How to Invest Your Money » Investing

What Is the Safest Investment?

What Is the Safest Investment?

Know safety, no injury. No safety, know injury.

~ Author Unknown

This is another question that’s come up quite a bit lately and it’s pretty easy to answer. The safest place for your money is in a government guaranteed account. If you are Canadian, this means an insured account at a CDIC member institution.

OK, so it’s not quite that simple. There’s quite a bit that you should know about where and how the Canada Deposit Insurance Corporation protects your deposits. I’ll try to cover most of it here.

What’s Covered?

Note that the following list refers only to Canadian dollar accounts. If you have a U.S. dollar denominated account, it is not covered by the CDIC.

Deposit Types

  • Savings and chequing accounts
  • GICs or other term deposits, as long as the original term is 5 years or less
  • Money orders, certified cheques, travelers’ cheques, and bank drafts issued by CDIC members
  • Accounts that hold realty taxes on mortgaged properties

Account Types

  • RRSPs: savings accounts, debentures issued by loan companies (not those issued by governments or corporations), and GICs with an original term of 5 years or less (in Canadian dollars at a CDIC member institution)
  • RRIFs: same rules as for RRSPs
  • TFSAs: same as for RRSPs and RRIFs
  • Money held in trust for a beneficiary: savings or chequing accounts, GICs (5 years or less), money orders, travelers’ cheques, or bank drafts issued by CDIC members, or debentures issued by loan companies

CDIC Deposit Insurance Limits

Most Canadians are aware that the CDIC insures deposits up to $100 000. But that doesn’t mean the most you can ever have insured is $100 000. The following types of accounts are insured separately and you can have up to $100 000 insured in each of these for each CDIC member institution:

  1. Savings held in one name
  2. Savings held in more than one name
  3. Savings held in an RRSP
  4. Savings held in an RRIF
  5. Savings held in a TFSA
  6. Savings held for you in trust
  7. Accounts that hold realty taxes on mortgaged properties

So you can see that this can get a little more complicated than it looked at first. If you’re interested in where you stand with your own set of accounts, try out the great deposit insurance calculator on the CDIC website. It really helps you see how they decide what’s covered and what’s not. I’ve added it to the Calculators section on the right side of the site.

What’s Not Covered

Basically, anything not mentioned above is not covered. Deposits held in other currencies and those that go over the $100 000 limit for each account type and institution are not covered. Money in stocks, bonds, mutual funds, ETFs, money market funds, or T-Bills inside or outside registered accounts is not covered.

To be clear, losses due to market movements or the failure of a money market fund (unthinkable until recently) are not covered. The CIPF (Canadian Investor Protection Fund) insures against the failure of your brokerage up to a limit of $1 000 000, but this only covers losses due to the failure of the financial institution where your investments are located. It doesn’t cover losses on the investments themselves.

How Can You Use This Information?

The bottom line is that most of the investments that your broker or financial advisor sells you are not protected. It pays to periodically examine your risk level and decide whether it matches your risk tolerance. If you stayed in the markets all the way through the recent pummeling as well as the subsequent bounce, it might be a good time to rebalance.

Did you feel sick when the TSX fell by several hundred points at a time for days on end, or were you confident that your risk exposure was well-positioned given your time horizon? Did you wish you had just a little (or a lot) less equity exposure? If so, you can reduce your exposure now to a level that you think is more appropriate for you. What level is that? Really, only you can say. It depends on your time horizon, your ability to earn income, your personality, and a host of other factors.

Right now we have no equity or bond exposure, but that’s an extreme position. It’s based on our personal financial situation, which has been quite volatile lately, as well as my view that we have yet to fix the underlying causes of the financial crisis. That doesn’t mean a zero risk position is right for everyone. I only mention it to put it out there as a legitimate possibility. Don’t forget that most of these CDIC insured vehicles do not pay very much interest. Alas, that’s the price of safety.

What’s your safety margin right now? Are you feeling like getting back into the water, or are you still standing next to the life preserver?


  1. Dave

    Can you not also say that Mortgages that are held in RRSPs are save if covered by CMHC Mortgage Loan Insurance?

    • 2 Cents

      I’m not sure if you’re talking about holding your own mortgage in your RRSP? Either way, I think your risk in holding debt on a house may be more than just a default issue. You may also have risk in the asset itself. If the house was destroyed by an uninsured incident or it’s value declined, that still affects your investment.

      Having said that, this is not an area that I’ve explored very deeply, so if anyone else cares to add some insight here, that would be great. Thanks for raising the question Dave!

  2. The Rat

    My asset allocation is presently at a roughly 50-50 split with safety and equities. My target allocation is to get to 60-70% safety over time.

    In the interest of trying to answer this thread’s main question, I would say GICs are pretty damn safe because they are backed by the federal government and CDIC as opposed to other guaranteed vehicles. The only issue is that a lot of GIC rates from a lot of the leading banks aren’t offering the most lucrative interest rates in recent times.

    Nice post!

    • 2 Cents

      You’re right. Nobody’s going to retire quickly on GIC interest rates as they are now, especially if you’re relying on the big banks. To get a decent yield you need to look at the online institutions like ING, Canadian Tire, and Ally. But only ING deals with RRSPs.

      Another alternative is to use a deposit broker like Fiscal Agents. Thanks for your input!

  3. Andrew Hallam

    Well researched and written. And of course, you’re right in your assessment.

    That said, there are other ways of looking at this. I prefer to go with a short term government bond index over anything fixed. Over time, if inflation starts running, my bond index will drop in price, increasing the yield, and when the index purchases new short term bonds in place of those that expire within the index, I’ll reap the higher interest yield on those–thus keeping pace with inflation.

    Short term, your analysis is bang on. Longer term, you stand the risk of getting hit by runaway inflation. It happened in the 1980s, and it could happen again. That’s why I’d prefer a short term government bond index like XSB. I’ll always stay ahead of inflation. There are also inflation adjusted fixed indexed bond securities as well.


    • 2 Cents

      Thanks Andrew. You make a good point about inflation. The XRB (Real Return Bond ETF) is a good alternative for fighting inflation. With regard to the XSB, I understand your strategy, but you could also achieve something similar with a good GIC ladder and thereby avoid the capital loss in the bond fund as rates rise. Maybe a good balance would be a bit of all 3 (XRE, XSB, GICs)?

  4. Laronda Fie

    Excellent article as always, thank you for writing so much informative content on a regular basis.

  5. Ian MacDonald

    Saving accounts, bonds, GICs and preferred shares are poor investment vehicles. With inflation running at 1.83% and banks paying less than 1% interest on savings, you stand a good chance of outliving your money. Bonds, GICs and preferred shares pay a bit more but there is no capital gain. Bonds are expensive to buy and preferred shares are likely to lose 99% of their face value after buying them. By carefully choosing 20 dividend paying stocks you can realize a 6% return on your dividend income plus 9% annual capital gain. The dividend income is given a tax advantage.This is explained in the book “Income and Wealth from Self-Directed Investing” which is available from

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