goes down on Bowen Island

Unclear how many passengers aboard and unclear where the helicopter was going

Surrey Pretrial in Newton. (Photo: Tom Zytaruk)
B.C. transgender inmate to get human rights hearing after being held in mostly male jail

B.C. Human Rights Tribunal member Amber Prince on March 3 dismissed the pretrial’s application to have Makayla Sandve’s complaint dismissed

Supporters rally outside court as Pastor James Coates of GraceLife Church is in court to appeal bail conditions, after he was arrested for holding day services in violation of COVID-19 rules, in Edmonton, Alta., on Thursday March 4, 2021. THE CANADIAN PRESS/Jason Franson
‘Law remains valid:’ Pastor accused of violating health orders to remain in jail

The Justice Centre for Constitutional Freedoms is representing the pastor

The Netflix logo on an iPhone. B.C. delayed imposing sales tax on digital services and sweetened carbonated beverages as part of its response to COVID-19. Those taxes take effect April 1, 2021. THE CANADIAN PRESS/AP, Matt Rourke
B.C. applies 7% sales tax on streaming, vaping, sweet drinks April 1

Measures from 2020 budget were delayed due to COVID-19

Chief Don Tom of the Tsartlip First Nation was outraged after Green MLA Adam Olsen revealed on social media that the community had been experiencing a COVID-19 outbreak – a fact the First Nation had chosen to keep private to avoid racist backlash as experienced by the Cowichan Tribes when an outbreak was declared there in January. (Black Press Media file photo)
B.C. First Nation ‘outraged’ after Green MLA reveals COVID-19 outbreak

Tsartlip First Nation chief shares concerns about racist backlash, MLA apologizes

A lawyer wears a face mask and gloves to curb the spread of COVID-19 while waiting to enter B.C. Supreme Court, in Vancouver, B.C., Friday, Aug. 28, 2020. British Columbia’s highest court has sided with the land owner in a dispute over public access to public land. THE CANADIAN PRESS/Darryl Dyck
B.C. high court finds in favour of large landowner in fight over access to pair of lakes

The Nicola Valley Fish and Game Club launched legal action after the cattle company blocked road and trail access

Prime Minister Justin Trudeau holds a press conference in Ottawa Friday, March 5, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Trudeau holds firm on premiers’ health-care funding demands, COVID-19 aid comes first

Premiers argue that the current amount doesn’t keep pace with yearly cost increases of about five per cent

Most Read