| ritaotay, If you get a guarantee that the principal can't shrink, that they toot their horns about a lot, there's another guarantee that they never mention ... ... it can't grow, either. So that asset only produces one kind of income - interest. In Canada, if you earn interest, you pay tax at top rate, so that income is eroded heavily. There are two rats that eat your cheese - the income tax rat wants to talk to you each year about all of your income that year - and wants part of it. Not only that, all that your principal earns for you is paid now - well, maybe next year. And tax-liable now (well, maybe next year). Suppose you'd put $10,000. into a guaranteed certificate for 5 years, 15 years ago, and renewed it twice, later. Now - you want to take it out. When you gave that money to the bank, that $10,000. would have bought a nice car, 15 years ago. Not now. The value of each of those dollars shrank each year that the bank used it. There's another rat that eats your cheese - the inflation rat gnaws away a portion of the value of each dollar of your principal (if it's fixed-dollar-denominated asset) every year. You can't avoid the depradations of the income tax rat - well, you can try, but some get big fines, even jail time for that. (How come so few of the scoundrels that have absconded with millions in some of these corporate scams in recent years have yet to see the inside of a jail?) And you can't avoid the annual shrinkage of value of each of your dollars because of inflation, either. Know what? The rats eat first. I bought some shares in one of Canada's major banks 39 years ago - for about 4 dollars each, I think (not sure if I took all of the splits into account - I think so). The value of each share has gone up, down and sideways over the years. Once each was worth $56. Some time after - only $24. (was that after one of the splits - I'm not quite sure, but I think it may have been). I didn't plan to need the money for quite a while, so they just sat there. Gathering dust? No - money. Originally they paid something like 6 cents or a dime annually as a dividend. On which I pay a much lower tax rate than on the same amount of interest. Some years ago, they were paying 80 cents. Then $1.00. Later $1.60, then $2.00. Now I think they're paying me $2.40 as dividend on each share, each year. And each share is worth something over $80.00. Had I invested that $4.00 in an asset that couldn't have grown - it'd still be worth $4.00. If paying 4% a year - that'd be about 16 cents. I like my apples better. Also. I haven't had to talk to Canada Revenue Agency about the increase in value of those shares - so far, it's all at my credit - but not all "mine", as I haven't realized it, yet. I don't have to talk to the income tax people, until either I sell the shares - or die. Don't figure to do either, this week or next. When I do sell them ... ... I deduct the amount that I paid in the first place (tax had already been paid on that). As you don't have to answer to the income tax people for the principal when you cash in your certificate. The I divide the amount of the gain in half. I keep half, free of tax. I pay tax at regular rate on the other half. I like them apples, as well. Learning how to manage money effectively - a great hobby. **That pays well**!! Have a great week. ole joyful | 
