Ralph Moss Limited

SMART MONEY MOVES

Where to park your money.

Keeping a contingency fund equivalent to three to six months' salary is a key element of a sound financial plan. But where's the best place to keep it?
Long-term investments such as stocks or bonds are out, because you may wind up taking a loss if you have to cash them in a hurry. You'll want your emergency money where you can get it quickly, but still earn a good rate of return.

It's your choice Generally, you rchoices consist of Canada Savings Bonds ((CSBs),), savings accounts that offer investment-level rates of interest, cashable Guaranteed Investment Certificates ((GICs)), and money market mutual funds.
There are five key factors to take into consideration when deciding on the best place to keep your contingency funds.

»Safety. You don't want to risk losing any of the principal in your emergency fund. That's why safety should be your number-one consideration.
»Liquidity. You must be able to get cash out of your investment quickly and easily.
»Convenience. You don't want to spend a lot of time managing this investment.
»Re-investment of earnings. The purpose of your contingency fund isn't t oprovide you with regular income. As aresult, you'll want earnings re-invested immediately and automatically.
»Yield. With the degree of safety you need for your contingency fund, you obviously can't expect to earn a yield equivalent to the longer term returns on stocks or bonds. However, the yield is still a consideration in weighing other alternatives.

YOUR MOVE For many investors, a money market fund is the investment of choice for holding emergency funds. Money market funds invest in Treasury bills and other forms of safe, highly liquid government and corporate debt. Usually, the return is close to that of Treasury bills, and you can get your money out within 24 hours
For more information or to have one of our consultants discuss setting up a contingency plan or mutual fund investing with you please contact us at 1-888-MOSS LTD or you may email Bryan Bennett

The information and opinions contained in this newsletter are obtained from various sources and believed to be reliable, but their accuracy cannot be guaranteed. Readers are urged to consult their professional advisors before acting on the basis of material contained in the newsletter.

Last updated November 7, 1996
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Copyright© 1996 All rights Reserved, Ralph Moss Limited and Ariad Custom Publishing Limited
This article has been reproduced from Financial Planning Gude, Vol.10 No6. Copyright© 1996 Ariad Custom Publishing.